Venture capitalists have shied away from backing twentysomething
entrepreneurs lately, but not in the case of fast-growing Mountain View
Plaxo, run by recent Stanford graduates Todd Masonis, 24, and
Cameron Ring, 25, allows computer users to tap into a network that
holds up-to-date address information for their friends, family and
business associates. Integrated into Microsoft Outlook and Outlook
Express, the software allows people to change their information and
have those changes automatically updated in the address books of their
Today Plaxo integrates Yahoo's search engine directly into the
Outlook e-mail program. Under the deal with Yahoo, Plaxo will get paid
for channeling people to Yahoo's search engine. The search box will be
placed beside a Plaxo icon that sits atop Outlook.
Plaxo will eventually make Web searching possible from individual
e-mails, according to Masonis. Ultimately, he wants Plaxo to search
individual words within the e-mails. You would click on the word and
Plaxo would do a Web search through Yahoo.
``We're in Outlook, so we're effectively within the operating system. We can scan words,'' he said. ''
The deal is significant because it puts Yahoo search directly into
one of the most popular e-mail programs. That helps Yahoo leapfrog
rival Google, which earlier put its search engine on the bottom of the
computer desktop with its Google task bar.
Plaxo's moves have caught the attention of investors. Today, Plaxo
will announce $7 million more in venture capital backing. The round is
being led by Cisco Systems and includes, among others, existing
investor Michael Moritz, a venture capitalist at Sequoia Capital. Plaxo
has now raised nearly $20 million.
The interesting twist is Plaxo's move to team up with Yahoo. Plaxo
investors and board members Moritz and Ram Shriram are also backers of
Google and sit on that company's board of directors. Plaxo's move to
give Yahoo more exposure to Web users at a time when Google is locked
in a full-fledged search engine battle against that company is
something neither Moritz nor Shriram would comment on.
Plaxo spoke to both Google and Yahoo, among others, about a deal,
but Yahoo was the best fit, according to Scott Epstein, Plaxo's head of
He noted that Plaxo has strong personal connections to Yahoo as
well. Tim Koogle, a Plaxo board member and investor, formerly served as
Yahoo's CEO. Moritz also was an investor in Yahoo and previously sat on
the company's board. But with Yahoo already public, Moritz has realized
most of the return on his early investment at Yahoo. With Google about
to go public, Moritz has a much greater financial interest in seeing
Google perform well.
In the beginning
Plaxo started in 2001, after Masonis and Ring graduated from
Stanford with computer engineering degrees. ``I had no money,'' said
Masonis, recalling the first six months after graduation when he was
writing code for the company. ``I was living completely off my
Both Masonis and Ring had tinkered with other start-up ideas,
including netElement, which let people communicate with each other at
different Web sites in a text box at the bottom of their browsers. The
idea didn't have an obvious way of making money and they abandoned it.
Then the pair talked with Ring's high-school buddy, Sean Parker,
co-founder of Napster. Parker told them about his hassles with keeping
an up-to-date contact list. He wanted updates to happen automatically
-- via a network where people entered their address or e-mail changes
and those changes appeared simultaneously in the address books of all
Bingo. Masonis and Ring liked the idea, and together with Parker
they formed Plaxo. The challenge, they agreed, was to build a network
from scratch when people wouldn't have an incentive to join. Masonis
and Ring started banging out the code while Parker took the lead as
chief executive and searched for funding. ``Sean was living on my
couch,'' Masonis said.
They built software that can be downloaded from www.plaxo.com, using a single click and installed by following a few simple instructions.
Three years later, the company has reached 2 million registered
users. Once you download the software, you can change your address and
all your contacts will have it updated automatically -- as long as they
also use the software. If they haven't, you can send out an e-mail
called an ``update request'' telling them about the change. And if they
change their address, your address book is updated automatically --
again, only if they have the software.
The trick now is to make money. Plaxo intends to do that by adding features to its network.
Masonis and Ring have taken over temporary leadership roles while
they look for a new CEO -- Parker departed from the company last month,
after a disagreement with the board. Adult supervision exists: Rikk
Carey, vice president of engineering, who held senior management
positions at Napster and Yahoo; and Scott Epstein, Plaxo's head of
marketing, who once worked for Google.