'DTV as important as Internet' arguably says Venture capitalist......
from Red Herring web site redherring.com
PANELISTS CONSULT VENTURE ORACLE
What's the best bet on the Net? These three insiders should know.
By Dan Mitchell
January 30, 1998
Sharing the stage for a wide-ranging discussion of the Internet on Thursday at the NationsBanc Montgomery Securities Technology Week conference were John Doerr, partner at Kleiner Perkins Caufield & Byers and perhaps the most famous venture capitalist in the world; Michael Moritz, general partner at Sequoia Capital; and Geoffrey Yang, general partner at Institutional Venture Partners. The high powered paneled held forth on everything from branding to bandwidth:
How to conceptualize Internet investing
Mr. Yang said there are two types of companies: "faster, better, cheaper" -- firms that take existing technologies to new heights; and "brave new world" -- those that cause a (yes, he said it) "paradigm shift" or bring a wholly new concept to market. IVP's portfolio, he said, includes about 70 percent of the former and 30 percent of the latter. IVP's Internet companies include Excite, Juniper Networks, and Mpath, among others.
Mr. Doerr, of course, is mostly interested in the brave new world stuff -- companies that offer a "compelling new experience." Netscape, say, or @Home. He said he looks for "a really big idea, like 'the Web is going to change everything.'" It's getting more difficult to find such companies, he said, because we are in a "postgarage era" where big companies are quicker to become aware of emerging technologies, and snap them up.
Mr. Moritz said he looks at companies that facilitate connections between companies and their customers or suppliers. "Any business with any form of intermediary between it and a customer had better adjust to the Web," he said. He also disagreed with Mr. Doerr, saying that "one of the things about the Internet is that you can still find companies that are still in the garage."
I got my brand on you
Mr. Doerr said that branding is crucial online. Of PC Magazine's top 100 Web sites, he noted, 95 are "new brands" and not established business names. He noted the [Kleiner Perkins-funded] success of Amazon.com. The bookseller's market share has increased since rival Barnes and Noble came online, he noted. "Barnes and Noble isn't gonna catch up.... It's over," claims Mr. Doerr.
Mr. Yang said the question is "how do you get to critical mass?" It's getting harder. The cost of brand equity, he said, is three or four times what it was just two years ago.
Bring it on home
Who will bring broadband services into the homes of America, and by what means? "I think everybody's going to win," said Mr. Yang. With the telcos investing more in digital subscriber line (DSL) technology, the cable companies will get a run for their money, but all players will see some action, depending on consumer needs and even regions.
Mr. Doerr disagreed. "I don't think the DSL guys are going to price DSL to be competitive," said the man whose firm funded cable-modem company @Home. He also said optical technologies like wave-division multiplexing (WDM) and photonics are the wave of the future. In the 1967 movie The Graduate, "they said, 'plastics.' Now, the answer is, 'photonics,'" said Mr. Doerr. And what else would he tell a present-day Benjamin? "Keep your eye on Qwest; keep your eye on Williams."
Mr. Yang said that with WDM, "at the margin, bandwidth becomes free and plentiful at the wide area network. And Mr. Moritz said there's a "big opportunity" in companies taking WDM to the local loop.
Is thin in?
Mr Yang said that while thin clients "make sense from an MIS point of view," it's hard to convince individual users of their appeal.
Mr. Doerr said that personal computers versus network computers -- PC vs. NC -- "is not the right question. The real trend is to the TC, the thin client," which he says can sport a disk or not. The important thing, he said, is that more and more data will be stored on servers and, in corporate settings, managed by network administrators.
Mr. Moritz said that the clients are actually on the Web, not in the box. "ETrade is a thin client, Amazon is a thin client, Yahoo is a thin client," he said.
Place your bets
The session ended with the three saying which sectors their firms are focusing on, and which they personally are betting on.
Mr. Moritz said Sequoia is focused on bandwidth companies, and his personal bet is on "merchandising of all kinds ... especially retailers."
Mr. Yang said IVP is investing in network-infrastructure players. He personally is betting on digital TV, which, he said, "arguably ... will be as important as the Internet."
Mr. Doerr says Kleiner Perkins is concentrating on fiber optics, photonics, and of course Java and cable modems. And personally? He's interested in companies that help shake up the healthcare industry, "the second most screwed-up part of the economy." Also, companies that do the same for education -- "the most screwed up. |
