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Home >Press > PlainDigital Jam

Media | Press Releases | Founders | Media Kit

Venture Capital in Silicon Valley

Bruce Francis, Steve Young
CNNfn: Digital Jam

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.


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 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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