Cautiously optimistic. Those are the words you hear, from
Silicon Valley to New York City, when you ask about the mood of the
technology industry today. From young startups to old pros,
everybody is looking hopefully forward while keeping one eye on the
pitfalls of the past. And in the thick of it all, entrepreneurs are
lighting the way with solid business plans and a careful attitude
toward funding.
OK, now brace yourself. Internet companies are making a
comeback. Not money-burning dotcoms as we knew them, but businesses
like CertificateSwap.com, an online marketplace for buying and
selling gift certificates. CEO Cameron Johnson is a veteran of more
than a dozen ventures. He's also 19 and living in a dorm at
Virginia Tech. Internet entrepreneurs are a diverse bunch these
days.
These new companies aren't whooping it up with indoor
basketball courts and lavish launch parties in expansive office
buildings. CertificateSwap.com doesn't even have an office.
"I've got a Web designer in India, another one in the
Ukraine, and one in the Netherlands," Johnson says. "My
programmer is in New Hampshire. I've got two people [who]
handle customer support out of California." And he still
hasn't actually met his partner and co-owner, Nat Turner, a
17-year-old living in Texas. Says Johnson, "The Internet
allows you to create these virtual corporations."
New Attitude
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The Internet, which spawned so much excitement during the boom
and ate up so much capital during the bust, has evolved into an
entity that entrepreneurs use to enable new—and more
sane—business concepts. Many of these startups,
CertificateSwap.com included, are just saying no to VC funding.
"We'd rather have a smaller company and be
profitable," Johnson says. His venture is entirely
self-funded. With no central office or inventory to maintain, the
no-VC approach works for his business.
Fortunately for those entrepreneurs actually seeking outside
funding, VCs are showing signs of coming out of hibernation.
They're still a little gun-shy after the bust. But that has
manifested itself in a more careful approach to choosing which
companies to fund. Mark Oster, management advisory services partner
with Grant
Thornton in New York City, has been keeping an eye on VC
movements. "Funders have moved the goal posts back," he
says. "They're not going to fund until there is a
demonstrated product or service, revenues and customers." That
may sound like common sense, but it typifies the new stance VCs are
taking toward technology companies.
One business that has passed muster under the eyes of VCs is
BitPass, a
micro-payments company in Palo Alto, California. The company has
logged $1.5 million in series-A funding since starting up in 2002.
CEO Kurt Huang, 33, is co-founder along with chief technology
officer Gyuchang Jun, 32. Their story echoes the experiences of so
many Internet boom startups, but with some important differences.
The founders were both Stanford students working on
degrees—the proverbial two college kids starting a dotcom.
But don't call BitPass a dotcom. It's actually a software
and services company. Micropayments have been done before, but not
with the mix of user-friendliness, flexibility and good timing that
BitPass brings. (On a side note, BitPass is great news for Internet
entrepreneurs who are looking for a way to accept scads of small
payments for content or services.)
Guy Kawasaki, CEO of Garage Technology Ventures, sees the potential for
BitPass' success. Garage is one of the firm's chief
funders. Kawasaki has helmed Garage for five years and has seen a
lot of swings in Silicon Valley. He sums up the changes since the
bust this way: "Back then, all you had to be able to do was
PowerPoint. Now you need to do PowerPoint and Excel." Though
VCs are emphasizing the need for proven technologies, proven
leadership teams and watertight business models, Kawasaki says
there's still room for technology entrepreneurs who don't
necessarily fit the new mold. Just look to history: Companies like
Apple Computer, eBay, Google and Microsoft defied convention, and
they won't be the last.
So are we in for another technology boom? The answer seems to be
a resounding "sort of." Kawasaki calls it a
"boomlet." Huang says one sure sign is that parking
around Palo Alto is getting tighter, and office vacancy rates are
slowly dropping. He calls it "the boom without the bust and
with the revenue model." And we're back to that sense of
cautious optimism. There are certain technology sectors that are
looking pretty rosy right now. Nanotechnology still has a lot of
buzz, but it's in extremely early stages. Wireless, security,
enterprise software and e-commerce are often mentioned as hot
areas.
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