Where is the Money for CNC? Right here:
TA
( BTW, I think this will aslo pay for the divorce.
Man!! Women can be expensive!!!!)
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July 10, 2000
EqualFooting Proves Funding Is Easy,
For B-to-Bs With Something to Sell
interactive.wsj.com
By JULIA ANGWIN
Staff Reporter of THE WALL STREET JOURNAL
STERLING, Va. -- It should have been an easy meeting for the seven bankers from Deutsche Banc Alex. Brown. They were listening to a pitch from a fledgling Internet business-to-business exchange while shares of other B-to-B companies were sinking with the rest of the Nasdaq Stock Market. The young company should have been desperate.
But after two hours, Jim Fox, co-founder of the start-up EqualFooting.com (www.equalfooting.com), leaned forward in his chair and said: "If you guys don't talk to me by the end of the week, you won't be in the deal." The bankers said yes a few days later, but were excluded anyway.
Internet stocks may have lost much of their sheen with Wall Street,
but contrary to popular perception, there is still loads of investable money available. So much, in fact, that savvy entrepreneurs like Mr. Fox can afford to play hard-to-get.
Competition to invest in EqualFooting.com's second round of funding has been so intense that two of the founders -- Mr. Fox, 34 years old, and Angie Kim, 31 -- have even rejected their mothers' requests to invest.
"She said only people doing business with them can invest; I understand that," says Anna C. Kim, 63, who brought her daughter to this country from South Korea in 1982. The younger Ms. Kim and Mr. Fox said they are setting aside some of their personal shares in a trust for their parents.
EqualFooting.com is hot in part because it is one of the few B-to-B sites that is already more than just an idea: 30,000 small businesses have become members, and many have bought industrial and manufacturing supplies from the site.
The success thus far of EqualFooting.com is also fueled by the fact that more money than ever is still available for investment. In the first three months of this year, venture capitalists raised $13.38 billion, twice as much as was raised during the first quarter last year. Although the rate of investing has definitely slowed since mid-April's stock-market sell-off, it is still four times higher than last year at this time, according to VentureWire, an online newsletter for venture capitalists, high-tech investors and entrepreneurs.
Certainly the stock-market slide has hurt all Web start-ups, including EqualFooting.com. When the founders started fund raising in April, they believed their company could be valued at $150 million and that they would need to raise only $40 million to make it to a public offering.
They wanted the best price possible while surrendering the fewest shares necessary to new investors. And they had reason to be upbeat. After the first round of fund raising, the three founders still owned 40% of the company.
EqualFooting.com was created in March 1999 when Ms. Kim, Mr. Fox and Aaron Martin, 31, were thrown together on a project at McKinsey & Co., the management consulting firm. After helping a large company build an e-commerce unit, they decided to create their own. Their plan was to sell goods online to small construction and manufacturing companies, despite established competition from industrial-supplies giant W.W. Grainger Inc., which operates its own B-to-B Web site.
On the strength of that simple idea, the three raised $650,000 from their friends and families. They then scooped up another $350,000 after a brief presentation to a group of Washington, D.C., investors that included Steve Case, AOL's chief executive, and Netscape founder Marc Andreessen.
Then they attracted New Enterprise Associates, a hot venture-capital firm, and the money poured in. William H. Draper, a San Francisco venture capitalist, didn't even ask them about their business. He committed money because he was impressed by the founders' resumes and personalities. "We back people more than ideas or markets," he says.
By November, the founders had raised $7.5 million for a company that lacked revenue and a Web site -- not unheard of in the Internet world but a formidable start nonetheless. Their site made its debut in January, and former Sen. Bob Dole spoke at the launch party in March.
But in April, everything changed. The Nasdaq market dropped sharply, and B-to-B Internet stocks took the biggest beating. Panicked, EqualFooting.com canceled all meetings scheduled with venture capitalists and banks for a week, figuring it wasn't a great time to be asking for money.
Slowly, a new plan emerged: They would woo a different type of investor -- Old Economy companies. One special quality of B-to-B Web sites is their ability to attract investment funding from people who also do business on the site. EqualFooting.com's founders were excited about the "clicks and mortar" trend where nonhigh-tech companies such as General Motors Corp. and Ford Motor Co. were suddenly jumping into e-commerce. They also believed, as many in financial circles do, that Old Economy companies will often pay a higher premium to invest in dot-coms than venture capitalists.
One of their first quarries was Textron Inc., the Providence, R.I.-based maker of aircraft, automotive parts and industrial equipment and provider of financial services, which was looking to build its e-commerce business. A former McKinsey colleague introduced the three founders to the chief executive, Lewis B. Campbell, in early April.
Ten days after their first meeting, Textron offered to be the lead investor, putting in $25 million. "It was an instant interest on my part," says Mr. Campbell. He thought that investing in EqualFooting.com would be faster than building his own e-commerce Web site.
The negotiation was brisk and fruitful: EqualFooting.com asked for a $125 million valuation from Textron. Textron replied with a $110 million offer, which was accepted. Once Textron had set the terms of the deal, offers from other companies rolled in. Yahoo! Inc., which wants to be a portal for B-to-B sites, wanted to invest. So did a major Florida-based capital-equipment company.
Soon, the founders were sifting through offers the way penny-pinchers pore over coupons in a Sunday newspaper. They debated the merits of each investor, discarding ones that couldn't help them deliver Wall Street's latest passion for New Economy upstarts: profits.
Along the way, Deutsche Bank Alex. Brown got bumped off the list. One main reason was that Textron's Mr. Campbell wanted to share EqualFooting.com with his friend Pete Musser, chief executive of Safeguard Scientifics Inc., a high-tech investment firm in which Textron had invested $100 million in January. EqualFooting.com had to make room for Safeguard, which wanted to invest $8 million.
In the end, EqualFooting.com was offered $75 million in total financing but accepted slightly less -- $60 million. That enabled the trio of founders to keep 24% of the business between them. Deutsche Banc Alex. Brown executives say they don't mind being excluded -- for now. After all, EqualFooting.com will run out of money in the next eight to 10 months, and the bankers hope to get their foot in door then -- possibly in time for an IPO.
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Message #1694 from donjuan_demarco at Jul 10, 2000 11:46 AM
Tunica you seem to believe that because CNC hired Wendt, CNC is now the equivalent of GE Capital.
Nothing could be further from the truth.
In GE Capital, Wendt enjoyed the strongest balance sheet possible. In Conseco, on the other hand, Wendt himself admits an immediate need to restructure the capital.
The fact that CNC debt is priced so low, together with a very recent report from a credit analyst that the debt should be avoided, indicates that CNC will be completely unable to refinance the debt.
Now, Wendt could sell some preferred, except for one complication: Hilbert already did that, to the tune of over $500m.
So, unlike GE Capital, Wendt is faced with: (1) A very week balance sheet; (2) An inability to refinance debt obligations which come due in the very near future; and (3) Difficulty in selling additional equity.
Regardless of this man's managerial skills, he cannot make $1,600,000,000 appear out of thin air.
As to Wendt's motivation to take on Conseco, we will find that out on Thursday when his compensation package is finally revealed (why is he so hesitant to discuss it?).
Given that he just went through a VERY expensive divorce, I think we will find that his motivation consists of hard, cold cash.
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