telecommunications giant AT&T—gave
Tellme a significant leg up on the competi-
tion. Still, the company faced increasing pres-
sure to deliver on its ever-evolving business
plan.
“Our long-term goal is to create Dial Tone
2.0,” McCue said, envisioning a future when
users would not even need to dial Tellme.
Instead of getting a dial tone when they
picked up the phone, users would be con-
nected directly to their personal Tellme vir-
tual assistant, ready at their disposal.iiWould
Tellme succeed in becoming the Yahoo! of
the voice portal market? How would the
company capture and sustain profits in this
rapidly evolving market?COMPANY BACKGROUND:
“NETSCAPEES”McCue got involved with computers at a
fairly young age. He wrote several video
games in high school, and after graduating
he joined IBM as a graphics specialist.^6 In
1989, he left IBM and founded Paper
Software, which went on to develop 3-D
Internet software that enabled Netscape
Navigator to display complex graphics. In
February 1996, McCue sold his company to
Netscape Communications for an estimated
$20 million and joined the firm as vice presi-
dent of technology. After America Online
acquired Netscape in 1998, McCue, like
dozens of Netscape’s other top engineers and
middle managers, left the company to start
his own venture.
In January 1999, McCue and 22-year-old
computer whiz Angus Davis, a fellow
“Netscapee,” founded Tellme Networks in
Mountain View, California. McCue also
quickly brought on one-time arch nemesisIt was close to midnight on a brisk night in
November 2000, and Mike McCue, co-
founder and CEO of Tellme Networks, was
on yet another recruiting mission.^1 His tar-
gets: top computer-engineering students at
Stanford University. His secret weapon: free
pizza. McCue planned to personally deliver
pizzas to the Stanford computer lab in hopes
of convincing a handful of top students to
quit school and join Tellme, the leading
provider of Web content that could be
accessed using simple voice commands over a
regular telephone. The now 32-year-old
McCue had skipped college and joined IBM
as a graphics specialist.^2 As CEO of Tellme,
McCue spent about 60 percent to 80 percent
of his time recruiting employees. “It’s not
hard to get money these days,” he claimed.
“It’s getting the right people that’s difficult.”^3
Indeed, it had not been hard for Tellme to
win over financial backers. In fact, its success
at raising money—an astounding $238 mil-
lion as of the end of 2000^4 —made the voice
portal war Tellme’s to lose. Its list of backers
was a virtual Who’s Who of the venture cap-
ital world. Tellme had raised $125 million in
October 2000 despite immense volatility in
the stock markets and the general downturn
of technology stocks.^5 The substantial invest-
ments—not to mention an alliance with492 ENTREPRENEURSHIP CASE
CASE 7
Tellme Networks: Dial Tone 2.0? (Revised)
Source:Marc Dollinger and Christopher Tucci. The first
version of this case was prepared by MBA candidates Yi-
Hsin Change, Quyen Chu, Kedric George, Dhruv Mohindra,
and Zinnie Yoon under the supervision of Professor
Christopher L. Tucci for the purpose of class discussion
rather than to illustrate either effective or ineffective handling
of an administrative situation. This revision is made with per-
mission. Copyright © 2001, 2007 by the Stern School of
Business, Marc J. Dollinger and Christopher L. Tucci.
Tellme, Inc. material used with permission. All rights
reserved.