The entrepreneurial bug bites

After spending much of the last decade at ground zero, Roberta Katz might have understandably wanted to kick back. After all, as the former general counsel for Netscape Communications (she held down the same job at McCaw Cellular), Katz played a central role in the exhilarating struggle to build what became the first big Internet success story.

She played an equally key role in devising a legal strategy that ultimately convinced the government to file antitrust charges against software giant Microsoft.

But not long after Netscape was acquired by America Online, Katz took over the reins of TechNet, a nonprofit advocacy group for the high-tech industry. Now she's on to her newest career--this time as the chief executive of Flywheel Communications, a software start-up that plans to go live with its service next month.

With backing from Goldman Sachs, VantagePoint Venture Partners and her old boss, Netscape co-founder Marc Andreessen, Katz says Flywheel can capture a relatively untapped market offering secure service for the management of rights among businesses around the world.

Katz talked in a recent interview about her ambitions for the company as well as her perspective on changes in the technology industry.

Why did you decide to make the leap to entrepreneur?
Joe Grundfest, who was professor at Stanford Law (and now chairman and co-founder of Flywheel) read a book that I wrote in 1997, "Justice Matters: Rescuing the Legal System for the Twenty-First Century," which was an anthropologist/lawyer's treatment on the state of the justice system. He gave me a quote for the dust jacket. Then, about fall of 1999, he called me up and said, "Katz, I've been thinking about some things in your book and I think there's a business to be built."

We got together and then the same thing happened to me that happened when I first met Jim Clark and Marc Andreessen. I had a strong sense in my gut that they were right and I had to help make it happen. That's how I felt about this.

What was the genesis of the idea?
We talked about my view of the justice system basically as an information system. But though we started looking just at the justice system, we realized that what we were thinking of had much broader application for corporate and professional use.

OK, so now you're doing the entrepreneurial thing. But during your tenure at Netscape and then with TechNet, you were dealing more with the broader legal and political issues surrounding those two operations. This is a big jump. Do you think you have the kind of background to run a company?
Well, I was general counsel of two fairly large moving organizations and I managed a large number of people. From the time I got to Netscape, I was involved in the great majority of the most senior decisions that were made. I was part of the team that met every Monday with (former Netscape CEO) Jim Barksdale, which was a small number of people.

What's your management style?
It's been very much informed by all those years spent by Jim Barksdale's side.

Do you think you have the brass to get in peoples' faces?
I think you should ask them. I've been described as persistent as a bulldog. And Marc (Andreessen) said I was "a total stud." (Laughing) But seriously, I've learned to do management in a style that's appropriate to me.

OK, let's talk about the business. A couple of years ago, ideas about how the Web could be used to make people's lives more convenient--up to and delivering pet food--were getting serious attention. But times have changed and budgets are tighter. Why does a company need an Internet-based service to help them manage their legal rights?
We don't say "legal rights." Lawyers deal with rights. But so do CFOs or property managers.

So what are they?
Rights are the glue that brings a corporation together. You can't even locate a business without some discussion of your rights. What happens is that people don't exploit their rights because, for example, they put something in the drawer and then forget about it. They miss a revenue opportunity or incur expenses that they don't need to incur.

The classic one is where they forget to do something under a lease and they wind up losing money. There's just so much information that people haven't done a good job organizing and understanding what to do with all that data.

Step me through the process. If I'm a Flywheel client, how would you make my life saner and more profitable?
There are a couple of attributes to Flywheel. One is a more secure forum for communication about rights. In a merger discussion, for example, people in a company tend to communicate on their intranet and tend not to use the Internet for obvious reasons. That means when they want to talk to the other side, they have to pick up the phone, which means you have to schedule a video or phone conference, or get on a plane or use a FedEx or fax. And if they choose the latter, it means all these documents, which were produced digitally, now have to be printed out.

And so?
And so what's missing is a good place in the middle where everybody can take advantage of digital communications. In a hosted location, we can offer the latest and greatest security technology that customers access through a browser. We will also offer applications, some of which we will build and some others where we will partner. The idea is to look at particular work flows as they are related to rights, whether you're talking about transactions, due diligence or arbitration.

Flywheel's going after a professional and corporate audience to help them manage entitlements and obligations. But isn't that going to be a tough sell when companies are especially anxious to keep down costs?
You mean why not do it yourself? The reason is that in a corporation, it costs you a lot of money to build a service like this and keep it state of the art. Also, your internal IT people may well be focused on what is the business of the business, rather than the administration of the rights.

Is there anything proprietary about what you're offering?
There are people doing pieces of what we're doing. But I think what we're doing is comprehensive. You never want to say that you're unique, but we do feel we have some very special technology.

You're debuting in the second quarter. How will you base your fees?
The fees will be based on matters that take place over the service. It's going to be based on bandwidth but will be charged over time. The number of people using it will also be reflected in the amount of bandwidth being used.

Any lessons learned in order to avoid repeating the key blunders that took down Netscape?
I'm not sure that Netscape committed blunders. Netscape was a once-in-a-lifetime, extraordinary experience. The amount of public attention that was brought to bear on a start-up in that set of circumstances--I don't think people have sufficiently appreciated what it was like. But that's another story.

The lessons learned are from life: to bring in the best people you can find. You can have great ideas, but without extraordinary people, those great ideas don't go far. I'm in my 50s now and I've learned that balance is also important.

You're running the show at Flywheel. But you're one of the very few female CEOs in this business. Why are there still so few women running high-tech companies in Silicon Valley?
I don't know the answer to that. When I was thinking about coming down (to Silicon Valley) from McCaw, I called a friend who was a graduate of the Stanford Business School and she said this was a really tough environment and people have sharp elbows--but that I'd be fine.

There were not that many women in the business when I started, so age is a factor. You have to be around to know what you're doing. But there are a number of very talented women in their 30s who would be very capable at running companies. If they want it, they will get their shot. A lot depends on start-up life here.

Let's segue. In your previous career at Netscape, you played a not inconsequential part in helping prepare the ground for the government's antitrust case against Microsoft. The appellate court gave the government's lawyers a pretty good going over last month. If the court overturns a good part--if not all--of Jackson's verdict, won't the entire antitrust litigation go down as a monumental waste of time?
I'm not really talking about that one anymore.