Successful companies can be formed out of the failure of a dream and a side project created for friends and family growing into much more. This is the story of the birth of PriceGrabber.com, a shopping comparison search company that grew from a side project into a half-billion dollar sale in about five years.

Grabware was envisioned as a software distribution company providing on-demand distribution of software through store kiosks. A buyer would approach the terminal, choose a few shareware titles or full versions of the software, and an in-store fulfillment service would burn a CD and print a user manual. The same hardware could also be repurposed for custom music selections.

I loved the idea because it allowed more developers a place on the virtual shelf, more frequent release opportunities through downloads to the kiosk, and no more wasteful display boxes the size of a large dictionary holding a 20 MB installer. Retailers could reduce their total software display area, or be more creative with their layout, while stocking a wider selection of titles.

We built a database of shareware titles and opened up shop online, selling custom collections of shareware and freeware CDs shipped anywhere in the world within days. The online commerce site was a demonstration of what in-store kiosks could do with the right retail and software partners.

The company set two pie-in-the-sky measures of success. If we could convince Microsoft to participate as a software manufacturer and CompUSA to sign on as a retail partner the business will have made it and all of the other companies in both spaces would soon clamor to do business with us.

After about 4 months of weekly calls we eventually had our first meeting with Microsoft. Unfortunately they were not as excited about our market-changing idea as we were. Microsoft’s products are popular enough to command prime display locations in stores across the country. They essentially receive free advertising on the shelf, stocking bundles such as Office, individual programs such as Word and Excel, or games such as Flight Simulator. Why would any established retailer want to give up their free shelf advertising for a small spot on a 19″ screen?

Electronic Arts had a similar answer, although the gaming industry did downsize their packaging a few years later and started including demo versions of games in compilation disks distributed with gaming magazines. CompUSA could manage to staff and maintain rows of cardboard boxes a lot easier than a new fulfillment device. It looked like the dream had died.

Grabware.com, the online marketplace and software showcase continued to do well. Software titles such as Winamp, ICQ, and Audiograbber became must have applications for every computer user. Linux desktops began to take off around the same time but the variety of distributions and extra bundles overwhelmed Internet connections on servers and workstations alike. Grabware was able to monitor the downloads of these hot pieces of software immediately after they were released and make them available to people around the world and take away the tiresome process of trying to get the right archive from the right server at the right time. Grabware was back, powered by the Web and the U.S. Postal Service.

A new business started to take off about the same time as software manufacturers turned down Grabware as a distribution platform. As a side project a few Grabware employees built a web spider designed to discover pricing information on thousands of items from online retailers. The project was called PriceGrabber because we were literally grabbing prices off of the merchant site and placing them in our own database.

It was time for a tough choice. Both Grabware and PriceGrabber had potential to succeed, but with the original Grabware vision dead PriceGrabber held a lot more opportunity and excitement for everyone involved. It was time to focus on just one product and do it really well.

Grabware was lucky enough to find another entrepreneur interested in taking on the business and acquiring our technology. It helps when your potential acquirer is in the same office building too! We moved out of our existing offices into a larger space in the same building, hired a few employees, and started working on building PriceGrabber and new shopping search features full-time.

This post was inspired by Xooglers, a blog by ex-Google employees. Thanks guys!

Tags: grabware, pricegrabber, shareware, shoppingsearch, startup