Cybermoola Inc. — «a pioneer in cash-based payment for shopping on the Internet«
Last Tuesday May 6th 2008 the IE Entrepreneurship Club welcomed Eric Freeman, Founder of Cybermoola who held a presentation about his unfortunately failed but great business venture.
Cybermoola which stands for ‘Cyber-Cash’ was the first prepaid Internet cash card to be sold to consumers in-store at major national retail chains and helped transform online and offline consumer traffic into actual online sales. Purchased with cash in brick and mortar stores, Cybermoola enabled consumers to shop online without credit cards or bank accounts. Consumers used Cybermoola online to purchase clothing, music, books, sporting goods, etc. at major retailers.
Freeman saw early that there were high potential target groups for e-commerce which have not been served yet.
Freeman explained that teenagers at that time spend around 153bn in shopping malls, were highly familiar with Internet and most of the time responsible for new technology purchases within their families. Freeman argued: «Teenagers like Cybermoola because it allows them to shop independently.» Cybermoola was therefore created which a particular focus on teenagers and minority groups who either do not have credit cards or do not want to use them for e-commerce due to credit card fraud etc.
Consumers were able to purchase Cybermoola from branded retail chains, similar to purchasing a pre-paid phone card, such as Foot Action stores in the Dallas, Texas area, and ShopRite grocery stores in the Northeast. A customer takes the Cybermoola unique serial number to the Cybermoola Web site and creates an account that subsequently will be accessed only by an e-mail ID and PIN. Cybermoola users could make «same as cash» purchases from any of the merchants in the Cybermoola network, which is considerable, but they didn’t have any purchase protection (comparable to credit cards) when they do make a purchase.
Because Cybermoola knew where customers buy Cybermoola, where they spend it, and what they purchase, merchants in the network can benefit from detailed purchasing behavior to offer targeted cash-like incentives to customers. However, Cybermoola was not able to leverage on that in the way as it would be possible today in the post «Google Area», explained Freeman. His Business was created to work on a large scale only, due to the very little margins this business model was able to achieve.
Mr. Freeman was able to raise around US $ 650.000 seed financing from Business Angels whom he considers with hindsight were not the right investors for his Venture. He himself was hoping for investors with more experience in this business area. Mr. Freeman was supported by his wife Luisa Piñole and two other Co-Founders who all brought valuable skills to the Venture.
By the end of 2000 the Cybermoola had around 50.000 users and was exceeding all expectations. However, the Company was still burning cash and was therefore looking for additional investors. The bursting of the dot-com bubble in 2001 marked the beginning of a relatively mild yet rather lengthy early 2000s recession in the developed world, which made it impossible for Cybermoola to conduct a second round of financing and eventually forced the owners to liquidate the Company.
Overall Freeman has valued this time as an extraordinary learning experience and encouraged all of the attending students to become entrepreneurs themselves but warned them that they might have to become serial entrepreneurs as re-entry into big corporations goes against the nature of an independent entrepreneur.