A Northern Virginia venture capitalist, speaking at Shenandoah University last month, compared the bubble of the late 1990s to today’s investing climate.
Back then, the business strategy was first to market; now it is first to profitability, said John Backus, Jr., founder and managing partner of Draper Atlantic, an early-stage information technology venture capital firm. “The entrepreneurs thought that capital was free; now they see that it’s scarce. In the old days-not so long ago- it was all about relationships with key partners which had name recognition; now it’s all about customers.”
Backus was at Shenandoah University to receive the Entrepreneur of the Year Award from its Harry F. Byrd School of Business. He was a founding investor and the president and CEO of InteliData Technologies, leading its predecessor, U.S. Order, through a successful $65 million initial public offering (IPO) in 1995. During the past 15 years, he has negotiated more than 15 merger, acquisition, divestiture, venture investment and corporate finance transactions, with a combined value in excess of $500 million
As for hot areas to invest in, Backus said wireless is a big one, and he expects everything to converge around a wireless device. They include text messaging, sms messaging, and cell phones which are “huge in Europe and Asia, growing at 20% a month. It’s all about the integration among instant messaging, e-mail and voice.”
Backus said the future looks brighter for 802.11b (Wi-Fi) networking, not 3G networks where expensive repeaters are needed. “It will be stationary broadband service, where bandwidth can be used,” he said.
Regarding investing in Internet businesses, Backus favors those that establish interactive communities like e-Bay and investing.com. “Direct mail and sales, where e-mail marketing and permission based marketing are used, will also take off,” he said. “Ads will be big on Internet where paid research and ads that are relevant are concerned. Direct mail through the Internet will be bigger than advertising on it.”
Copyright News for Business, Inc. May 2003
