MetalSite kills exchange, seeks funding

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MetalSite L.P. has shuttered its independent Net marketplace for steel and other metals and fired 62 of its 72 employees.

MetalSite is maintaining its Pittsburgh headquarters and seeking financing to make another go of it. A handful of Web developers and customer service reps are keeping the company going, at least for now.

Doug Schuster, MetalSite’s VP-marketing and strategy, insisted the company’s future is bright. "Right now, we are extremely bullish on our business model," he said. "We are looking for a very modest investment. Independent exchanges will still work."

Several factors are working against MetalSite, which launched in August 1998. Venture capitalists will likely be skittish about investing in an exchange company that has already burned through $35 million in financing. Additionally, the refusal of some of its earliest financial backers, including Bethlehem Steel Corp., to invest any more money, is telling.

MetalSite also is hampered by tough times in the steel industry, with prices at their weakest levels in two decades.

"The financial markets and steel industries are going wrong," Schuster said. "It made it very difficult for us to break even."

Others say that MetalSite didn’t market itself effectively.

Chris Peters, CEO of consultancy eMarket Concepts and a co-founder of MetalSite, said a lack of marketing focus was a factor in his leaving the start-up in 1999. "I had a number of concerns about the direction it was going," he said. "It started to turn more into an IT project."

MetalSite spent too little time voicing its worth to buyers, Peters said.

MetalSite’s prob-lems mirror those of its competitors, two of which— Inc. and MetalSpectrum—closed only days after MetalSite.

One notable survivor in the space is e-Steel Corp. Michael S. Levin, chairman-CEO and founder of the New York-based company, said its prospects are good, and that after raising $100 million in venture financing, it has "enough cash on hand to run this company for two years."

Since last year, e-Steel has cut its work force from 140 to 100 and in recent months has morphed into a supply chain and procurement software developer, gaining Ford Motor Co. as one of its clients.

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