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Venture Capital in Silicon
Valley
Bruce Francis, Steve Young
08/03/2000
CNNfn: Digital Jam
http://cnnfn.cnn.com/services/fnonair/video/dj/56k/080300pt1.html
FRANCIS, CNNfn ANCHOR, DIGITAL JAM: Hummer Winblad is
an anchor of the venture capital scene in Silicon Valley. Founded in 1989, it`s
main mission is to seed software startups. In tonight`s Digital Jam money hunt,
we profile founding partner Ann Winblad, who joins us from San Francisco. Ann,
always good to see you, welcome back to the JAM.
ANN
WINBLAD, HUMMER WINBLAD VENTURE PARTNERS: Great to see you Bruce
and Steve.
FRANCIS: First of all I remember, it was probably about a couple of years
ago on
this program when I asked you, gee Ann, what`s hot now, what`s interesting
and
you mentioned B2B exchanges and this was long before any of these companies
have
really gone public. They gone public, they took off like crazy and a lot of
them
have been crunched down in their valuations. What is your current feeling
about
this area?
WINBLAD: Well we funded several B2B exchanges that I talked about last time
I
was one, including Internet mortgage exchange, the national transportation
exchange. We did not take those companies public early. We though they were
two
innings on the B2B exchanges. You had to build the exchange and then you had
to
add value added services and information to build a large enough business. I
think a lot of the exchanges thought it was a one inning game, you just
build an
exchange, started running stuff through it and many of those exchanges first
didn`t get up and running and second found themselves a very small business.
So
I think one has to have a bigger perspective on these exchanges and many of
the
private companies are doing extremely well.
FRANCIS: You`ve made bids in this areas on companies that have been
independent
of some of the big suppliers or the big purchases here.
Do you think that is where the money will be in, the independent agencies?
WINBLAD: Well I think the independent B2B`s are actually part of more of an
industry food chain. They`re not just moving transactions across the
exchange
and taking pieces of it. The inter-company exchange is like the large
companies
building - the car companies or other companies are really for processing
transactions. Companies like Internet mortgage exchange are actually a new
piece
of the mortgage industry where they handle transactions between brokers and
lenders as part of what they do, but they also are actually an application
that
sits between the brokers and lenders that has been manage the daily work
flow
for the brokers and for the lenders. So they are very different in scope
than
just the transaction processing engines that people try to flip quickly out
into
the public marketplaces.
FRANCIS: Ann, probably there hasn`t been in recent memory and investment of
your
firms. It`s been more controversial than Napster. Now I now you probably
don`t
want to talk about the legal stuff, but what made you and your partner sit
down
and say, this is a business that we can put our investors money in and get a
good return on?
WINBLAD: Well two things. First of all, it`s been a long time before we`ve
been
able to see anything that leverages the [INAUDIBLE] nature of the Internet.
The
essence of the Internet where the customers actually cost other customers to
use
the product and the community unifies the application. You wonder why a lot
of
these consumer companies need so much money to attract the consumers. In
this
case Napster has 20 million plus consumers with no marketing budget. So we
thought this was the essence of community on the Internet. Secondarily, we
helped create a company called Liquid Audio, 4 years ago that built the
infrastructure for digital downloads of music on the Internet. So we`ve had
four
years of experience in digital music delivery. We`ve learned a lot. We think
this is a long term game. Even though it looks a little precarious and
overexciting out there, we think that the industry is changing and that is
will
benefit companies that have a role in the newly evolved digital music
industry.
FRANCIS: If there isn`t a legal way for Napster to operate the way it does
now,
are there peer to peer ideas that you can pluck out of this that you think
are
interesting? Are there other peer to peer models that appeal to you?
WINBLAD: You know Bruce I think this peer to peer thing is trap like B2B
and
B2C where the industry grabs onto a moniker that they try to make bigger
than it
is. I`m not sure there is an industry segment called peer to peer. There is
an
infinity group called music and there is a community that where one of these
groups lives on called Napster. That happens to be peer to peer. We are
going to
see all sorts of nutty investments made by all sort of people that they
called
peer to peer. I`m not convinced there is a peer to peer segment. I can`t
tell
you what Napster will do in the future for obvious reasons, but we`re not
viewing this as a peer to peer category killer, we`re viewing this as a
killer
application.
FRANCIS: There`s been, up and down Silicon
Valley word of a lot of cutting back in startups. Have you seen that
in your - especially [INAUDIBLE] like pets.com or
myprimetime
, there is still free public. What about those? Have you seen
cut
backs and how are you navigating through these kind of tough times?
WINBLAD: Well actually it is tougher times in
Silicon Valley. We`ve been pretty fortunate with our companies
today. Myprimetime just zoomed up to number 250 on
media metrics out of nowhere and basically their marketing budget
has become so efficient, because they just started last September.
We`ve learned a lot. We`ve been here 5 years trying to learn how the
Internet attracts and maintain customers. So the newer companies
like myprimetime
are not the ones cutting
back
because they got to benefit from the runs, hits and errors of their
predecessors. So they`re actually doing extremely well and are on their plan
of
hiring and are not tuning and pruning. Many of our other companies through
the
history of our 11 years of software investing. When you get to about 100
employees you need to prune and tune. Get to 200 you prune and tune. There
are
differences where some companies are doing lay offs. Our companies look
brutally
all through their growth periods at whether they have the right employees,
doing
the righ
t stuff, under the right assumptions set and building a cohesive strategy.
FRANCIS: [INAUDIBLE] but I got to ask you a favorite question. What has the
weirdest most out there idea that you`ve gotten? I know you`ve had a few.
WINBLAD: Well actually there weirdest one we`ve had in 11 years was
actually
the gentleman that presented just to me and said that he can control
networks
with brain waves. And this was actually pre-Internet, right before the
Internet
was distribution platform and I was very excited. I couldn`t wait for the
demo.
And I said well give me the demo. Unfortunately he said -
FRANCIS: Unfortunately
we can`t control the airwaves with our brain waves and we lost Ann
right in the middle of that conversation. We apologize to our
viewers and of course to Ann.
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