Building His Own Start-Up Ecosystem

By Zachary A. Goldfarb
Monday, April 7, 2008

Staff writer Zachary A. Goldfarb's "Tech Post," which looks at people and ideas driving the local technology industry, runs Friday on the WashBiz blog.

Eric Litman is a longtime Washington area technology guy who calls himself an "Internet entrepreneur and evangelist."

Litman was one of four founders of a well-known local Internet development company in the 1990s called Proxicom. Using proceeds from the sale of that company and other ventures, he is now running a technology investment firm out of Rockville called WashingtonVC.

If you listen to him explain his vision for the future of technology, it sounds quite sweeping:

"There's the perception that the Internet is done in terms of innovation. . . . We're still at the very beginning in terms of human-computer interaction models in terms of opportunities. . . . People today sit in front of a computer typing on an absolutely bizarre keyboard layout that was traditionally designed to prevent people from typing too quickly, so they wouldn't jam the typewriter. We use a device that causes repetitive stress syndrome called the mouse."

He continues, "It's going to take 10, 15, 20 years to say who's going to win. We know it's going to look nothing like a QWERTY keyboard, a mouse at our side and an Internet Explorer version 30."

So WashingtonVC is investing in disruptive technologies that will change the future of technology, right?

Not exactly.

WashingtonVC, a little more than a year old, is investing in many basic technology companies -- many of them seemingly straight out of the late 1990s. To some degree they don't even touch on the current Web craze for social media and Web applications.

As one of his top investments, Litman touts DialAGeek, a remote technical support solution that he says can help consumers and small- and medium-size businesses get computer support at prices far below competitors, based in Rockville.

Other examples of companies in WashingtonVC's portfolio include a Utah company called SEO.com, for getting your company high on the list of Google results; BrowserMedia, a Web development and Web design agency in Bethesda; another Bethesda firm called HappyBirthday.com, a site for celebrating birthdays; and Phone.com, a Boston-based virtual phone service.

Asked to unravel the seeming contradiction between his vision for the future of technology and his investment decisions, Litman explains, "There are still many fundamentals around the technology that are underserved."

(One might guess that another reason for those investment choices: Litman's partner at WashingtonVC, Mike Mann, previously founded a company called BuyDomains, and many of WashingtonVC's investments have top-of-the-line domain names that are virtually impossible to get today.)

WashingtonVC's latest play is a company it created and funded called Aux Interactive (pronounced "ox"). Aux, with just a couple of employees so far, is WashingtonVC's top company directly engaging the social media space. The company's goal is to help customers -- businesses -- develop strategies for social media. That could mean building applications that work within social networks like Facebook to bolster a brand or sell a product, or even applications for internal corporate social networks.

By no means is Aux the first interactive firm. There have been countless such firms, many of them resting in peace. But Litman, who is searching for a chief executive for Aux, says the company will triumph because it has developed proprietary tools for assessing the value of social media for companies.

(He wouldn't share the approach, making it hard to know how unique it actually is.)

"Social media for any new technology requires some analysis of the metrics you use to judge the success," Litman said.

He added that the future of social-media applications will build on what's available now -- simple games you play against your friends, book recommendation services and other distractions. For example, LinkedIn, the social network geared toward professionals, will eventually allow outsiders to build applications for it. When it does, enterprise-oriented software companies will want to -- to recruit employees, to find customers, to sell services.

WashingtonVC pools Litman's and Mann's money. Litman wouldn't say how much, though he would say it's well into the millions.

WashingtonVC's investments are usually under a million dollars.

In addition to the cash, WashingtonVC provides important corporate back-end services that many start-up companies can't afford or don't know much about, such as marketing strategy, human resources, legal advice, etc. Litman, who spent several years investing in and commuting to East Asia, calls the concept "keiretsu," a Japanese word referring to a company that's at the center of a business ecosystem.