High-tech beauty contest matches start-up firms with needed capital
DAVID E. KALISH
Jun. 01, 1997
ATLANTA (AP) _ Wanted: Bright-eyed dreamer with attractive figures, sexy concept, passion for the Internet. Desire for sugar daddy a must.
If the technology industry played the personal ads, this one probably would sum up the curious side-show unfolding here this week, alongside one of the computer world's biggest trade events.
Starting today, some 50 high-tech start-ups are strutting before a group of venture capital firms, investment bankers and corporate investors in a sort of financial beauty contest _ a mating dance between those with money to burn and those with the fire to burn it.
The entrepreneurs mostly are in the Internet business, with offbeat names like CyberGold, CDnow, ICast and Voxware. Attending sessions for tips on raising capital to one-on-one backroom meetings, they're making their case for why their money-losing private firms are worth the investment.
Some are barely hanging on, looking to pay the rent. Others seek to expand, with dreams of becoming the next Netscape Communications browser company, which came from nowhere last year to launch one of the most popular initial stock offers of all time.
And they hope the Comdex Venture Forum in the Ritz-Carlton Atlanta _ off-site from the far larger computer and consumer electronics Comdex show that is sponsoring it _ will help them get there.
``You write a business plan, then you make an appointment. You shake a lot of hands and tell stories,'' said Nat Goldhaber of CyberGold Inc., who is well familiar with the process. His Berkeley, Calif., software company developed a novel way to promote Internet advertising _ giving people money if they click through an ad on the World Wide Web. But while CyberGold is near completion of a $4 million round of financing on top of an initial capital investment, Goldhaber says he hasn't drawn a salary since starting the firm two years ago.
To be sure, capital match-making conferences have become commonplace since the World Wide Web with all its money-making potential exploded on the scene a few years ago.
But the separate forum on venture capital formation is a first for the giant Comdex show, whose spring event expects to draw about 110,000 retailers, corporate technology managers and other attendees to the 3,000 displays on the cavernous main floor of the Georgia World Congress Center.
The event combines two trade giants for the first time _ the Comdex and Consumer Electronics shows _ reflecting the convergence of high-tech gear such as computers with traditional consumer electronics equipment such as television sets.
Featured products include TVs that enable people to surf the Internet and hook into their computers. For cost-conscious businesses, exhibitors are showing stripped-down computers that download information across the Internet or corporate networks, instead of requiring expensive installation of software on each machine.
Softbank Comdex, which is running the event, is itself an investor in Silicon Valley start-ups. But ironically, most of the entrepreneurs at the nearby hotel _ companies at the heart of the high-tech world's explosive growth _ won't be featured on its main floor: They can't afford the $4,500 it costs to rent even the smallest booth _ a 10-foot-by-10-foot space _ for four days. That's not including the cost of a display and travel for staff.
All of which highlights the importance of standing out in the match-making session today and Tuesday, dubbed ``The Conquest of Capital.''
Participants have worked hard to develop niches to woo investors hesitant to pour funds into a crowded technology corner. CDnow, for its part, runs an on-line record store that promises fast delivery of almost every U.S. recording in current release. Voxware makes digital speech-processing equipment.
Following a huge burst of Internet investment last year, there's still plenty of capital looking for a home. While investments by traditional venture capital firms flattened in the first quarter, according to Venture Finance newsletter, new investors are filling the gap _ big corporations seeking promising technology and individual ``angels'' with money to spend.
Still, ``I think the wild rush of enthusiasm of a couple of years ago has been tempered somewhat by more skepticism about different kinds of business models,'' said Bill Marbach, Venture Finance's managing editor.
One type of start-up that faces snowballing competition are companies specializing in ``push'' technology _ software that delivers on-line news, sports and other information directly to your desktop, so you don't have to search through the maze of Web sites for it. After PointCast pioneered the niche a year ago, a rush of rivals promises a shakeout.
The shakeout already has begun in another area. Nets Inc., a pioneer in the field of Internet commerce, filed for bankruptcy court protection from its creditors last month. Led by the former chairman of the Lotus Development Corp., Jim Manzi, it ran an on-line shopping mall for manufacturers selling basic industrial goods, from ball bearings to glue guns. But the business was too broad-based at a time when most big Internet growth comes from selling more specialized products.
``It's kind of tough when small companies get lost in the noise,'' says Richard Brandt, editor of Upside, a high-tech finance magazine that is a sponsor of the Venture Capital forum.
``The venture capitalists can only make money off a certain number of companies.''