Starmedia
Encyclopedia
StarMedia is a leading Latin Internet brand, co-founded in August 1996 by Fernando Espuelas
and Jack Chen as the first pan-regional Internet portal for Spanish and Portuguese speaking audiences. During the dot.com boom of the 1990s, StarMedia became an iconic company when it raised the first dollar of venture capital for a Latin Internet company, and then did the first IPO in the sector, while becoming one of the top 10 biggest sites on the Internet, measured by audience, and the only one not in English.
Under Espuelas' leadership, StarMedia launched a massive marketing effort to attract the very first Internet users, advertisers and e-commerce companies across the Latin world. Called the "Espuelas Effect" by leading Brazilian news weekly Exame, StarMedia was the catalyst for the Internet industry throughout Latin America. While Espuelas was CEO, Starmedia was the leading Latin portal, serving over 25 million Spanish and Portuguese speakers every month across the Latin world.
In total, StarMedia raised over $500 million in a series of private and public offerings, reaching a market capitalization of over $3.8 billion dollars at its peak. According to the Harvard Business School
Case StarMedia: Launching a Latin American Revolution, by 1999 StarMedia was the Latin American market leader. StarMedia is now owned by France Telecom
subsidiary Orange, serving "more than 24 million" Hispanic
Internet users per month, according to company statements in 2008.
StarMedia, acquired by France Telecom in 2002, is a free-to-web global service connecting Spanish-speakers through the Internet as well as providing consumers relevant and extensive information and services. StarMedia has local operations in Colombia, Mexico, Peru, Spain and throughout the United States (Los Angeles, Miami and New York)
and his childhood friend, Jack Chen, founded StarMedia in 1996 with $100,000 in personal savings, credit cards and loans from friends and family.
A year later, after being turned down by over 50 venture capitalists across the U.S., the pair were successful in raising $3.5 million from Susan Segal, general partner of Chase Capital Partners and its technology affiliate Flatiron Partners. Soon after, StarMedia raised additional venture capital from WarburgPincus, the New York City Investment Fund and David Rockefeller
. In 1998, StarMedia made history when it raised an additional $80 million dollars in the largest private placement for an Internet company up to that time. David Rockefeller
, wealthy Latin American families, Intel, the Hearst Corporation
, Intel, NBC
and GE Capital
were the principal investors in that round.
StarMedia went on to raise over $500 million dollars in a combination of public and private offerings. Well before the twin stock market and Latin American collapses of 2000-2001, which severely impacted StarMedia's business and share price, major StarMedia investors had realized significant profits on their StarMedia investments. Investors such as WarburgPincus, Intel, GE Capital
, Hearst
and many other institutions and individuals sold their StarMedia shares at or near the peak of the market. Espuelas writes in his book Life in Action
: “Because I believed in our company and our mission, I had never sold a single StarMedia share or stock option. I personally lost close to $500 million.”
According to the Harvard Business School
case StarMedia: Launching a Latin American Revolution , written by professors Thomas Eisenmann and John K. Rust, "by the fall of 1999, StarMedia had sprinted to a sizable lead in the race to acquire Latin American Internet users. Its pan-regional, horizontal portal was the first to target Spanish- and Portuguese-language speakers on the Internet, registering 1.2 billion page views in the third quarter of 1999. Thirty-three-year-old StarMedia co-founder Fernando Espuelas
was the toast of "Silicon Alley
" and a recognized hero throughout Latin America
. A picture of him on the cover of Internet World magazine--ripping his shirt open to show the StarMedia logo, like Superman
, summed up the spirit of the company."
StarMedia implemented Espuelas' "relentless innovation" strategy. StarMedia launched web-based email, chat and streaming video in Spanish and Portuguese before its U.S.-focused competitors such as Yahoo, Excite
, Lycos
or AOL
did in English. In 1996, Espuelas launched the first ever television campaign across Latin America promoting the Internet and the StarMedia brand, helping to spark the subsequent explosion of Internet use in the region. Along with CBS News
, it launched the Web's first video news channel in 1997. Other innovations included the first instant messaging system in Latin America; in partnership with HP the first out-of-the-box e-commerce platform for small businesses; and with IBM
, the first free ISP in the region. As part of Espuelas' push, StarMedia acquired 12 other media and technology companies in the U.S., Latin America and Spain. At its peak, StarMedia had over 1,200 employees in 18 offices across 12 countries.
under stock symbol STRM, on May 25, 1999 in an IPO of 7 million shares priced at $15 per share, reaching a market capitalization of $1.2+ billion on its first day of trading. It was the first Latin Internet company to go public, creating what Brazil's leading business magazine Exame called the "Espuelas Effect", eventually reaching a market capitalization of more than $3.8 billion dollars. According to the New York Times in an article from May 31, 1999, Espuelas, who had immigrated with his mother from Uruguay with $100 dollars, was worth over $160 million at the end of the first day of trading; at its peak, Espuelas' holdings in StarMedia were valued at over $500 million dollars. He never sold any shares or stock options, as Espuelas wrote in Life in Action
.
StarMedia became the best known, most highly traded Latin Internet Stock on Nasdaq during the late 1990s dot-com boom. Other stocks in the sector included Terra Networks and AOL Latin America.
of the early 2000s, which coincided with the worst Latin American economic collapse in a generation, StarMedia lost almost all of its market value, and was the subject of class-action shareholder litigation. After an independent investigation initiated by a special committee of Board of Directors found no wrongdoing by management, the Board's Audit Committee and StarMedia's outside accountants, the class-action suit was settled by the Board and its insurance company. As part of the settlement, a full release was given by the shareholders to the former management, the company's outside accountants, Ernst & Young
, and the Board's Audit Committee. The lawsuit was subsequently dismissed by the Federal judge.
In August 2001, Espuelas resigned as CEO after conflicts over strategy with the Board of Directors. Enrique Narciso was named head of the company. The Board, led by Chase Capital Partners' Susan Segal, decided to abandon StarMedia's core business to focus on the mobile solutions subsidiary, StarMedia Mobile. The StarMedia network of websites, related intellectual property and over 25 million unique users per month audience were sold to the Spanish ISP eresMas Interactive for US$8 million in cash on July 3, 2002. The following week eresMas, now claiming to be the leader of the Spanish-language Internet industry because of its acquisition of StarMedia, was acquired by France Telecom
subsidiary Wanadoo SA (now called Orange after a rebranding in 2006) for $250 million dollars. According to Orange, StarMedia is the leading Spanish-language portal in the world. Since 2009 Starmedia is part of Orange Advertising Network Americas, run by CEO Giuliano Stiglitz. Orange Advertising Network Americas is one of the leading players in US Hispanic and Latin American online marketing.
In 2002, StarMedia Mobile was renamed CycleLogic and shareholders approved a one-for-1,000 reverse stock split. Shortly thereafter, CycleLogic deregistered its shares from NASDAQ
.
On March 2004 the assets of CycleLogic were acquired out of bankruptcy by an international group of investors, becoming a part of the IMS group of companies, Intelligent Mobile Solutions Inc.
Fernando Espuelas
Fernando Espuelas is an American entrepreneur, author, media personality and philanthropist.Espuelas is one of the pioneers of the consumer Internet. He is the co-founder and first CEO of Starmedia, the first pan-Latin Internet portal, launched in 1996 and now part of Orange, France Telecom's...
and Jack Chen as the first pan-regional Internet portal for Spanish and Portuguese speaking audiences. During the dot.com boom of the 1990s, StarMedia became an iconic company when it raised the first dollar of venture capital for a Latin Internet company, and then did the first IPO in the sector, while becoming one of the top 10 biggest sites on the Internet, measured by audience, and the only one not in English.
Under Espuelas' leadership, StarMedia launched a massive marketing effort to attract the very first Internet users, advertisers and e-commerce companies across the Latin world. Called the "Espuelas Effect" by leading Brazilian news weekly Exame, StarMedia was the catalyst for the Internet industry throughout Latin America. While Espuelas was CEO, Starmedia was the leading Latin portal, serving over 25 million Spanish and Portuguese speakers every month across the Latin world.
In total, StarMedia raised over $500 million in a series of private and public offerings, reaching a market capitalization of over $3.8 billion dollars at its peak. According to the Harvard Business School
Harvard Business School
Harvard Business School is the graduate business school of Harvard University in Boston, Massachusetts, United States and is widely recognized as one of the top business schools in the world. The school offers the world's largest full-time MBA program, doctoral programs, and many executive...
Case StarMedia: Launching a Latin American Revolution, by 1999 StarMedia was the Latin American market leader. StarMedia is now owned by France Telecom
France Télécom
France Telecom S.A. is the main telecommunications company in France, the third-largest in Europe and one of the largest in the world. It currently employs about 180,000 people and has 192.7 million customers worldwide . In 2010 the group had revenue of €45.5 billion...
subsidiary Orange, serving "more than 24 million" Hispanic
Hispanic
Hispanic is a term that originally denoted a relationship to Hispania, which is to say the Iberian Peninsula: Andorra, Gibraltar, Portugal and Spain. During the Modern Era, Hispanic sometimes takes on a more limited meaning, particularly in the United States, where the term means a person of ...
Internet users per month, according to company statements in 2008.
StarMedia, acquired by France Telecom in 2002, is a free-to-web global service connecting Spanish-speakers through the Internet as well as providing consumers relevant and extensive information and services. StarMedia has local operations in Colombia, Mexico, Peru, Spain and throughout the United States (Los Angeles, Miami and New York)
Founding, Capitalization and Growth
Fernando EspuelasFernando Espuelas
Fernando Espuelas is an American entrepreneur, author, media personality and philanthropist.Espuelas is one of the pioneers of the consumer Internet. He is the co-founder and first CEO of Starmedia, the first pan-Latin Internet portal, launched in 1996 and now part of Orange, France Telecom's...
and his childhood friend, Jack Chen, founded StarMedia in 1996 with $100,000 in personal savings, credit cards and loans from friends and family.
A year later, after being turned down by over 50 venture capitalists across the U.S., the pair were successful in raising $3.5 million from Susan Segal, general partner of Chase Capital Partners and its technology affiliate Flatiron Partners. Soon after, StarMedia raised additional venture capital from WarburgPincus, the New York City Investment Fund and David Rockefeller
David Rockefeller
David Rockefeller, Sr. is the current patriarch of the Rockefeller family. He is the youngest and only surviving child of John D. Rockefeller, Jr. and Abby Aldrich Rockefeller, and the only surviving grandchild of oil tycoon John D. Rockefeller, founder of Standard Oil. His five siblings were...
. In 1998, StarMedia made history when it raised an additional $80 million dollars in the largest private placement for an Internet company up to that time. David Rockefeller
David Rockefeller
David Rockefeller, Sr. is the current patriarch of the Rockefeller family. He is the youngest and only surviving child of John D. Rockefeller, Jr. and Abby Aldrich Rockefeller, and the only surviving grandchild of oil tycoon John D. Rockefeller, founder of Standard Oil. His five siblings were...
, wealthy Latin American families, Intel, the Hearst Corporation
Hearst Corporation
The Hearst Corporation is an American media conglomerate based in the Hearst Tower, Manhattan in New York City, New York, United States. Founded by William Randolph Hearst as an owner of newspapers, the company's holdings now include a wide variety of media...
, Intel, NBC
NBC
The National Broadcasting Company is an American commercial broadcasting television network and former radio network headquartered in the GE Building in New York City's Rockefeller Center with additional major offices near Los Angeles and in Chicago...
and GE Capital
GE Capital
GE Capital is the financial services unit of General Electric, one of five major units. Its various divisions include GE Capital Aviation Services, GE Capital Real Estate, GE Energy Financial Services and GE Money....
were the principal investors in that round.
StarMedia went on to raise over $500 million dollars in a combination of public and private offerings. Well before the twin stock market and Latin American collapses of 2000-2001, which severely impacted StarMedia's business and share price, major StarMedia investors had realized significant profits on their StarMedia investments. Investors such as WarburgPincus, Intel, GE Capital
GE Capital
GE Capital is the financial services unit of General Electric, one of five major units. Its various divisions include GE Capital Aviation Services, GE Capital Real Estate, GE Energy Financial Services and GE Money....
, Hearst
Hearst
Hearst may refer to:People* Amanda Hearst* Garrison Hearst, NFL running back* George Hearst* George Randolph Hearst, Jr.* Hunter Hearst Helmsley, WWE professional wrestler* John Randolph Hearst* Lydia Hearst-Shaw* Michael Hearst* Millicent Hearst...
and many other institutions and individuals sold their StarMedia shares at or near the peak of the market. Espuelas writes in his book Life in Action
Life in Action
Life in Action is a book by Fernando Espuelas, published by Penguin Books in 2004, as an auto-biographical and philosophical story using Espuelas' experiences from childhood in Uruguay, through his early years in the United States, to the founding of Starmedia, the first Latin portal and VOY, as a...
: “Because I believed in our company and our mission, I had never sold a single StarMedia share or stock option. I personally lost close to $500 million.”
According to the Harvard Business School
Harvard Business School
Harvard Business School is the graduate business school of Harvard University in Boston, Massachusetts, United States and is widely recognized as one of the top business schools in the world. The school offers the world's largest full-time MBA program, doctoral programs, and many executive...
case StarMedia: Launching a Latin American Revolution , written by professors Thomas Eisenmann and John K. Rust, "by the fall of 1999, StarMedia had sprinted to a sizable lead in the race to acquire Latin American Internet users. Its pan-regional, horizontal portal was the first to target Spanish- and Portuguese-language speakers on the Internet, registering 1.2 billion page views in the third quarter of 1999. Thirty-three-year-old StarMedia co-founder Fernando Espuelas
Fernando Espuelas
Fernando Espuelas is an American entrepreneur, author, media personality and philanthropist.Espuelas is one of the pioneers of the consumer Internet. He is the co-founder and first CEO of Starmedia, the first pan-Latin Internet portal, launched in 1996 and now part of Orange, France Telecom's...
was the toast of "Silicon Alley
Silicon Alley
Silicon Alley is a nickname for an area with a concentration of Internet and new media companies in Manhattan, New York City. Originally, the term referred to the cluster of such companies extending from the Flatiron District down to SoHo and TriBeCa along the Broadway corridor, but as the location...
" and a recognized hero throughout Latin America
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
. A picture of him on the cover of Internet World magazine--ripping his shirt open to show the StarMedia logo, like Superman
Superman
Superman is a fictional comic book superhero appearing in publications by DC Comics, widely considered to be an American cultural icon. Created by American writer Jerry Siegel and Canadian-born American artist Joe Shuster in 1932 while both were living in Cleveland, Ohio, and sold to Detective...
, summed up the spirit of the company."
StarMedia implemented Espuelas' "relentless innovation" strategy. StarMedia launched web-based email, chat and streaming video in Spanish and Portuguese before its U.S.-focused competitors such as Yahoo, Excite
Excite
Excite is a collection of Internet sites and services owned by IAC Search & Media, which is a subsidiary of InterActive Corporation . Launched in 1994, it is an online service offering a variety of content, including an Internet portal, a search engine, a web-based email, instant messaging, stock...
, Lycos
Lycos
Lycos, Inc. is a search engine and web portal established in 1994. Lycos also encompasses a network of email, webhosting, social networking, and entertainment websites.-Corporate history:...
or AOL
AOL
AOL Inc. is an American global Internet services and media company. AOL is headquartered at 770 Broadway in New York. Founded in 1983 as Control Video Corporation, it has franchised its services to companies in several nations around the world or set up international versions of its services...
did in English. In 1996, Espuelas launched the first ever television campaign across Latin America promoting the Internet and the StarMedia brand, helping to spark the subsequent explosion of Internet use in the region. Along with CBS News
CBS News
CBS News is the news division of American television and radio network CBS. The current chairman is Jeff Fager who is also the executive producer of 60 Minutes, while the current president of CBS News is David Rhodes. CBS News' flagship program is the CBS Evening News, hosted by the network's main...
, it launched the Web's first video news channel in 1997. Other innovations included the first instant messaging system in Latin America; in partnership with HP the first out-of-the-box e-commerce platform for small businesses; and with IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
, the first free ISP in the region. As part of Espuelas' push, StarMedia acquired 12 other media and technology companies in the U.S., Latin America and Spain. At its peak, StarMedia had over 1,200 employees in 18 offices across 12 countries.
First Public Offering of a Latin Internet Company
StarMedia went public on NasdaqNASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
under stock symbol STRM, on May 25, 1999 in an IPO of 7 million shares priced at $15 per share, reaching a market capitalization of $1.2+ billion on its first day of trading. It was the first Latin Internet company to go public, creating what Brazil's leading business magazine Exame called the "Espuelas Effect", eventually reaching a market capitalization of more than $3.8 billion dollars. According to the New York Times in an article from May 31, 1999, Espuelas, who had immigrated with his mother from Uruguay with $100 dollars, was worth over $160 million at the end of the first day of trading; at its peak, Espuelas' holdings in StarMedia were valued at over $500 million dollars. He never sold any shares or stock options, as Espuelas wrote in Life in Action
Life in Action
Life in Action is a book by Fernando Espuelas, published by Penguin Books in 2004, as an auto-biographical and philosophical story using Espuelas' experiences from childhood in Uruguay, through his early years in the United States, to the founding of Starmedia, the first Latin portal and VOY, as a...
.
StarMedia became the best known, most highly traded Latin Internet Stock on Nasdaq during the late 1990s dot-com boom. Other stocks in the sector included Terra Networks and AOL Latin America.
Technology market blow-up, Latin American regional bust and sale
During the .com bustDot-com bubble
The dot-com bubble was a speculative bubble covering roughly 1995–2000 during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the more...
of the early 2000s, which coincided with the worst Latin American economic collapse in a generation, StarMedia lost almost all of its market value, and was the subject of class-action shareholder litigation. After an independent investigation initiated by a special committee of Board of Directors found no wrongdoing by management, the Board's Audit Committee and StarMedia's outside accountants, the class-action suit was settled by the Board and its insurance company. As part of the settlement, a full release was given by the shareholders to the former management, the company's outside accountants, Ernst & Young
Ernst & Young
Ernst & Young is one of the largest professional services networks in the world and one of the "Big Four" accountancy firms, along with Deloitte, KPMG and PricewaterhouseCoopers ....
, and the Board's Audit Committee. The lawsuit was subsequently dismissed by the Federal judge.
In August 2001, Espuelas resigned as CEO after conflicts over strategy with the Board of Directors. Enrique Narciso was named head of the company. The Board, led by Chase Capital Partners' Susan Segal, decided to abandon StarMedia's core business to focus on the mobile solutions subsidiary, StarMedia Mobile. The StarMedia network of websites, related intellectual property and over 25 million unique users per month audience were sold to the Spanish ISP eresMas Interactive for US$8 million in cash on July 3, 2002. The following week eresMas, now claiming to be the leader of the Spanish-language Internet industry because of its acquisition of StarMedia, was acquired by France Telecom
France Télécom
France Telecom S.A. is the main telecommunications company in France, the third-largest in Europe and one of the largest in the world. It currently employs about 180,000 people and has 192.7 million customers worldwide . In 2010 the group had revenue of €45.5 billion...
subsidiary Wanadoo SA (now called Orange after a rebranding in 2006) for $250 million dollars. According to Orange, StarMedia is the leading Spanish-language portal in the world. Since 2009 Starmedia is part of Orange Advertising Network Americas, run by CEO Giuliano Stiglitz. Orange Advertising Network Americas is one of the leading players in US Hispanic and Latin American online marketing.
In 2002, StarMedia Mobile was renamed CycleLogic and shareholders approved a one-for-1,000 reverse stock split. Shortly thereafter, CycleLogic deregistered its shares from NASDAQ
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
.
On March 2004 the assets of CycleLogic were acquired out of bankruptcy by an international group of investors, becoming a part of the IMS group of companies, Intelligent Mobile Solutions Inc.
External links
- www.starmedia.com
- Harvard Business School Cases StarMedia: Launching a Latin American Revolution
- El Excelsior ¡StarMedia vive!, August, 2008
- CNN starMedia Launches New Comprehensive Finance Channel, July 2008
- Hispanic MPRM StarMedia launches new entertainment portal for Spanish speakers, May 2008
- espuelas.com Fernando Espuelas' Official Site