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Technology Stocks : MRV Communications (MRVC) opinions? -- Ignore unavailable to you. Want to Upgrade?

To: mph who wrote (21825)	7/6/2000 10:49:51 AM
From: Greg h2o	Respond to of 42804

Where is venture money going? Optical networking, international investments are hot By Ken Sawyer, CBS.MarketWatch.com Last Update: 2:14 PM ET Jul 5, 2000 NewsWatch Latest headlines SAN FRANCISCO (CBS.MW) -- For the past several years in Silicon Valley and other hotbeds of Internet fever, the expression “drinking the Kool-Aid” has become popular. This expression has come to mean that one believes that the Internet will revolutionize the way people and businesses interact around the world. In the early days of the Internet (the early 1990s), entrepreneurs looked to find funding from venture capitalists that had “drunk the Kool-Aid” or believed, almost religiously, in a revolution that would occur driven by a technological messiah -- the Internet. Early believers invested in such successful companies as AOL, Netscape and Amazon. But of course, they also invested in the likes of failed companies like U.K.-based Boo.com. Almost all venture capitalists have been drinking plenty of Internet Kool-Aid in the last year. Given the recent volatility in the stock markets, the question VCs most often get asked is: “Are you still drinking the Kool-Aid?” The answer is, in fact, “Yes, but I don’t like the cherry flavor anymore.” What flavors are out of favor? There isn’t a venture capitalist I have come across lately that is investing in B2C commerce models. Since today there are only seven e-tailing public companies with a market value above a billion dollars, venture capitalists view the opportunity for compelling returns in this sector as greatly diminished. Advertising models have also come under greater scrutiny and even such areas as B2B exchanges have already come out of favor among much of the venture community. So what is the flavor of the day? I would say it’s optical networking and other specialized networking companies. ONI Systems (ONIS: news, msgs), Arrowpoint (ARPT: news, msgs) and Zaffire, which recently received another venture round of financing, are examples. International investments are also hot. Sina (SINA: news, msgs), which recently went public, and Firstmark or Mercadolibre, which recently raised venture rounds, are good examples. Also, customer interaction technology or solutions like Nuance (NUAN: news, msgs), salesforce.com and Teloquent, are popular. Profit in the near-term is important Not only have the flavors changed but the types of issues that we are focusing on are changing as well. We have always focused on the business models of potential investments. But now more than ever we are focused on insuring that the company’s burn (or spending) is reasonable and that the company can achieve a meaningfully profitable business in the near-term. We are tired of seeing the companies that give away the Kool-Aid in hopes that they will be able to sell advertising space on the placard for their stand. We are definitely unenthused with plans that purport to sell their Kool-Aid with only 20 percent gross margins. We don’t want the Kool-Aid that requires $100 million investments for non-capital investment businesses before reaching profitability. Times are changing Interestingly, the venture business is changing this year. There has been a flood of Internet incubators pumping out new companies as well as a proliferation of Angel money that has funded an amazing number of companies. These angels and incubators have provided services to jumpstart these businesses and there seems to be a huge supply of early-stage deals looking for their first real round of financing. This, combined with the normal entrepreneurial process, has provided plenty of investment opportunities.