LOS ANGELES (Reuters) - Think you've got what it takes to start an Intern=
et
company?
You don't need to be the world's smartest engineer. You don't need a huge
bank account, or friends who make their living finding and funding new
companies, though either one would help.
What you do need is a good idea, a great idea, a fabulous idea -- and
Herculean amounts of smarts, energy and commitment to bring it to life.
Though the last three years have seen scads of start-ups in the Internet
industry, there's plenty of room for more. That was the message from vent=
ure
capitalists and Internet entrepreneurs attending the recent VentureNet99
Internet investment conference in Dana Point, Calif., sponsored by the
Software Council of Southern California (www.scsc.org).
At the daylong meeting, more than 400 hundred venture capitalists and
investment bankers who specialize in funding start-up Internet companies =
sat
through presentations from a dozen early-stage businesses, most from
southern California. During breaks, they sipped coffee and strolled by
table-top exhibits from a dozen more.
Venture investors continue to pour cash into start-ups of all kinds at
record rates, sinking $4.56 billion into new ventures during 1998, accord=
ing
to a recent PricewaterhouseCoopers Money Tree report (www.pwcmoneytree.co=
m).
Internet companies accounted for more than 40 percent of funds directed t=
o
software investments alone.
The world might not need another online bookstore or person-to-person onl=
ine
auction, but there are plenty of other areas in which a newcomer could st=
and
out, said venture capitalists speaking at the event.
However, investors disagree on exactly where those opportunities are. Som=
e,
including Christine Comaford, partner at Artemis Ventures
(www.artemisventures.com), a Sausalito, Calif., venture company, believe =
the
biggest potential lies in helping companies do business with other
companies, an area known as business-to-business electronic commerce.
Artemis is only funding business-to-business start-ups, to the tune of $1
million to $4 million a pop.
But Tim Draper, founder and managing partner at Draper Fisher Jurvetson
(www.dfj.com), a Redwood City, Calif., venture capitalist that's backed
Preview Travel (www.previewtravel.com), eFax (www.efax.com) and Four11
(www.four11.com), believes the best bet is still selling to wired consume=
rs.
"We look for hyper-growth, and selling to consumers is one way to achieve
it. You can reach 100 million people today and 6 billion in 10 years and =
if
you can get them each to buy a bar of soap or use your e-mail product,
you're doing well," Draper said.
At the conference, one standout in the business-to-business category was
Wazzu (www.wazzu.com) a Fountain Valley, Calif., company that uses
telemarketing to sell low-end Web stores to small merchants. Others were
PeopleSupport (www.peoplesupport.com), a Los Angeles-based provider of li=
ve
customer service help for online retailers, and Interval Inc.
(www.intervalinc.com), a Santa Monica, Calif., marketing service auto mak=
ers
and dealers can use to set up personal Web pages on their Web sites that
customers can use to keep track of their cars' service schedules.
Companies targeting consumers included TopTutors.com (www.toptutors.com),=
a
Pacific Palisades, Calif., company that will launch a fee-based online
tutoring service in the fall; Vitamins.com (www.vitamins.com), a vitamins
and nutritional supplements company that plans to sell through retail
stores, print catalogs and a Web site; SuperDrugStore.com
(www.superdrugstore.com), an online pharmacy that plans to work directly
with HMOs and other medical plans, and SmartHome.com (www.smarthome.com),=
an
Irvine, Calif., direct marketer of home automation supplies that's expand=
ing
its Web site.
The typical venture firm funds a handful of start-ups a year, though they
review business plans for hundreds or thousands. As a result, it pays to
know how to sell your company, said Ann Winblad, co-founder of San Franci=
sco
venture capitalist Hummer Winblad (www.hummerwinblad.com), which has fund=
ed
Pets.com (www.pets.com), HomeGrocer (www.homegrocer.com) and Liquid Audio
(www.liquidaudio.com) among other Net ventures.
If you're not the management type, recognize it. "If you're not a good CE=
O
... find another CEO," Winblad told the crowd. "You also need a money rai=
ser
because you may raise $50 million or $60 million before doing an IPO." Wh=
en
it comes to looking for money, not all venture capital funds are alike.
Because many specialize in narrow sectors of the business, do your homewo=
rk.
Find out what other Net firms a venture capital group has invested in and
quiz them about the experience, Winblad said.
She also cautioned cash-strapped entrepreneurs against accepting investme=
nts
from lots of friends and family; when and if you get venture capitalists =
to
step in, they might think twice about having to share future profits with=
a
whole bunch of smaller investors, she said. Venture investors are most
interested in companies "that break the rules," and are willing to move a=
t
break-neck pace to achieve their goals. Said Winblad: "It's like driving
across country at 80 miles an hour and taking all the curves without gett=
ing
a nick."
(Michelle V. Rafter writes about cyberspace and technology from Los Angel=
es.
Reach her at [email protected]. Opinions expressed in this article ar=
e
her own.)