In the venture world, there are two types of VCs: those who invest in
business-to-consumer (B2C) deals, and those who back business-to-business
(B2B) companies.
These two camps don't look kindly on one another. Although both sides say
they will invest in the other side's deals if the money is right, B2C VCs
argue that the market is placing higher valuations on consumer deals.
Meanwhile, B2B investors think B2C proponents are chasing after fool's gold:
in their view, the market for Web-based enterprise business applications has
not even been tapped, and businesses are much more predictable than
consumers.
Ravi Chiruvolu of Alta Partners <www.altapartners.com> is a champion of B2C
bets. Although the markets have already afforded outsized valuations to B2C
companies like Amazon.com (Nasdaq: AMZN), Mr. Chiruvolu thinks this market
could receive an even bigger boost as more traditional retail chains lend
their brand names and store infrastructures to Internet ventures.
The Barnesandnoble.com IPO was disappointing. A panel at Venture 99 agreed
that the best way to build an Internet division was by spinning it off.
Point.com used to be named Wireless Dimension. This hybrid approach is not
new. Companies like Barnesandnoble.com (Nasdaq: BNBN have emphasized the
"synergies" that they can achieve because of their strong relationship with
their offline parents. But Mr. Chiruvolu says both Barnesandnoble.com and
Barnes & Noble (NYSE: BKS have "dropped the ball" because they have not
taken full advantage of the opportunity to drive customers from Barnes &
Noble's stores to Barnesandnoble.com.
Mr. Chiruvolu thinks the problem lies in Barnes & Noble's decision to spin
off Barnesandnoble.com. Although spinning off Internet companies can help
traditional retail chains maintain the integrity of their balance sheets and
provide incentives to talented Web professionals used to making "Internet
money," it can also mean that a company's stores and its Web offshoot do not
always work hand-in-hand.
WIRELESS CONNECTIONS
Totally Wireless, which sells long-distance and wireless service plans,
phones, and phone accessories through 19 stores located in the San
Francisco, Seattle, and Salt Lake City areas, is taking a different
approach. With $14 million in first round funding from Alta and U.S. Venture
Partners <www.usvp.com>, the company has built a Web site that it will keep
close to the fold. Totally Wireless's strategy works like this. Because
Totally Wireless has been working with carriers for years, it believes it
has a unique value proposition as a Web business: unlike companies like
Point.com (formerly known as Wireless Dimension), which predominantly
recommends phone service plans, Totally Wireless can actually sell these
plans through its site.
Totally Wireless hopes its brick-and-mortar stores will help distinguish it
further from its competition. According to Mr. Chiruvolu, customers who
place orders on Totally Wireless will be able to pick up their goods at a
nearby store on the same day, thus avoiding shipping delays. Also, they will
be able to turn to a Totally Wireless store representative whenever they
have a problem with a product -- a key difference from many Web businesses,
which often require customers to ship products back to their manufacturers.
To drive Totally Wireless' store customers to its Web site, he says the
company is considering putting Web kiosks in its stores. And the Web site
and stores will offer the same low prices (tax not included).
Are these changes revolutionary? Not really -- other companies have
announced similar plans. But as one measure of how integral the Web is to
its business, Totally Wireless is not only holding onto its Web division,
but plans to change its name to herald its new hybrid approach. Mr.
Chiruvolu thinks business-to-consumer e-commerce benefits from close
partnerships between traditional retail companies and their Web offshoots.
In his opinion, venture capitalists can play a key role in providing offline
companies with strategic guidance. But another Ravi -- Ravi Mhatre of
Bessemer Venture Partners <www.bvp.com>-- isn't so sure.
Next week - the B2B side of things.
source : http://www.redherring.com/insider/1999/0630/vc-vcps.html
Tushar J. Mehta
email: [email protected]