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December 21, 1999


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Kher Smashes the Fixed Prices Barrier

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Nitish S Rele

Raghav Kher says he left Microsoft last year to "take it easy for a few months". He wanted to enjoy his early retirement.

"I decided to make some renovations on the house, like painting," he recalls. "I found out there were a lot of hassles before you could find someone good."

And then for every suggestion he had met with a counter suggestion from his wife. The domestic concern led Kher to wonder about people who might have similar problems. Could there be a way to help busy people who are planning a new home or renovating one, he wondered.

"So I decided to start a service that would focus on the needs of the consumer," says Kher.

" has created the first 'reverse marketplace' for important, time-consuming purchases. Our aim is to put an end to fixed pricing on the web and become the first place people turn to for products or services that are tailored to fit their needs."

It took him a few weeks to devise the plan. Kher, 40, once a strategy director at Microsoft, got Eric M Johnson, 28, a product development vice-president at Microsoft, to join him to start the company.

The concept of reverse marketplace was so simple and dramatic, Kher cannot understand why nobody thought of implementing it effectively before him.

With's reverse marketplace, customers fill out an online form detailing what they want, and the firm connects them with merchants across the street or across the country that can meet their specifications and vie for their business. After reviewing the ratings of those merchants, consumers select which merchants they want to contact directly.

Customers log on to the web site at and fill out a form detailing what they need -- anything from a house painter to a color printer to rare books and new office space. Then connects them with local and national merchants that can meet their exact specifications and want to compete for their business.

'Customers no longer have to surf the web or drive all over town searching for what they need, or give the same explanations repeatedly only to find they are talking to the wrong person,' the web site assures, 'because, with, the right sellers come to the customers.

" offers choice, convenience, and competitive prices to consumers by having the largest network of merchants, and the broadest spectrum of products and services on the web," Kher says.

Within six months,, the first electronic "reverse marketplace,"bagged $ 15 million in first-round funding. Early this month, announced that its nationwide network of merchants has grown 12 per cent in the last two months. At present, has 168,000 merchants all over the United States, with 50,000 registered consumers using the site.

"We haven't done much marketing," says Kher. "But next year, we will be launching our big campaign. We will be spending $ 10 million on building our brand advertising."

Kher is reminded that home improvement services remain a relatively low-tech industry, full of independent contractors and small businesses who are more comfortable with advertising in the yellow pages than online marketing. Why would anybody want to go to

He hopes a lot of people will change their ways, given the added advantage offers. Customers can easily provide job specifications and receive quotes online, he adds. expects to generate revenue by collecting a referral fee from contractors, who now pay nothing. The site will begin charging fees this spring, says Kher. offers hundreds of categories including home services, house cleaning, remodeling and house painting, small business services and products such as ISPs and fax machines; travel services such as customized vacations and discount international airfare; life services such as home mortgages and automobiles; hard-to-find items such as first-edition books and rookie baseball cards. has launched 10 new product and service categories, including pest control, home security and diamonds. It also offers small businesses access to payroll service companies, business security companies, CD-ROM duplication companies, airport shuttle services and limousine services.

For Kher, who was raised and educated in India, choosing a name for his new firm was not difficult. He knew that for centuries the mandi was the place to conduct business in India. Bargaining also was part of that culture. And wasn't bargaining in a way part of the reverse marketplace concept Kher had developed?

In an interview recently, Kher admitted that selling services over the web is much more complex and difficult than selling books or compact discs. But he also said it is a big market to crack. Forrester Research estimates businesses will buy $ 220 billion in services by 2003, up from $ 22.1 billion this year.

Kher knows that it excludes services for consumers, which Forrester has not yet calculated.

Headquartered in Redmond, Washington, the company has a development center in Bangalore, where Kher was born.

Kher's seven-and-a-half year tenure at Microsoft engineering prepared him to the challenges of the new business. At Microsoft, he led several groundbreaking alliances with cable television, the Internet and e-corporations. He worked as Microsoft's director of strategic business decisions to acquire Hotmail, the world's largest e-mail provider with more than 30 million accounts. He also helped bootstrap the market for Windows CE products by successfully initiating partnerships with companies such as Casio, Sega, Hewlett Packard and Timex.

Success then is nothing new to Kher but he feels the initial success of is just the beginning. With the quality-backers associated with imandi, his firm has acquired high profile. The $ 15 million that was raised in October through venture capital funding was led by Menlo Ventures (backer of Hotmail, InfoSeek, UUNet and

Other venture capital firms backing include Bertelsmann Ventures (the independent capital fund of the world's third-largest media company -- Bertelsmann AG), Madrona Investment Group (backer of, and Northwest Venture Associates (backer of AdRelevance, Packet Engines and Netpodium).

Kher expects to have a million consumers by the end of next year.

"We intend to build into the place for people to come for any product or service that must be tailored to fit individual needs," he says.

"We are pioneering merchant neutral distribution channels where consumers can pick the best merchants and location isn't an issue."

Presently, employs about 30 people at its Redmond headquarters. Thirty more people are to be hired next month.

A native of Dharwar, Karnataka, Kher earned his bachelor's degree in mechanical engineering from Bangalore University. When he was 21, he started a company called Gryfin Tools Private Limited with two others, manufacturing machine tool accessories. The firm employed about 100 people.

Then he came to the United States for further studies. He got an MS in both computer science and mechanical engineering from the University of Missouri-Rolla. Later, he earned an MBA from the University of Michigan, Ann Arbor. Kher was software developer for three years at PMX Inc in Michigan. PMX produced computer-aided design products. And then he joined Microsoft where he began a career of high achievements.

After nearly 12 years in corporate America, he says he is determined to watch succeed.

"We will lead the e-commerce revolution by driving the last nail into the coffin of set prices," he says. "It's a big endeavor and we like the challenge."

A P Kamath contributed to the feature.

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