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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: Robert Jacobs who wrote (17781)	2/12/2000 7:31:00 AM
From: Bruce Brown	Read Replies (1) of 54805

RE: buying candidates early I cannot recall if anyone from the listserv GG digest had posted some comments Geoff made about a week ago. However, in spending this morning catching up on the weeks digests I was struck by the quality discussion of Cisco and the acquisition process as the next generation technology adoption life cycle zooms off into the distance. One of the posters, Steve Legler, recalled Geoff's post and I thought it was worth sharing as it applies to the discussion of how and why we hunt and seek prospective candidates and how the question of 'early or waiting' applies to investing our money. ============ Subject: CSCO buying companies sooner From: "Steve Legler" Date: Fri, 11 Feb 2000 13:48:20 GMT Martin Human's post about CSCO buying companies "BEFORE they really want to" reminded me of a post from Geoff Moore last week that I saved. >From: "Geoffrey Moore" <geoffmoore@chasmgroup.com> What capital markets have become better and better at is pricing in market development models that predict outcomes earlier and earlier in the Technology Adoption Life Cycle. Think of election night. It used to be you counted all the votes and said who was the winner. Then it was that you counted some of the votes and projected the winner. Then it was that you sampled a key demographic subset and you projected the winner. Now it is you interview a key subset on exiting the polls and declare the winner. The system gets better and better at projecting outcomes earlier and earlier. Same in the stock market. P/E is an after-the-fact measure. P/S ratios are a market share measure that "assumes" that P/E will follow. Now we have "P/V" (Price/Vision) ratios that assume that P/S will follow and P/E after that. The risk, of course, is that the model is wrong. But if the model is right, then getting in earlier makes sense. That is where the market is headed. It is what we all did with Qualcomm last year, and JDSU --- used our models to act earlier than other investors. Now, the model could be wrong, of course. But I would argue the correct response then is to change the model, not to bet later. Geoff Geoffrey Moore Chairman, The Chasm Group Venture Partner, Mohr Davidow Ventures ============= BB

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