[RealMoney.com] Still Plenty of There There in Silicon Valley

Date view Thread view Subject view Author view

From: Linda (joelinda1@home.com)
Date: Wed Dec 06 2000 - 14:57:45 PST

["Well-funded companies, dreamy-eyed entrepreneurs, slick technology
that's changing the world..."

'Nuff said :)


There's Still Plenty of There There in Silicon Valley
By Adam Lashinsky
Silicon Valley Columnist
12/6/00 1:10 PM ET

SAN MATEO, Calif. -- It's time for a reality check. Time to ask the
question: Just how bad is it out there? After 24 hours driving up and
down Silicon Valley, there's no easy answer. But the short version is
this: The euphoric era defined by the late 1995 initial public
offering of Netscape Communications to the Barron's-inspired pursuit
of profitability in early 2000 most definitely is over; the age of
Silicon Valley, whose starting point was the founding of
Hewlett-Packard (HWP:NYSE - news - boards) in 1939, most decidedly

Message to investors: The consistently easy tech-stock gains are a
thing of the past. After all, how many were well-positioned for
Tuesday's triumph? Having said that, the time to be invested with some
portion of your savings in the information-technology economy is as
much now as it was yesterday and will be tomorrow.

Over sushi Monday night here in San Mateo, a bedroom community halfway
between Palo Alto and San Francisco, a friend has quit his job after
nearly four years with a once-flying -- and now struggling -- publicly
traded Internet company. He's burned out and plans to travel, shop for
Christmas presents and ski. And then? Does he plan to turn to
meditation or take up a career as a professional bowler? Of course not.
Already he has a lead on a great gig with a promising technology
company in the Valley.

A friend of his, a one-time entrepreneur who made a bundle (eight
figures counts these days; it used to be nine), also recently ditched
his day job. He played for a while, too. Now? He's brainstorming with
friends, meeting with venture capitalists, helping out newbie
entrepreneurs. He spent three hours the other night helping perfect
the PowerPoint presentation of a group he's introducing to the same
VCs who originally funded his company. Definitely not giving up on
this technology thing.

On the way to breakfast in Woodside Tuesday morning, the traffic on
bucolic Interstate 280 is jammed before 7:30. There's no accident.
It's just heavy because there are so many people working here. Over
pumpkin pancakes (hers) and oatmeal (mine) at the
so-kitschy-it's-cliche Bucks Restaurant, newbie venture capitalist
Lise Buyer confirms that the entrepreneurial bug isn't dead. Her
take is that lesser known firms like hers, Technology Partners, are
in somewhat less pain than the nosebleed firms that get more attention.
Everyone made bad investments, of course. But the higher the
elevation, the greater the need for thick skin in times like these.

Buyer says oodles of business plans continue to flow into her inbox.
"But at least now they're business plans," she says, not merely
notions masquerading as ideas masquerading as proposals. Buyer
is focusing on the music industry, where she thinks the post-Napster
landscape continues to hold great promise for the Internet. Tellingly,
the former buy-side (T. Rowe Price) and sell-side (Credit Suisse
First Boston) media analyst hasn't made an investment yet. But
she's evaluating scores of companies.

At lunch in San Jose, a consistently pessimistic journalist friend
shocks me with her confidence. She has worked in the Valley for
more than two decades. For me, that's sort of the equivalent of a
soldier just arriving in Vietnam and talking about war with a sergeant
who's been fighting since Korea. She's always predicting the demise of
the Nasdaq and its high-multiple excess. And yet, while discussing
the prospects for an acquaintance considering working for a start-up
in the Valley, my friend shocks me. "It's not like it's all going to
go away," she says. "It's just going to be like before."

In other words, risk-taking employees will take a chance on
cutting-edge companies, some of which will get funded and some of
which won't. A few will become home runs, some will provide
respectable returns, and many quietly will go away. A goodly number
of the MBAs, lawyers, journalists and investment bankers will go away,
too. But Silicon Valley will keep churning out start-ups -- and making
money for investors and careers for employees.

In the parking lot of Cisco Systems (CSCO:Nasdaq - news - boards)
later in the afternoon is more convincing proof than the exhortations
by CEO John Chambers the day before that Cisco means to be around for
a long, long time: The parking lot is so jammed that a visitor has to
hunt and hunt for a place. This is a serious place. No dogs to be seen.
Row and after row of cubicles and purposeful-looking people. Ammar
Hanafi, the company's 34-year-old vice president of business
development, says Cisco likely will make the same number of
acquisitions next year as this year (22 and counting). More from him
in a later column, but suffice it to say that Hanafi isn't doing
any deals at the moment due to market volatility. It's tough to peg
prices when buyers and sellers truly believe their stocks are too low.
But Hanafi isn't contemplating a time when there's nothing left to buy
for Cisco.

Finally, back in San Mateo, hope springs eternal for the well-funded
start-up. BroadBand Office, backed by Kleiner Perkins Caufield & Byers,
hosts a lavish dinner at an Italian eatery and invites journalists
from Fast Company, Forbes, Reuters, The Industry Standard, Time and
other publications. This is some of the best free publicity a young
company can buy. For the price of dinner and drinks, BroadBand Office
can generate buzz ahead of its hoped-for IPO some time next year,
market allowing.

The company, founded in mid-1999 after being "incubated" in the
Kleiner offices on nearby Sand Hill Road, is attempting to act as a
one-stop shop for providing high-speed Internet access, software and
services for corporate customers. Its hook is that it capitalizes on
relationships with leading commercial real estate companies (who,
naturally, are investors in BBO) to pitch their tenants packaged deals.
Microsoft (MSFT:Nasdaq - news - boards) and Sun Microsystems
(SUNW:Nasdaq - news - boards), seeing the chance to sell their wares
to BBO, are early investors. So far, you can count the number of BBO
customers on both hands and feet. And that's where the information
stops. CEO Dan Chu is mum on revenue, gross margins or a predicted
break-even date. See, start-ups in the Valley, even now, want
journalists to hype their stories but won't share with the public
the same type of information they readily will disclose to prospective
private-round investors (Chu suggests another BBO funding
announcement is imminent.) or attendees at an IPO roadshow.

In a different climate, BroadBand Office likely would be public by now.
So there's progress in returning to "normal." But the dream continues.
Well-funded companies, dreamy-eyed entrepreneurs, slick technology
that's changing the world: Silicon Valley isn't going away. You just
might have some trouble seeing it again until some of the
euphoria-charged detritus is cleared from the roadside.

Date view Thread view Subject view Author view

This archive was generated by hypermail 2b29 : Wed Dec 06 2000 - 15:19:47 PST