SAN FRANCISCO (04/20/2000) - There's the part of the Internet world that felt pain from the stock market's recent meltdown. And then there's the "eEstablishment," as celebrated on the dais of Vanity Fair magazine's "ebreakfast" on Tuesday morning in San Francisco.
The bottom line: The steep stock market decline might affect people with flimsier business practices, but it means nothing to moi. The event was held at the hyper-designed Hotel W in San Francisco's South of Market district, to promote the magazine's May 2000 eEstablishment feature. The article lists the usual suspects, with an occasional oddball thrown in - About.com's Scott Kurnit? Venture capitalists Ann Winblad and Steve Jurvetson were in attendance, as was Inktomi's Eric Brewer. The mood was cheery, the women were blonde, and the men used visible hair product.
"Strong companies dropped 50 percent. Lesser companies dropped 80 percent. That 30 percent difference is because Wall Street is smart," said a winsome Jurvetson. Winblad also saw a bright side to the shakeout: Companies that have been spending a lot to compete with one another won't have to spend as much if their competitors die. "You needed to spend a lot of money to rise above the noise," she said. Now VCs will "be able to give similar companies less money, she said, because they won't need to spend it competing with each other."
Inktomi fell by about 150 points in the past few weeks, shedding roughly half its value in the past 10 days before recovering more than 25 of those points on Monday and Tuesday. Despite the losses, though, Brewer saw nothing but buying opportunities in the wake of the meltdown. "I got six calls yesterday from companies that would like to talk because their funding opportunities don't look so good," Brewer said. "Big-name companies with war chests will be on a buying spree." Inktomi just raised $300 million in cash, which it now will use for acquisitions.
Jurvetson, a partner in the venture firm Draper Fisher Jurvetson, said the market shakeout can only help the top-tier venture firms. "Investors can't presume other financial markets will bail them out," he said. "They can't worship at the Church of the Greater Fool." Winblad agreed. "A lot of venture firms have sprung up that are funding the runners-up," she said. "Not only will those companies go away, but those venture capital firms will go away, too."
And maybe things will slow down a little.
As one breakfaster put it, "Nowadays, the first thing your venture capitalist does is introduce you to the investment banker." More than one participant voiced the hope that everybody would now spend less time worrying about going public and more time creating good businesses. "The instant gratification will be gone," Winblad predicted. "It doesn't matter what happens today," Jurvetson said. "The question is, do you believe in the industry? It feels like we're in the first inning of a nine-inning baseball game. Every business is at core an information business, and the Internet provides a way to structure the exchange of information."