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Strategies & Market Trends : Gorilla Game Investing in the eWorld -- Ignore unavailable to you. Want to Upgrade?

To: Teflon who wrote (41)	9/3/1999 11:30:00 AM
From: Sunny	Read Replies (1) \| Respond to of 1817

Proprietary Transaction service may drive the companies that eventually end up on the DITR list, but it seems that the 3 companies that are currently on the list are nurturers, power brokers and perhaps future king makers. I think that if you limit the scope of discussion to only those transaction based companies we may miss the big money as these companies nurture and then release their charges into the eBusiness world. Sunny

To: Teflon who wrote (41)	9/4/1999 6:40:00 AM
From: Seeker of Truth	Read Replies (1) \| Respond to of 1817

Just whose switching costs are we considering? 1. The venture investor who spends 10 million to get a share of a partnership with the operator company(Softbank,CMGI, ICGE,PFE) to launch a particular company. After that company is launched he can switch any time with his next ten million. There are no costs. 2. The infant company founder. Typically she is only doing this one time. She is not a switcher. 3. The shareholders of the venture capital operator company. Our switching costs are capital gains taxes. 4. The customers of the operator company's portfolio companies. If they are primarily using company A's services and incidentally using services of company B and C, all A,B and C being portfolio companies, surely the customer can buy B and C's capabilities elsewhere. If B and C refuse to sell their expertise to any but customers of A then they are eliminating large chunks of the market. So the switching cost to the customer depends on details, such as how much company A needs to know about the customer's business. In other words, there is no switching cost to the venture business per se. IMHO a switching cost arises when the company manages an aspect of your business that involves knowing the internal details. Something like printing your manuals etc. is not such. It would have to be something like outsourcing or strategic planning or building a customized system etc. An independent company, such as CSC could give its customer big reasons not to switch, if it gets intimately involved in the complicated details of the customer's business, which details are unique. But per se, I can't see switching cost to a venture capital operator. Though I do think they are great investments, just not gorillas or even godzillas. They are great investments because we are at the dawn of a new, internet era and they minimize the risk to us of getting involved, investment wise. Also the biggest rise in a company's stock is usually right at the beginning, when it makes the transition from an idea to a profitable business. The venture capital operator in one way or another gets us into such opportunities. By the way which one of the above four venture capital operating companies has far and away the best stock performance in 1999 so far? It's SOFTBANK. Surprised? I'm long 3 out of the four companies.