Founding, capitalization and growth
Fernando Espuelas and his childhood friend, Jack Chen, founded StarMedia in 1996 with $100,000 in personal savings, credit cards, and loans from friends and family.
A year later, after being turned down by over 50 venture capitalists across the U.S., the pair were successful in raising $3.5 million from Susan Segal, general partner of Chase Capital Partners and its technology affiliate Flatiron Partners. Soon after, StarMedia raised additional venture capital from WarburgPincus, the New York City Investment Fund and David Rockefeller. In 1998, StarMedia made history when it raised an additional $80 million in the largest private placement for an Internet company up to that time. David Rockefeller, wealthy Latin American families, Intel, the Hearst Corporation, Intel, NBC, and GE Capital were the principal investors in that round.
StarMedia went on to raise over $500 million in a combination of public and private offerings. Well before the twin stock market and Latin American collapses of 2000–2001, which severely impacted StarMedia's business and share price, major StarMedia investors had realized significant profits on their StarMedia investments. Investors such as WarburgPincus, Intel, GE Capital, Hearst and many other institutions and individuals sold their StarMedia shares at or near the peak of the market. Espuelas writes in his book Life in Action: “Because I believed in our company and our mission, I had never sold a single StarMedia share or stock option. I personally lost close to $500 million.”[10]
According to the Harvard Business School case StarMedia: Launching a Latin American Revolution , written by professors Thomas Eisenmann and John K. Rust, "by the fall of 1999, StarMedia had sprinted to a sizable lead in the race to acquire Latin American Internet users. Its pan-regional, horizontal portal was the first to target Spanish and Portuguese-language speakers on the Internet, registering 1.2 billion page views in the third quarter of 1999. Thirty-three-year-old StarMedia co-founder Fernando Espuelas was the toast of "Silicon Alley" and a recognized hero throughout Latin America. A picture of him on the cover of Internet World magazine--ripping his shirt open to show the StarMedia logo, like Superman, summed up the spirit of the company."[11]
StarMedia implemented Espuelas' relentless innovation strategy. StarMedia launched web-based email, chat, and streaming video in Spanish and Portuguese before its U.S.-focused competitors such as Yahoo, Excite, Lycos or AOL did in English.
StarMedia's webmail service, branded as LatinMail was a popular free email service, launched in 1997, 7 years before the creation of Gmail in 2004 as an early beta webmail service. LatinMail services were discontinued suddenly in 2017[12] with no prior notice from Starmedia.
StarMedia's chat was first introduced in 1999 and branded as LatinChat.[13] StarMedia's chat service was very popular for some years and visited from all over Latin America since its launch until StarMedia discontinued the service in late 2017, disabling the website.
LatinMail and LatinChat websites and brands were registered as independent trademarks, operated as a service by StarMedia.
In 1996, Espuelas launched the first ever television campaign across Latin America promoting the Internet and the StarMedia brand, helping to spark the subsequent explosion of Internet use in the region. Along with CBS News, it launched the Web's first video news channel in 1997. Other innovations included the first instant messaging system in Latin America; in partnership with HP the first out-of-the-box e-commerce platform for small businesses; and with IBM, the first free ISP in the region. As part of Espuelas' push, StarMedia acquired 12 other media and technology companies in the U.S., Latin America, and Spain. At its peak, StarMedia had over 1,200 employees in 18 offices across 12 countries.
