DECEMBER 22, 2000 VOL. 26 NO. 50 | SEARCH ASIAWEEK

Wei Leng Tay for Asiaweek. Mark Ferreira gave up coaching tennis for the dotcom game. But he says bad management made victory impossible.

The Agony of Defeat
Like so many others who dreamed of a Net victory, SportsNetGlobal may be out of the running for good
By YASMIN GHAHREMANI

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Venture capitalist Dev Wadhwani had just walked into the garden of his friend's Mumbai home when his assailant confronted him. Not an unknown assailant. It was the very person he had come to see: fellow sports buff Mark Ferreira, a childhood buddy who for the past five months had worked for the Hong Kong-based Internet firm, SportsNetGlobal Holdings Ltd. Bellowing that Wadhwani had betrayed him, Ferreira, 33, swung at his visitor. Wadhwani, 27, hit back. Suddenly the two ex-jocks — Ferreira was a tennis star with India's national team when Wadhwani was a rising badminton champ — were punching and scuffling like schoolboys. Ferreira's father had to break up the fight.

Partnerships and friendships are not supposed to end this way. But there's a lot of bad blood in the dotcom business these days. Ferreira, director of India operations for SportsNetGlobal, jumped Wadhwani because he had pulled the plug on the struggling venture, refusing to sink a $1.3-million investment into the company following a bad $325,000 loan. "It was hard to say 'no' because Mark is a friend," Wadhwani says. "But I knew I would have been patching through the money for all the wrong reasons. I would have had $1.65 million in the company and at the end of the month they would have come back asking for more."

Throughout Asia, venture capitalists like Wadhwani and countless others are cutting their losses and mopping up debris in the aftermath of a remarkable interlude in the region's economic history. The dotcom boom — and bust — hit Asia especially hard. Coming on the heels of the financial collapse three years ago, the new economy looked like the fast track back to prosperity. Otherwise-rational investors, seduced by the prospect of making an IPO fortune, threw billions of dollars at start-ups that, in retrospect, held slim chances for success. But for the last six months, the dead dotcoms have been piling up. Plenty of undead are still marking time until they too are forced to close for good.

SportsNetGlobal's tale is typical — a black dotcomedy comprised of runaway optimism and inexperienced managers who squandered millions trying to execute a business plan that contained little more than marketing buzzwords. At its peak, SportsNetGlobal (SNG) employed 80 people in 23 countries, including India, Australia, the U.K., the U.S. and South Africa. Its goal was to create a network of athlete websites in local languages. Top stars, including Aston Villa soccer player David Ginola and U.S. golfer Davis Love III, signed up.

Today, SNG has decomposed to a near-empty shell that the principals, who refused to be interviewed for this story, are trying to sell. They maintain the company is not out of business. Meanwhile, 51 ex-employees are petitioning to force it into liquidation so they can recover a small part of the $641,000 they are owed in wages and expenses. "It was like being on a plane that's gone into a nosedive," recalls Ferreira. "You say, 'Captain the plane is going down.' No response. Next you hear the warning from the ground proximity system: 'Whoop, whoop, pull up, pull up!' Still the captain says, 'we are flying straight and level.' So finally, you have to say, 'I've got my parachute. I'm out of here.'"

The captain of the stricken aircraft is Steve Feuerstein, a 38-year-old serial entrepreneur whose sports marketing company, ProSport Management, has handled the Hong Kong Open golf tournament since 1996. SportsNetGlobal was his idea, hatched with Tim Bredbury, a 35-year-old professional Hong Kong soccer player looking for a career change. The pair met at a seminar in 1999, got to talking about sports business ventures, and settled on building fansites for sports stars. Revenues were to come from online advertising, the electronic sale of autographed merchandise, and customized tours to international sporting events. Eventacom was formed on Oct. 1, 1999 and was later renamed SportsNetGlobal.

Even to outsiders, it seemed like a good idea at the time. In a March 28 letter, Peter Schloss, managing director for the Internet group at investment bank ING Barings Asia, wrote that if the company went public, its market capitalization could reach $1 billion. Schloss based the estimate on revenue projections of $20 million for the year 2001. But Feuerstein and Bredbury were an unlikely team to be running a $1 billion Internet venture. Bredbury, the chief operating officer, was forthcoming and likeable, but the only thing he had ever run was circles around a soccer pitch. "He got better as time went on," says one ex-staff member, commenting on Bredbury's business skills. "But by that time, it was too late."

Feuerstein's resume, on the other hand, was full but checkered. His past endeavors include a soccer training school, a regional sports management institute and a marketing consulting firm called Entertainment Asia. Those ventures, and others, all fizzled. The fast-talking, hot-tempered American has also been embroiled in monetary disputes. Last summer, he was ordered by the Hong Kong Labour Tribunal to pay $1,200 worth of commissions to a former employee of ProSport Management. Ian Doyle, chairman of a U.K. company called The Sportsmasters Network and an agent whose clients played in the Hong Kong Open last year, said he reported Feuerstein to Britain's pro golfers association in order to collect about $6,000 in cash prizes due his players. "It took us three months to track down the money," Doyle says.

While Feuerstein, SNG's chief executive, wasn't always able to part with cash, he is blessed with the ability to convince others to part with theirs. "He's a great salesman," says Steve McGraw, a 22-year-old ex-research assistant for SNG. "Door to door, he'd make a killing." Drumming up seed capital for the start-up proved little trouble when Internet fever was running high. Although it's not clear how much money was raised initially, insiders estimate the amount at $2 million to $7 million, most coming from Feuerstein's contacts in the community. Other recruits were brought aboard. Peter Kaminsky, a longtime accountant with Pricewaterhouse Coopers, became SNG's chief financial officer. Lee Kaplan was hired as managing director. Formerly employed by Hong Kong Internet design consultancy Web Connection, she was the only top SNG manager with Internet experience.

Right out of the blocks, SNG began falling behind. Feuerstein insisted on signing as many top athletes as possible, before they were snapped up by dotcom competitors. Sports agents, however, insisted on package deals — if SNG wanted rights to big names, it had to agree to build websites for the agents' no-name clients as well. At one point, Feuerstein flew to China and signed up the entire Dalian football team; the rights cost the company $800,000. In all, 252 athletes eventually joined, albeit most of them for free.


"So many of those [athletes] were not high profile enough to warrant their own sites," says Ali McCullough, a former member of SNG's athlete management team. Nevertheless, the company had committed to delivering them — all of them. In February 2000, Feuerstein began hiring bodies to build hundreds of web pages. Within 90 days the payroll expanded from 15 to 60 people. Recruits weren't hard to find. They were promised stock options, which, although never spelled out on paper, inspired visions of quick wealth. Money wasn't the only draw. Sports stars and the Internet made a heady combination. "People loved what they did there, and it was a really fun place to work," says McCullough, 34, who left STAR TV's publicity department to join SNG in March. She and McGraw had a regular Friday evening rugby toss in the corridor, colleagues would banter about their favorite rival teams, and famous athletes like footballer Ginola occasionally dropped by.

Fun, yes — a great game funded, unfortunately, with Monopoly money. Expenses soared to $500,000 a month with the hiring blitz. Feuerstein's penchant for bartering kept some costs down (he reportedly exchanged free website advertising for Dell computers) but there was little effective control. The SNG merchandising manager, who declines to be named, spent 18 weeks in England buying up goods on his personal credit card to sell on the websites. In all, he racked up $19,000 worth of bills that the company did not pay for months. His American Express card was canceled. When SNG finally reimbursed him, he quit. "They knew exactly what I was doing,'' he says, "and nobody ever said, 'hang on a minute, we're not going to have the money to pay you back.'"

Even with new personnel, the workload far outweighed manpower. At a staff meeting in March, Feuerstein ordered 500 sites built in six months. Geoffrey Yuen, the chief technology officer who had been with the company for less than 30 days, shook his head. He had already turned in his resignation. "I had problems working with the management," says Yuen, now vice president for Internet services development at the NOW division of Pacific Century CyberWorks. "They weren't realistic, they weren't listening to what needed to be done." Only about 10% of the sites ever made it to the Web.

Yuen wasn't the only one with misgivings. By now Ferreira, a one-time Davis Cup tennis player and the son of a four-time world billiard champion, had joined, bringing with him contacts that enabled him to recruit 80% of India's national cricket team. He also convinced his old pal Wadhwani to become a special financial adviser to SNG. Right away, Wadhwani warned Ferreira that the business plan was sketchy. "Even I could see it was not a business plan, it was a marketing plan posing as a business plan," says Ferreira. Moreover, Wadhwani says he thought SNG subsidiaries like Ferreira's India operation were getting a raw deal. The country units were responsible for doing most of the work but only got a 35% stake in their own operation — Feuerstein and his Hong Kong partners got the rest. Acting on Ferreira's behalf, Wadhwani phoned Feuerstein and asked him: "Exactly what do you bring to the table, sir?" That touched a nerve. "What do I bring to the table?" the CEO reportedly thundered in disbelief. "I am the table. I am the legs, I am the wood. Every contour you see on that table is me, and don't you forget it." Hoping to smooth things over, Ferreira got on the line and explained that Wadhwani was going to help raise money for the India operation. Feuerstein, who was instantly mollified, apologized and welcomed Wadhwani to the team.

Increasingly, management's focus was on raising cash to stay afloat. Employees continued to be hired even though meeting the payroll was becoming dicey. Kaminsky, the CFO, approached Wadhwani for a loan in March. A $15 million investment from Credit Lyonnais was nearly clinched, he told Wadhwani. The company just needed a little cash to tide it over for a few weeks. Despite his qualms about the business structure, the young Wadhwani wanted to believe in this friend. "I bought into Mark the person," he says. "So a lot of the due diligence I would have normally done, I overlooked. Besides, it was not an investment, but a loan for which I have a promissory note."

The Credit Lyonnais money never materialized. It was merely the first in a string of cash infusions that management told worried employees were in the works — but which were never secured.

Any chance of help from institutional investors effectively died on April 3, when the tech-laden Nasdaq stock market index plunged a record 349 points. By May 23, Nasdaq companies had shed $2.4 trillion in market capitalization — one-third of their value — and the Internet IPO boom was finished.

Feuerstein, in too deep to quit, continued to jet all over the world chasing investors. Fewer and fewer were listening. Desperate for cash, management turned to Wadhwani, offering him a stake in the company in exchange for a $1.3 million investment, part of which would go for June salaries. Kaminsky offered to pay $140,000 of the March loan debt as a good-faith measure. According to Wadhwani, the CFO claimed to already have memoranda of understanding from companies in Israel and Chicago that were willing to invest; he said the money was coming in August. Although still skeptical, Wadhwani says he did sign an agreement to invest, but only on the condition that he first receive audited financial statements. Kaminsky paid Wadhwani the $140,000 and on the last day of June, a Friday, let employees know that they could pick up their pay over the weekend if they wanted. There was none to be had, however. Wadhwani insists he never received the documents he requested. He never wrote the company a check.

Back in Hong Kong, Feuerstein told the staff they wouldn't be paid after all. It was the first inkling many of them had of just how bad things were. In public, Feuerstein appeared his usual optimistic self. Even while pleading with Wadhwani for money, he was hiring more people. A new human resources manager appeared — although it was not clear if there would be any human resources to manage. A lawyer started hanging around the office, but the biggest impression he left was on a plate-glass window he walked into accidentally. "It was farcical," says McGraw, the former researcher. "It was like, we have no money, you're not paying us, but there's five new people starting today."

Ferreira made a personal fund-raising trip to impoverished Vietnam to approach some Indians he knew in the garment industry. No score. "There seemed to be a huge number of people they were talking to, which kept confidence high," says McCullough, the ex-athlete management team member. "We would go into a meeting and there would be a whiteboard with ten names and a note by each one indicating when these people would give answers." The longer employees went without paychecks, however, the more restive they became. Water-cooler conversations began to revolve exclusively around the legal rights of unsecured creditors. One employee started taking her company laptop computer with her whenever she left the office, so that she could salvage something if she returned to find the doors padlocked. Most were relying on savings or friends and family to pay the rent. "My parents thought the company was not very good," says Robbie Ho, a 23-year-old former Chinese translator for SNG. "But they said they would help me out if I wanted to stay." The athletes were also getting impatient. They wanted to know why their sites were not finished — other Web companies were approaching them with offers. Ferreira eventually paid some of them out of his own pocket to compensate for the company's broken promises.

One last deal was held out as possible salvation. Israeli multimedia firm Orad Technologies, which makes applications like virtual chatrooms, considered injecting $1.2 million in cash, plus $800,000 in software. An e-mail was circulated by management telling staff that the investors would be coming for a due-diligence visit and everyone should try to make a good impression. When the Israeli team failed to show, however, the employees knew the arrangement was off. In the first week of August, Feuerstein again called a meeting and broke the news in a locker-room-style speech. "Running a business," he said, squatting for bizarre theatrical effect, "is like giving birth." The company was going through a rough labor, he told them. Then he dropped the bomb: there was no money for June or July salaries. Personnel were welcome to stay on a voluntary basis, with the understanding that all back wages would be paid once funding was secured. Within days, the office cleared out. "I was very depressed," says Ho. "I had lost my job and I had no pay."

A few faithful stragglers stayed on for another month. They watched as computers were repossessed and collection notices piled up. "There was a constant flow of people with invoices," remembers McCullough. "It was really hard to watch." Eventually, even the last holdouts bailed. Feuerstein moved what was left of the operation to the accommodations of Cell Plus, his wife's Hong Kong mobile phone accessories company. As this story goes to press, the SNG website is still up (www.SportsNetGlobal.com). It is the Net equivalent of a ghost ship. The site has not been updated for months; a pre-Olympics story is still splashed across the home page. An inventory of sports merchandise is gone. The warehouse that was storing it in England sold the goods after SNG failed to make rent.

Today, Bredbury, the ex-soccer player who helped launch the firm, is selling insurance. Kaminsky, the CFO, is looking for work. The pressures of employees, vendors, investors and his own family have taken their toll. "He looks like a broken man," says McCullough. She recalls Feuerstein saying philosophically that at least everyone still had their health. "And I looked at [Kaminsky] and thought, do we?"

Most employees have little sympathy for management. "If they had wound up the company earlier, when they still could have gotten something for it, I wouldn't be in this position," says McGraw, who is also sending out resumes. Many of his former colleagues share his bitterness. They still believe in the SNG concept. They think poor management spoiled it.

Feuerstein is hoping that U.K. firm Digital Sport will buy what's left of SNG. "I've been through this too many times before," says one ex-employee. "I'll believe it when I see the money." If the money does come in, then who knows? "It's not a crime to be a bad businessman," says John Toohey, a liquidator for Arthur Andersen. "There is no section of the companies ordinance that says you must have a business plan or strategies or budgets." For a time it appeared traditional business rules had been repealed by the Internet. But as SNG and other dying dotcoms are proving, common sense still applies in cyberspace.

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