Baltimore taught Joseph A. Mathews well -- so well that the young entrepreneur plans to take public within nine months the information-service company that he launched two years ago.
"Baltimore was a beta market for us to get out and perfect our product," said Mathews, a Baltimore native, who is founder and chief executive of Nexus Communications Inc., based in Hanover. "We learned what worked and didn't. Our numbers get better in every market we go into."
Mathews' company started out as a competitor to the $13 billion Yellow Pages, which had long been the only game in town for local commerce.
Customers call 555-NEED and talk with live operators or go to www.555-NEED.com to request information about plumbers, dentists or floral shops, for instance. Company names, phone numbers and other information are provided on behalf of merchants who pay to be included.
"When we kicked off in 1998, we were more focused on the telephone," said Mathews, 29. "Six months after May 1998, we realized it makes sense to give people the same information on the Internet that you could get on the telephone."
Becoming a client of Nexus Communications effectively puts a company that doesn't already have an Internet presence into the e-commerce business.
"It's a classic case of a company being nimble enough to adjust the business model to reflect where consumers are trying to take us," said Mark Plakias, vice president of voice and wireless commerce for the Kelsey Group, a Princeton, N.J., research and analysis group. "They found that they could apply principles from the e-commerce world and extend them to everyone with a phone."
Initially, the company was essentially a competitor to 411, a tough market because of the difficulty in changing established consumer and merchant behavior, Plakias said.
"They've moved to a model where they act as a service broker for customers with identified needs," he said. "The bigness of this comes from the fact that they're marrying a network that everyone has with the network that has all the information, which is the Internet."
Internet usage represents about 10 percent of 555-NEED's business, Mathews said. The company has grown to 250 employees and has 7,000 business subscribers.
In addition to being offered in Baltimore, the service is available in Cleveland; Washington; and Tampa and Orlando, Fla. Mathews said. He wants to be in 20 markets by the end of the year.
Kevin Weiner, vice president of Nations Home Remodelers Inc. in College Park, has been a client since 555-NEED started up.
"I've been impressed with the way they've adapted to the needs of the market," Weiner said. "Since they've started their newest ad campaign, we're getting four or five referrals a month."
Mathews has raised $20 million in private capital -- about the same amount he plans to spend this year on advertising. He plans to raise another $15 million to $30 million before going public, he said.
"We feel Nexus is in the vanguard of a very hot area in the e-commerce world," said Plakias, of the Kelsey Group. "They have figured out at the end of the day that people still like a live person out there."
Dwight Allen, a consultant with Deloitte Consulting who follows the telecommunications industry, said recent market fluctuations have created new challenges for start-up companies such as 555-NEED. The thinking seems to be that larger companies will be the ones that take the Web to the next level, Allen said.
"I think they may have a steeper hill to climb in terms of perceptions for as long as the new conventional wisdom stays in place," he said. "Still, they have going for them the nimbleness, the agility and the creativity that you would expect from a smaller, newer company."
Mathews is optimistic: "I think Baltimore is a place where there is a lot of momentum from people wanting you to succeed."