LoD: An Interesting Article on "The Birth of NETP"....
<<Net Perceptions is model of Minnesota high-tech fledgling success
DAVE BEAL SENIOR BUSINESS EDITOR
Pure happenstance. That's how Steve Snyder describes his
unexpected meeting with Ann Winblad three years ago in Minneapolis.
They ran into each other at the Strictly Business trade show in
Minneapolis. Their meeting quickly led to the sense of urgency that
gave birth to and still drives Net Perceptions.
Today, the company has successfully gone public.
Snyder is its CEO. Winblad, a principal at the Hummer Winblad
venture capital firm in California, is a huge backer. And many people
view fast-paced Net Perceptions as a model for a high-tech growth
enterprise in Minnesota.
''I would love to see half a dozen Net Perceptions created every year,''
says Christine Maziar, vice president of research at the University of
Minnesota. ''From our perspective at the university, they really did
things right.''
The company develops and sells software tools that help merchants
move more goods and services over the Internet. Using Net
Perceptions' tools, retailers can forecast customers' preferences.
John Riedl, a computer science professor at the U, developed the
technology, called collaborative filtering, that led to the company.
Today, both the university and the company benefit from the ties that
have flowered from Riedl's work. Net Perceptions got the technology.
The U got a stake in the company, can obtain more equity under terms
of an agreement between the two parties and will get money from the
company for further research.
Net Perceptions went public April 23 at $14 a share. The stock, an
obvious beneficiary of the then-sizzling market for Internet plays, shot
up to nearly $35 on its first day of trading. That gave the company a
whooping market valuation of more than $625 million, one of the best
first-day showings ever for an initial public offering from a high-tech
Minnesota company.
The stock, like all Internet-related issues, has cooled off considerably
since then. It was trading at about $16 Friday.
Net Perceptions raised $54 million from its April offering. Earlier
financings, participated in by Hummer Winblad, St. Paul Venture
Capital and Microsoft co-founder Paul Allen's Vulcan Ventures, helped
the company lift off quickly.
Analyst Hany Nada just began following Net Perceptions for US
Bancorp Piper Jaffray, a co-manager for the initial public offering.
Nada estimates the company has a 70 percent share of the
fast-growing market for its ''recommendation solutions.'' He expects
revenue to grow to $20 million in 2000 from $10.4 million this year and
$4.5 million in 1998. Last year, the company lost $5 million; Nada
expects losses of $12.2 million this year and $7.6 million in 2000 as the
firm rushes to exploit its markets.
Rushing is what it's all about at Net Perceptions.
Traditionally, venture firms waited five to seven years to see returns
from their investments via sales of companies or initial public offerings.
The frenzy of competition among Internet companies has compressed
that window to two to three years for such firms.
Snyder, 44, joined Microsoft in 1983, when the software giant had only
250 employees. He met Bill Gates, then little-known, when the
Microsoft chief journeyed to the Harvard Business School on a
recruiting trip. Snyder and Winblad met when she was a consultant to
Microsoft; she and Gates once dated.
Snyder left Microsoft in 1988 to work toward a doctoral degree in
psychology at the University of Minnesota. He picked the U, he says,
because its psychology department is among the five best in the
country.
When Snyder ran into Winblad in Minneapolis in May 1996, she
asked: ''What's up?''
He told her about Riedl's work, saying: ''I'm in the early stages of
discussions regarding a company. Is this interesting to you?''
''Absolutely, yes,'' Winblad replied.
By mid-summer, the company was off to the races. Hummer Winblad
agreed to put money into the firm. Ann Winblad became the company's
first director; now there are five including Fingerhut president Will
Lansing, an Internet visionary who joined the board last week.
Riedl, who was on leave from the U, has returned to the campus. He
remains on the board.
The company, which employs 92 workers, recently quadrupled its
space by moving to a new headquarters in Eden Prairie.
Today, Snyder traces much of the early success at Net Perceptions to
the unexpected conversation he had with Ann Winblad three years ago.
''It was one of those chance meetings that, when you look back on it,
you say, 'How did that happen?' ''>>
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