March - 2000 - issue > Cover Feature

Stop me if you’ve heard this one before. It’s about the e-stamp, or electronic stamp, one of the earliest business-to-business concepts. As the story goes, Salim Kara was running a refrigeration business in Toronto in the mid-1990s when one day he sent his secretary to fill a postage meter. The secretary suffered a car crash, broke a leg and sued Kara. After that, Kara came up the idea of an e-stamp, so that he would never have to send his secretary out and risk getting sued.
It is a good story, but just that. Not true at all, says Kara, not knowing how it came to fill the pages of Internet.com and other news media.

The Real Story

The E-Stamp came about in much less dramatic fashion, in fact, in the course of everyday business. Although the postage meter is a simple enough device to work with, it took too long to get refills — half a day to take the meter to the post office, stand in the line, refill it and return. This delay would knock a big dent in productivity, contends Kara, for any business. As he says, he was stuck for “this piece of fluorescent ink.” Kara found himself asking “Why can’t we get stamps off the PC?” Soon after, the E-Stamp was born.

Using a lot of his imagination and the services of computer professionals, Kara designed a device that would hook up with the US Postal Service (USPS), carry out secure transactions and deliver stamps from the PC. When he acquired five patents in 1994, the Net was by and large limited, “e-commerce” and “B2B” yet uncoined phrases, not buzzwords that have set stock markets on fire.

Although Kara was not even trained in computer technology (he studied mechanical engineering in Zaire and his forte was heat transfer), he was an early adapter of PCs and became a self-taught addict. He introduced PCs into most areas of the refrigeration business he ran in Canada and linked most operations of his sprawling business on a computer network, in those days when it still not, as it is now, the obvious thing to do.

For pioneering the concept of the E-Stamp and also for becoming the first to implement it through the E-Stamp Corporation (initially named Post and Mail), the USPS now proposes to present him an award.

Kara met with the USPS officials for the first time in January of 1994. At that meeting, Kara demonstrated a prototype of the postage vault and even discussed the nuts and bolts of the technology as the meeting, scheduled to last one hour, went on for four hours. Although enthusiasm remained high on the part of the USPS and E-Stamp, the security features necessary were a challenge to create and implementation took unexpectedly long.

But security was a crucial point, which could make or break the deal. After all, it was the first new system of delivering stamps in over 70 years since the postage meter came into being, and the USPS could stand to lose millions of dollars for its misuse.

From concept to reality, it was a long arduous journey for the E-Stamp. Kara’s technology remained wedded to the concept of a postal vault, which alone would ensure that a user could download postage online but print postage offline. This would avoid the necessity to remain online to print stamps, and would be a great convenience for businesses, Kara thought.

Manufacturing a secure postal vault posed unforeseen challenges. Kara’s collaboration with Dallas Semiconductors alone took over two years before a prototype vault, consisting of a microchip and a microprocessor, emerged that was acceptable to everybody involved. The first electronic stamp was actually used in 1999, more than five years after Kara first met with the USPS officials.

During gestation period, competitors such as Stamps.com caught up quickly, neutralizing E-Stamp’s advantage of an early start. Nevertheless, industry analysts reckon that E-Stamp has competitive advantages because its technology allows users to download once and print many times — unlike, for example, stamps.com, from which users may print stamps only when connected to the Net.

New Ventures

The stamps market is considered one of the hottest areas of B2B commerce with unrealized potential in overseas markets too. The E-Stamp Corporation, which has equity investments from Microsoft and AT&T Ventures, has signed a number of deals with leading Web sites including AOL as it targets small businesses. Although Kara is no longer associated with the management of E-Stamp, he and his family remain in line to reap huge profits from its success, as they are still significant shareholders.

“I have learned not only to be smart but also to surround myself with smarter people,” he said, in a reference to how he ceded management control of the company. Kara has since moved into another e-commerce space: finance. Kara Technology, based in Houston, will offer what Kara calls “intelligent financial instruments” online and will target both B2B and B2C (business-to-consumer) customers. “My feeling is (that) B2B has great potential,” Kara said, “but if you turn around and look, what is after B2B? B2C. Eventually it has to business-to-consumer.”

The startup is “going through growing pains” but also “coming along very well,” according to Kara. It received a first round of funding in November and is due for a second round in April, and Kara considering an initial public offering as early as the summer.

If that happens, it will be two IPOs in two years. After all, E-Stamp went public only in late 1999. Success has come at a stiff price, though, says Kara, head of a tightly knit family. His family went back to Toronto about three years ago, and Kara has been flying home on weekends. “I can assure you it is a long flight from Houston,” he says.