Lights out at online energy exchange
Altra Energy Technologies has sold one of its last remaining business units to ChemConnect and plans to shut down its operations completely by the end of the week.
The Houston, Texas-based company, launched in 1996 as one of the first Internet start-ups to focus on business-to-business e-commerce, couldn't compete with newer rivals, said Paul Bourke, CEO of Altra.
With the rise of competitors such as IntercontinentalExchange, TradeSpark and EnronOnline, all financed by large energy companies, Altra began to steadily scale back its business. In 2000, the company shut down its marketplaces for electricity and crude oil. In November 2001, Altra sold its software division, which developed applications automating business transactions for natural gas companies, to software company Caminus for $60 million. With the sale of Altra's natural gas liquids marketplace to ChemConnect Monday, Altra is left only with a natural gas marketplace that it's now in the process of shutting down.
Altra, which raised a total of $85 million in venture funding, would not disclose the value of the cash-for-assets ChemConnect deal.
Many online marketplace start-ups have capitulated under competition from rivals like the IntercontinentalExchange, or so-called industry consortia set up and funded by the large companies that also promise to use the marketplace. The IntercontinentalExchange, for example, is financed by large energy companies BP Amoco and Royal/Dutch Shell Group, who also do business on the marketplace.
The arrival of industry consortia is a show-stopper for start-ups like Altra, simultaneously scaring off potential customers, confused about which marketplace to use, and venture capitalists, who feared too much competition. Unable to attract customers or raise more money, hundreds of online marketplaces folded.
Yet many marketplaces set up by industry consortia have hit hard times lately, shutting down or becoming acquired when the economy began to sour. Those still in business have yet to deliver big payoffs to investors through going public or through cost savings associated with using their technology.
Altra, which once had 275 employees, was billed a survivor of the dot-com bust by analysts last year. AMR Research included Altra in its list of top 20 trading exchanges last May.
AMR Research analyst Jill Feblowitz said her company gave kudos to Altra because it boasted the ability to integrate its marketplace systems with its customers' back-office software, such as accounting and order-management applications. Such integration is supposed to cut down on data entry tasks and save companies money.
"What we failed to realize is that energy trading companies didn't have their houses in order to handle that," Feblowitz said. "There's still a lot of work to be done in the back office before companies can integrate to outside systems."