The technology craze
Do you find it more difficult or more easy because you have so
many companies to choose from now?
I think it's positive and negative. One of the things is that when
you have a boom, everyone jumps in on the scene, so we've never seen
so many people who are now software investors.
Also, a lot of people are funding early-stage companies who
never did before. It's sort of like everyone hopped on a bus and everyone thought the
ride was going to be to Disneyland and some people have found themselves in
a desert. And I think a lot of entrepreneurs found ready money but not
experienced investors and that will be tough on them and we'll see some
The positive is that people who we could never dislodge otherwise are
leaving companies. Look at Silicon Graphics; look at Hewlett-Packard. Lifers
are actually leaving those companies. Some really great people have come to
us for the first time with ideas that they've been wrapping their minds
around for some time that are inclusive of the Internet. The quality of start-ups coming to us is very, very high, and we're funding a lot more
companies than we would normally in this period just because the quality is
so high. Last year, we auditioned about 700 software companies. This
year, in the first six months, we auditioned 600.
When do you think a shakeout will come?
I think the shakeout will occur probably as we turn into 1997. You'll mostly see a lot of companies running out of money or they'll need to
do that second round and that's where they'll really take a serious, hard,
critical look at who they should invest in. On the other hand, there'll be a
lot of companies that don't need a lot of money that will have great
businesses on the Net. They just won't be public companies. They'll be great
small businesses, great medium-sized businesses, be great places to work, be
great innovation leaders and they may be good acquisition candidates.
We'll also see a whole next round of Internet IPOs as we get into fall of 1997, and people will actually see Internet companies with good
revenue and profits.
Speaking of public offerings, What do you think of this IPO-mania?
I think companies have to be on a mission, not thinking this is a
quick ride to riches. The IPO is not an endgame; the IPO is a
capital phase of your company where you build an even thicker mattress of money to support
your growth, to withstand competitive onslaughts, and to execute your
full-grown mission. There are companies that will need to go public as part
of their strategic plan. Some of the business models are much more
capital-intensive than others, such as those that are producing shows on the
Net or on hybrid media. Those are very rich in content and
need to fully complete their content mission.
On the other hand, companies that just want to grab the IPO brass ring,
stuff the money in the mattress and are not clear about their mission, don't
have a full management team, don't have a good board of directors, don't
really have the convincing story that they are on a long-term mission do not
deserve to go public and probably will spend the public offering money they
obtain if they do successfully conclude a public offering unwisely.
Will all this money improve content?
It used to be that you could have the richest site and it might
cost you $50,000. Now such a site probably costs $300,000 to $400,000 for
editorial and technology; that makes it hard for the new entrants.
The cost of the commerce side is even higher because you have to have that
database back end, you have to have a billing system, you have to
have an email notification system. Together, perhaps that site might cost a quarter of a
million dollars or a million dollars to launch on competitive parity with
those companies who are well-funded, who have gone public, and have the
richest climate. So that will start to happen here. We still will have to
watch for what's happening at the edges because all these edges brings up
the creative stuff.
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