Venture Capital Drawn to Freewebs
Monday, April 9, 2007
Haroon Mokhtarzada has always been an entrepreneur. Growing up Silver Spring, he set up lemonade stands, hosted magic shows and started a neighborhood lawn-mowing business.
During the rise of the Internet, he was fascinated by the proliferation of Web sites and social networks. Someday, he predicted, everyone would have his own Web site to stake a personal claim on the ever-expanding net.
It wasn't until after the dot-com bubble burst that Haroon and his brother Zeki started putting together the business plan for their own start-up. In 2001, when they were both in their last year at the University of Maryland at College Park, they bought a few servers from failed Internet firms, invested $1,000 each and launched Freewebs, a company that helps people build their own Web sites.
Part social network and part Web site publisher, Freewebs gives its 15 million users access to nifty content they can add to their personal pages, where they can also keep blogs and post photos. The company now has more than 18 million unique visitors a month, 40 employees scattered across three states and $11 million in venture-capital financing. Every day, about 20,000 people sign up to build a Web site.
Growth was much more modest six years ago, when the Mokhtarzada brothers were starting out -- each day brought only two or three new users. But their youngest brother, Idris, who was 14 at the time, surprised them: He secretly added Freewebs to Google's registry, which caused the site to pop up more frequently in search results.
"All of a sudden, a lot more people started to sign up," Haroon said. "We weren't even ready to launch."
But there was no turning back. A few months later, on graduation day, Haroon and Zeki, 28, ran over to a campus computer lab to check how many people had signed up that day, discovering a record number: 34. "That was so much more exciting than graduation," Haroon said.
A year later, Haroon went to Harvard for law school and Zeki got a job at the National Institutes of Health, both working on the business part-time.
"The great thing about the Internet is that it runs itself," said Haroon, 27. "People can be building sites and advertisers can even pay you while you're sleeping."
By 2005, Freewebs was making enough money that the brothers could make it their full-time jobs. West Coast venture capitalists tried to persuade them to move to Silicon Valley. But Mokhtarzadas wanted to stay close to their roots. In August 2006, they closed a $11 million deal with local firms Novak Biddle Venture Partners and Columbia Capital.
Idris, now 20, jumped in full-time. Another brother, Yahya, 23, recently opened a one-man Freewebs branch in Palo Alto, Calif., in the building where Google and PayPal began. (It's known as the "lucky building.")
And they made a few other strategic hires. The firm's president, Shervin Pishevar, who also grew up in Silver Spring, had worked with Zeki on another Internet venture in the late '90s. Last summer, Freewebs hired Andrea Spiegel and Rick Robinson, both former AOL executives. Liddy Manson, a former vice president of Washingtonpost-Newsweek Interactive, became chief operating officer in January.
Today the company does more than host free Web sites for people. It recently began building widgets -- mini-Web sites people can paste into their blogs, profiles or Web pages. It's working with such clients as Adidas, Reebok, Cingular Wireless and New Line Cinema.
"You can't hold customers hostage to your site," Manson said. "You have to open it up and let people take the content with them. But companies are nervous about that because they think it takes value away from their actual Web sites."
As the company grows, the brothers said, they try to remember their slow start. Haroon keeps a printout of the company's first home-page design taped by his desk, and he scrawled the words "Still CEO!" next to the door to his office.
"I still can't believe it," he said.