Quokka Kicks

Can Virtual Adventure Thrive on the Internet? A Brazen New Web Site Says Yes. But Is This Digital Expedition into the Unknown a Revolutionary Way to Experience Sports, or a Business Disaster in the Making?

Dec 1, 1999
Outside Magazine

Walking through Quokka's Brannan Street offices, I experienced the strong first impression that, at least in one sense, the company lives up to its hype: Its own employees—for the most part a fit-looking crew of tanned, windburned, techno-savvy jocks—represent Quokka's ideal target market. For however long the ride lasts, these are some shiny happy young people, and they've found a place where their two interests, adventure and the Internet, are aligned. The perks are also in place: Many new employees are given cell phones and Palm IIIs, and they are encouraged to make time to get out and play. Describing a quality he calls "Quokka DNA"—good people replicate more good people—CEO Alan Ramadan, 41, says that he looks to hire people who are, among other things, athletes, "because they know how to work on a team" and because they accept that "you have good days and you have bad days."

Ramadan's DNA is pure Quokka. A solidly built six-foot-four and a devoted sailor since childhood, he graduated from Monash University in his native Melbourne, Australia, in 1983, with a dual degree in computer science and applied mathematics. He opened a technology consulting company in 1987 and then founded a telecommunications software startup called OzWare in 1991. The following year, fellow Aussie John Bertrand, hero of Australia's first-ever America's Cup victory (in 1983) and an acquaintance of Ramadan's from local sailing races, asked Ramadan to head up a technology company supporting his next America's Cup bid, in 1995.

The racing yacht oneAustralia II arrived off San Diego for the semifinals touted as the only boat capable of beating the eventual winner, Black Magic, from New Zealand. But then, less than two hours into the trials, in high winds and steep seas, oneAustralia II snapped in half and sank off the California coast in 90 seconds, taking with it 18,000 man-hours of labor. After an interlude of gaping disbelief, Ramadan cooked up design modifications for Bertrand's training yacht that enabled it to compete in the superboat's place. "Dealing with that kind of adversity, although that's on a pretty grand scale—one I hope I never repeat, I might add—is a wonderful lesson in life," says Ramadan, who carries another lesson everywhere he goes: an inch-long vertical gouge above his right eye from a sailing accident in his twenties.

During the '95 America's Cup competition, Ramadan noticed something peculiar. Even though Bertrand and crew were ten miles out to sea while he sat just offshore in a support boat stuffed with computers, Ramadan could survey data displays about oneAustralia II's pitch and yaw and speed, its maneuvers, and the wind direction, and get an almost visceral sense of what Bertrand was experiencing. "It turned out that everyone wanted to be in front of that screen," Ramadan recalls. "It was this realization that—shit!—that's interesting!"

Following the America's Cup, Ramadan attended Stanford University's Executive Program for Growing Companies and caught the Internet bug. "Netscape was about to go public," he says, "and Yahoo was two doors down." Why not start a company marrying his two passions, technology and adventure? After Ramadan enlisted Bertrand's support, the pair moved to San Francisco in 1996 to be near Web talent and signed on Silicon Valley guru Richard Williams, who was head of Illustra Information Technologies at the time. The three men are now in an equal partnership. (Williams has been the driving force behind Quokka's seemingly incongruous involvement in car and motorcycle racing—sports, like sailing, that are heavily reliant on high technology. "He's a petrolhead from way back," says Bertrand.)

Initially, the trio intended to build Web sites for various sports governing bodies. They named the company Quokka, after a rare relative of the kangaroo, and went about securing its first event, the Whitbread. Quokka acquired the rights to the race by agreeing to underwrite the entire cost of production for the site and to share revenues with the Whitbread organizers. The Whitbread site snagged a surprising 1.8 million "unique" or individual users from 177 countries over a period of nine months and generated $9.4 million in revenue from sponsorships. "This thing was smoking, and we had lots of people knocking at the front door," Ramadan says. "We quickly realized that what we needed was a network of programming with our own brand and with its own qualities. Our dream was to become a public company."

Armed with their Whitbread numbers, the partners began planning the launch of Quokka.com and went hunting for more funding. Media Technology Ventures, Trinity Ventures, and other corporations soon kicked in undisclosed amounts of money; Accel Partners and MediaOne Interactive Services, among others, followed. More support poured in this past June, just after the site launched, when the company raised $40.7 million from private and other corporate investors, including Hearst Communications, British Telecom, and [email protected], bringing the total amount of equity it had raised to $78.2 million.

With the money in place, all Quokka needed was the requisite boatload of buzz that Internet startups must have if they're going to attract the all-important IPO investors down the road. But the company relied too much on its track record in the Whitbread event, which is still its only major success. (According to a Quokka survey, those visitors were primarily between 25 and 34 years old, 64 percent were college graduates, and their average household income was $75,000—impressive, but then these are people with a keen interest in yachting.) The Whitbread success only proved that Quokka would make a great Web site producer-for-hire, not a stand-alone sports entertainment company. It had fueled almost uniformly enthusiastic media coverage—not the same thing as powerful buzz, as it turned out.

Everybody at Quokka "expected [the IPO] to go out the door and go nuts," Ramadan recalls. But investors had serious doubts about projections touting Quokka's future revenue stream—a sentiment apparently widespread in the marketplace given that the IPO, on July 28, quickly went sour. It was initially priced at $12, closed at $11-3/8, and over the next few months would drop as low as $6. The IPO "seemed almost disastrous," observed the online affiliate of the tech-business magazine Red Herring. (Also on July 28, shares in another much-anticipated Internet IPO, Drugstore.com, were initially priced at $18 and closed above $50.) Quokka's IPO debacle prompted a wave of schadenfreude among rivals, who had gotten a bellyful of the company's perceived arrogance. Recalling its underwhelming production titled "First Ascent" in China's Karakoram Range last spring, when a team of world-class climbers failed to find a route up a mountain known as Hidden Peak, detractors began gleefully referring to the IPO as Quokka's First Descent. In mid-October, as this article went to press, Quokka's stock was listed at $8-1/8 per share.

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