Commentary: Ex-analyst learns from her Web days
A VC's post-bubble conviction
By Bambi Francisco, CBS.MarketWatch.com
Last Update: 12:09 AM ET Nov. 6, 2001
<<DANA POINT, Calif. (CBS.MW) -- Oh for the days when Internet analysts were abundant, in high demand and seemingly eager to leave the hot seat.
In due time, they would. Some went to start-ups that failed; some lost their jobs and continue to seek employment at a time when the opportunity is dim. Many evolved as analysts and went to venture capital firms.
Keith Benjamin, once a star at Robertson Stephens, went to Highland Capital Partners; Danny Rimer left Hambrecht & Quist for The Barksdale Group. Softbank Capital Partners tapped Bill Burnham, formerly of CS First Boston.
Another ex-CSFB Net analyst, Lise Buyer, became a venture capitalist at Technology Partners in Palo Alto in the spring of 2000.
Like her former colleagues, Buyer set off in a new direction in hopes of building upon an experience that seems surreal in hindsight.
The bursts of energy and grit that sustained her throughout the bubble years remain with her today. Yet one integral part of her persona, an attribute she said she lost for a brief stint during those boom years, is particularly important: conviction.
"Most of us convinced ourselves that we were missing something," Buyer, a native of Buffalo, N.Y., said ruefully.
And after what she's been through, she's not going to let the madness of the crowds sway her again. "Buffalo is a city of no illusions and hard work. Silicon Valley never seemed real."
Buyer came to Silicon Valley, the wellspring of optimism, innovation and hubris, after taking on the role of Internet analyst at Deutsche Morgan Grenfell in the fall of 1997. She and her tech colleagues eventually moved to CSFB in 1998. She rode the names of the stars that commercialized the Web, such as AOL Time Warner (AOL: news, chart, profile), Yahoo (YHOO: news, chart, profile), and Amazon.com (AMZN: news, chart, profile) from ground zero all the way to their apogees.
I recall receiving the daily CSFB reports with Buyer's name in it. She never caused the kinds of hyperbolic stir as her former rivals may have. In fact, she seemed downright reasonable. She spoke positively about Intuit (INTU: news, chart, profile) and Electronic Arts all (ERTS: news, chart, profile) too often for my interest. And I always remembered Buyer's attachment to old-fashioned value investing and analysis after she was quoted in a Fortune article in 1999 speaking of the teachings of value preachers Graham and Dodd.
"I'm most proud of keeping a level head," she told me at a Red Herring conference for venture capitalists in search of trends for investment ideas in private companies. "In general, the math had to work, or the companies wouldn't work." Well, so much for being sensible. Buyer may as well have worn a T-shirt emblazed with the word spoilsport on it. "I did take some heat for being an Internet curmudgeon," she said, with a measure of pride.
Recalling Beanie Baby days
In a way, even as Buyer espoused the opportunity, she ridiculed with her quirky sense of humor the prices investors were paying. "In '97, I compared Net stocks to Beanie Babies. You could buy them at $30 and sell at $40. But at the end of the day, they were really worth 50 cents and $2 for cuteness."
But somewhere along the way, conviction gave way to doubt as small bets parlayed into high stakes. "It was easy to have courage and conviction for the first six months, but by the time it came to a few years, that was hard. You find yourself wondering, 'Am I smarter? Or, am I missing something?"
Soon, Buyer seemed to give up on steering investors away from stocks. "There are certain times and new fields of endeavor when analysts try to pick out the distinguishing characteristics of those that can be winners and there can be rich rewards," she'd explain to clients then.
She also allowed them to invest at their own risk: "You can bet on these things -- but don't confuse that with investing in undervalued opportunities. Go ahead and invest because momentum is carrying it forward and momentum can change with the wind. It's Vegas. The dice can roll against you."
And eventually they did. But Buyer wouldn't be around to analyze the demise. She quit the week of April 14, 2000. It wasn't soon enough. Her tenure there would make her a defendant in at least one of the shareholder lawsuits against Amazon.com and its bankers and analysts. Buyer insists that she acted with probity.
"I don't think I did anything to compromise my analytical integrity," she said. "I made some calls that have proven to be dead wrong. But with the information I had, they were made with integrity. There was no advantage for me to shove a deal down someone's throat."
Blaming does seem passé at this juncture. She admits her mistakes. "I absolutely made mistakes, I liked Fogdog and I didn't tell anyone to get out of Yahoo or start selling on April 14." But if anyone is to blame for the downfall, "blame human nature," said Buyer. "You couldn't help but get caught up. When there is something for virtually nothing, everyone wants to play and everyone did, and everyone acted in their own best interest. It worked for a while and it went away."
I can't disagree with that statement.
Buyer's bet on the next Net wave
She's been at her new digs, for 18 months but only recently made her first investment with the firm -- a $3 million package for Recipio, which helps companies such as Procter & Gamble to conduct market research online.
Although the venture capital industry is in for a long hibernation period before returns on investments are realized, Buyer enjoys life in this seemingly slow-motion world.
"It's a cool time to be in this business. The sense of entitlement is gone. Entrepreneurs understand that they have to work incredibly hard. No more, 'Hi I'm just out of school, I'd like $100,000 and oh, by the way, can you throw in a car."
Her inclination to feed her seemingly relentless curiosity and energy, however, seems to draw her back to the public markets. Part of this petite ex-Internet analyst would like to be back in the hot seat.
Since Sept. 11, she pointed out, there have been many opportunities, especially with non-cyclical stocks, she said. She'd also look at Microsoft because of the big product cycle that's ahead of the company.
She wouldn't be fully invested, however, because she doesn't think expectations are fully adjusted to reflect pretty dour times ahead.
And what about Yahoo and Amazon.com, a couple of the companies she used to cover?
Yahoo suffered from an "if-it-ain't-broke-don't-fix-it" mindset, she said. They wouldn't look ahead and thought they could win just because they were Yahoo. Now, it appears that they're buckled down, but it's unclear what the strategy is. As for Amazon.com, the debt problem is a continual drag and the company may unfortunately be suffering from "founderitis." In Buyer-speak, that means it may be time for a new CEO. True, it does take a different CEO or different management skills to operate a firm that generates $2 billion in revenue rather than $100 million, after all. "They were awesome off the block."
Awesome they were, just like the many that never had parental guidance and the many that, left when alone, created their own destruction.
With her renewed conviction, maybe Buyer can be the watchful guardian or voice of reason that keeps, at least the start-ups she's invested in, from being too awesome too soon, and more awesome in time...>>
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Bambi Francisco is Internet editor of CBS.MarketWatch.com, based in San Francisco. |
