'Silicon Investor' Flees the Valley
For Independence in the Midwest
But Living Is Lean for Financial Web Site,
Far Off the Scope of Venture-Capital Firms
By BARTON CROCKETT
MSNBC
They're investment pros on the cutting-edge of cyber-finance
-- brothers Brad and Jeff Dryer, the Generation-X
co-founders of Silicon Investor, a top-rated stock discussion
area on the World Wide Web. So why can't Brad get an
apartment without having his mother co-sign the lease, and
why was Jill -- their only employee -- very quiet in the
morning?
Because the Dryer brothers are investor-less in the Midwest,
after turning down several multimillion-dollar financing and
takeover offers and moving away from Silicon Valley.
"We thought long and hard about
what we wanted in life," said Brad
Dryer, 27, the younger of the two brothers. "We weren't sure
what we would do if we didn't have Silicon Investor. It's what
we want to do. It's an adventure."
Launched in August 1995, Silicon Investor
(www.techstocks.com) has emerged as one of the most highly
rated destinations for people who like to research stocks
on-line. It has background information on more than 1,000
technology stocks, with charts and quotes. But its claim to
fame -- the thing that's given it Internet buzz -- is its
StockTalk discussion boards with more than 2.5 million,
searchable and organized message postings.
Talk is cheap, and so are messages. So the quality of postings
on S.I., like other on-line discussion forums, including the
Motley Fool (www.fool.com) and the misc.invest area on
Usenet, is mixed, with no shortage of erroneous and
amateurish comments and some apparent blatant efforts at
market manipulation.
Rave Reviews
But savvy investors, from the rich and famous to the small
and obscure, also frequent Silicon Investor and other online
stock research areas, with many claiming that the talk on S.I.
may be the best on the Web.
"It's one that I visit on almost a daily basis" a top Silicon
Valley venture capitalist said on the condition he not be
named, adding that S.I. lets him "stay on top of the scuttlebutt
in the market."
"The discussions going on S.I. are a lot more technical and
more in depth than a lot of the research I see on Wall Street,"
said Chester Lee, 33, supervisor at a Hercules, Calif.-based
chemical company.
Mr. Lee says he surfs through Silicon Investor every night for
his personal portfolio.
S.I.'s share of net surfing traffic -- 0.4% of all home-based
surfers in November, according to researcher Media Metrix --
is less than many other popular financial destinations,
including top-rated Yahoo! Finance (www.yahoo.com), with
4.6%, Quicken Financial Network (www.quicken.com) with
3.5% and Quote.com's (www.quote.com) 1.6%.
But Silicon Investor is winning critical acclaim, with Internet
World magazine dubbing it the "best financial market site" on
the Web and Barron's rating it among the top 20.
"If technology is your game, you won't find better discussion
on the subject anywhere on the Internet," Barron's wrote.
So who's behind this Web phenom? Well, like the scientist
working the gears behind a black curtain in the Wizard of Oz,
a pretty modest group of people.
Only three people work at Silicon Investor, the Dryer
brothers, and a 26-year-old former administrative assistant
named Jill McKinney, who the Dryers met through the
Internet and hired as their Webmaster and press
spokesperson.
Sleeping in the Office
Brad Dryer, who got a computer engineering degree from
Rice University in 1992, did the programming work for the
site, and Jeff Dryer, 30, who got a Masters of Business
Administration from the University of Missouri, designed the
look of the site, and put together background information on
tech companies.
Ms. McKinney says that when she started, the brothers were
sleeping in their rented office in San Jose, Calif., working
almost all waking hours, and showering at a nearby health
club.
"I would come into the office and one of them would be
asleep," she said.
The brothers say they started the site because of an early
interest in investing, prompted by their father, a career
General Electric manager, who had them play stock-picking
games as youngsters.
They threw all their savings into the venture, and by early
1997 were more than $300,000 in debt to their parents and a
handful of other backers, with no revenues to speak of.
Within a year, their tech stocks site had gotten so much traffic
and buzz that they had meetings with several major venture
capitalists in Silicon Valley.
The Dryers claim -- and knowledgeable sources confirm --
that at least two venture capital firms, Hummer Winblad
Venture Partners and Softbank Ventures, were willing to back
the Dryers with millions of dollars of financing in deals
valuing their company at more than $4 million. Furthermore,
in 1996, the Dryers said they had a letter of intent to sell the
company to Web navigation guide Excite Inc. for 900,000
shares of Excite stock, valued at more than $5 million. (An
Excite spokeswoman declined to comment.)
A Chance to Be Rich
Any one of those deals could have set the Dryers up to be
millionaires, or even better. Another Internet start-up,
Hotmail, took on its first venture financing at the time the
Dryers were first getting offers, and at the end of December
Hotmail was purchased by Microsoft Corp. in an all stock
deal reportedly worth at least $300 million.
But the Dryers turned down the venture financing and
takeover offers because they thought better deals would come
later and because they didn't want to lose control. Indeed, late
in 1997, they moved from San Jose to Overland Park, Kan.,
to be closer to their family, and get away from all the deal
inquiries flowing in from venture capitalists and other Internet
companies. In a testament to their meager means, Brad Dryer
said he had to get his mother to co-sign his lease on a new
apartment because the landlord didn't believe he had any
income.
"We just really have decided we don't want to be acquired at
this point," Jeff Dryer said.
The snubs have left bad feelings with some influential
investors, who wonder if S.I. can make it without bigger
backing.
"We had a great deal of interest in Silicon Investor and were
ready to make an investment," said Charley Lax, managing
director of Softbank Technology Ventures, an investment arm
of Japan's Softbank Corp.
Mr. Lax explained that Softbank's goal was to link Silicon
Investor to its other popular Web sites, including online
technology news from Ziff Davis, a Softbank subsidiary; the
Yahoo! navigation guide, in which Softbank was an investor;
and INVESTools, a highly rated investment newsletter site
that Softbank backs. (Technology trade magazine publisher
Ziff Davis supplies content to MSNBC.)
But Mr. Lax says that Silicon Investor "did not see its way to
deal with us clearly."
Since the deal collapsed more than a year ago, Mr. Lax says
he hasn't talked to the Dryers, considering them "unfundable."
Competition Mounts
Furthermore, Mr. Lax and others said that Silicon Investor
could get hammered if it doesn't raise money and beef up
marketing as other big players move more aggressively into
stock discussion boards.
Chief among the rivals is the Motley Fool, a popular
investment discussion area on America Online, which last
year beefed up its formerly tepid Web site, and Yahoo!,
operator of the Web's most popular site, which three months
ago launched discussion boards for more than 8,000 stocks.
"I think they've created a great asset," Mr. Lax said. "But
without partners, I don't think these guys will be able to make
it happen," he added.
For their part, Brad and Jeff Dryer said they were satisfied
with their go-it-alone choices, though they realize their
financial situation is tenuous. Monthly expenses now top
$30,000 for telecom lines, servers and Ms. McKinley's salary,
and ad sales have been minimal because they don't have a
dedicated salesman.
In March, the Dryers turned around their finances by
launching a successful subscription plan apparently unique to
the Web. Users pay a fee to become "lifetime" members,
which gives them the right to post messages. (Surfers can
read messages for free.) Initially, the fee was $45, now its up
to $125 and soon to be $200.
Jeff Dryer said that with the subscription fees, he and his
brother have been able to cover their expenses, pay off their
debts -- writing a check to their parents last week -- and are
now getting ready to pay themselves their first salary. "It's a
pretty scary environment right now, and we're always just
feeling like we're holding on for our lives," he said.
"That keeps us motivated to keep improving the site." |
