Date: August 26, 2000

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The Industry Standard's 2nd Annual "Internet Summit" was held
July 15-18, 2000, at the Ritz-Carlton, Laguna Niguel, California
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Dear Clients, Partners, Friends, and (especially)
beloved readers of my first report:

Okay, I admit it, it's been several weeks since the Summit and I'm late with this report. So, what do you expect when it's free -- timely delivery, too? Shees! Hey, with this gig, at least you get the follow-ons I promise (okay, *most* of the time). But no one can predict when -- least of all me.

And besides that, I had a big naming project and another conference to cover in between. (See "Lurking With Luddites in LA-LA Land"...likely still lurking in your insidiously over-packed email box somewhere.) And, after all, what I'm reporting on here is not like news with some short half-life, but perspectives and opinions that certainly have ongoing value. So there.

First off, thanks to all those former English teachers, or whoever you were, who corrected my spelling errors in the last one. Geez, you guys expect typo-free copy, too? Sure--I'll get the tooth fairy to stop by and proofread the thing next time. Uh huh, right before I click Send...

Anyway, for you spelling-bee-winners out there, the corrections:

-Salt Creek (the very excellent surf beach next door to the Ritz-Carlton, where I have spent many a day and sure as hell should be able to spell--duh)

-LoudCloud (Mark Andreessen's new company--and, by the way, if I hear one of more new company using the word "cloud" in their name, I think I'll be sick. Enough already.)

-VerticalNet (another mere slip of the fingers...hey, I know how to spell Verticla!)

Friends, that's what you get when it's a *TotallyInsanelyFree.com" newsletter. At least I didn't misspell one of the names of you panelists out there! (Whoa, do I get flamed when I that happens. Well, excuuuuuse me!)

You may recall, in my first send I asked readers to vote on what I should write about in my second and final report on this conference.

Before I get to the winners, though, here again for your reference were the candidates -- the sessions I sat through, taking copious notes...or at least the sessions I got good notes from...

The Internet Summit Included the Following Sessions:

1) - Steve Case interview: "Defining the World's First Fully Integrated Media and Communications Company for the Internet Century" (it didn't--but sure was a nice, friendly chat with Mary Meeker, one of the co-hosts)

2) - "The New Pioneer: Asia and the Internet"--An Interview with Richard Li, Chairman of Pacific Century Group. (how you say "da man" in Cantonese?)

3) - Panel: "E-Commerce--It's About Platforms" (the heads of CNet, Amazon, Yahoo, Priceline, eBay)

4) - "The State of the Global Capital Markets," a firehose presentation like none I've ever seen/heard/experienced, by analyst-buddies Mary Meeker and Ruth Porat of Morgan Stanley.

5) - Panel: "The New face of Venture Capital" (eCompanies, Internet Capital Group, 12 Entrepreneuring, and CMGI)

6) - Panel: "The Future of Wireless Applications and Services" (NTT DoCoMo, Phone.com, America Online)

7) - Panel: "Beneath the Surface - Infrastructure" (the heads of LoudCloud, Akamai, Genuity, and Exodus)

8) - "How I Saved $100 Million Using B-to-B E-Commerce," by the CEO of Carrier Corp.

9) - Panel: "Who Controls the Future of B-to-B?" (the heads of Healtheon, FreeMarkets, Ventro, and VerticalNet)

10) - An interview of Keith Krach, CEO of Ariba (by Bill Gurley, the other host)

11) - "The Return of Interactive Television," a presentation by Mitch Kertzman, CEO of Liberate.

12) - The music panel (but who cares about that)

13) - "What's in a Name?", an interview of Stratton Sclavos, CEO of Verisign, focused mostly on talk about recent acquisition Network Solutions.

14) - An interview with Jim Clark, on "The Elements of Start-up Style." (the billionaire's billionaire shares some interesting perspectives on life in the e-fast lane)

15) - Three new companies' business models: pitches by the CEOs of Village Ventures, Epinions, and iWon.com (three young turks out to knock our socks off)

16) - Panel: "Over There - The Internet in Europe" (yes, they've seen the movie, and look out)

17) - A (reeeally) informal talk by Bill Joy, Chief Scientist at Sun, on "The End of Technology."

18) - And a final interview: the Bill & Mary team go at Yahoo! CEO, Tim Koogle.

(As you'll recall, I said number 12, the music panel, was a disappointment and don't vote for that. And I'd already actually written a report covering numbers 8, 9, and 10....the B2B sessions. By the way, if you want to refer back to the latter, it lives here ...and my first emailed report on The Internet Summit now lives here.)

Anyway, the sessions that got the most votes from my readers were 5, 14, 17, and 18 (in that order)...followed by a four-way tie of 3, 4, 7, and 15. Here are rundowns on the winning four.

Session #5: "The New Face of Venture Capital" Panel

For starters, here's what the panelists said when asked by moderator Jonathan Weber to explain their models:

Dave Wetherell/CMGI: "We were an operating company first, then started the first Internet venture capital firm in '95 -- @Ventures. We try to find complementary investments that leverage our operating companies. We look for points of intersection, and find synergies. We're more like a corporate investor."

Halsey Minor/12 Entrepreneuring: "We're entrepreneurs, not funders. But we have a lot of people behind us. [Partners include Eric Greenberg, founder of Scient & Viant, and Benchmark Capital.] We believe the economy gets restructured over the next five years. And we want to hire 12s on a scale of 1 to 10."

Ken Fox/Internet Capital Group: "We started in 1995, and take a long-term view. We now have 71 portfolio companies, of which seven are public and one-third are outside the U.S. All told, we're on a $1B run-rate, with 40% growth quarter-over-quarter. We're more like GE. We take the path of least resistance, and make minority investments, averaging 35%. We believe we're in a Renaissance periood--it's easier to build great companies today and to recruit. We use our stock as currency, on behalf of entrepreneurs. In the next few years, we're building the business to several billion dollars in annual cash flow."

Sky Dayton/eCompanies: "I'm a serial entrepreneur, just like my partner Jake Winebaum. One thing we're focused on is the fact that 65% of the consumer (Internet) market is still untapped. Who will capture that? Venture funds are still loaded for bear. We believe the secret sauce is execution, and we surround the best ideas with the best people. We went out and got 60 of the best second-generation professionals we could find--in recruiting, strategy, and so forth. We start with nothing, at the earliest stage. It's very intense--about 12 companies per year. We figure about four will fail during incubation--yes, including this year. Then we learn from that--bottle it. The startup founder is the visionary--we can't do that. We provide the great environment where they can flourish."

To the question "Is the structure of VCs and incubators part of the bubble burst--that is, going away?"...the panelists had this to say:

Wetherell: "Our companies get stock in CMGI, to encourage them to support other companies in the fold. We believe our business model has lasting value."

Fox: "We use common technology platforms, including RightWorks and Commerce One. We have 35 recruiters in house. It's about synergy and cross fertilization. We started ICG Commerce 60 days ago, from scratch--it's now 100 employees."

Minor: "It won't be Internet versus traditional companies much longer--it will be just one economy. One strategy will be acquiring traditional companies, doing rollups. What people like us bring is having built profitable companies, without the scrutiny of public shareholders. There's enormous opportunity to acquire and transform these traditional companies. Not so different from Berkshire Hathaway."

Dayton: "In 10 years, the Internet will not be the organizing concept for business. Like Jeff Mallet (of Yahoo) said yesterday, 'It's now about good companies versus bad companies'."

Moderator question: How do you value yourselves these days?

Wetherell: "For CMGI, it's the sum of its parts--like the NAV for mutual funds. There has to be value for us in the 'network effect.' With all our investments, we see future value."

Fox: "We want to own more than 25% of each of our companies. We got exemptions early on from the SEC, regarding 'the 40 Act'."

Dayton: "Value creation happens when you're pushing against something. Value is created when you go into a headwind and persevere. With Earthlink, in my first round, I sold 40% of the company for $100,000. The climate today is healthier."

Minor: "There's a simple formula regarding the Internet: All ya gotta do is believe! The best time to buy is when people don't believe."

Audience question (to Ken Fox of ICG): How do you justify such future optimism regarding your stock?

Fox: "It's just about time. Execution is going to change everything. We have a lot of confidence in how big these companies will be."

Audience question: How long a cycle to go public now? It was six months.

Minor: "CNet was an eight-year gestation, four years to go public. And two years after that to turn profitable. All the mistakes I made were from going too fast. There will be windows to going public, as long as you focus on the business."

Moderator question (to Wetherell of CMGI): And the length of the path to profitability?

Wetherell: "It depends on the sector. Like global hosting, for example, takes a long time--building the data centers, etc."

Moderator question: and what role will government regulation play?

Dayton: "Washington cannot possibly run as fast as the Internet."

(end of session)

Session #14: An Interview with Jim Clark

The introduction, by interviewer John Heilemann (author of the forthcoming book, "The Valley): "Jim Clark is the first person to found three multi-billion dollar companies--Silicon Graphics, Netscape, and Healtheon--and the subject of Michael Lewis' recent book, "The New, New Thing."

Q: What do you think about the crash?
A: I think it's healthy, and it may not be over. I'm sort of neutral now.
A lot of big caps are still over-valued.
Q: So, what inning is it in the Internet Economy?
A: The second or third. And the term "Internet" will go away.
Q: What's next?
A: I'm not the one to ask, since I focus on just a few things.
Q: Will there be a return to patented type technology and hardware?
A: Yes, although I'm not interested in hardware companies myself.
I'm focusing on the services area--particularly "DNA services."
Q: And what about Shutterfly, where you've recently been spending
most of your time?
A: Well, it's about managing your photo shoebox. The digital camera
will replace traditional film.
Q: Isn't it a crowded market?
A: Yes, and tough. A low cost of entry. We're out to be the Amazon
of photos, with overnight delivery.
Q: Do you offer unique services?
A: Yes, but it's more of a market-share game.
Q: And what about your other startup, MyCFO.com?
A: The issue is where's the sweet spot in the market. It's high end.
In the U.S., 1% of households control half the wealth in the country.
Q: Will it always be a niche company?
A: You're asking the wrong person. I ran it for nine months--
now we have a new guy.
Q: Tell us about your new company, DNA Sciences, or DNA.com.
A: It's one of the most interesting things going on, based on the
work of a Johns Hopkins researcher. It's about finding the correlation
between treatment and disease state to genotype....The ones making
the big money in healthcare are the pharmaceuticals. That's
Healtheon's problem.
Q: One thing that really gets your juices flowing is Microsoft. What's
your outlook for them? And what's your opinion of the breakup?
A: It's a great company. Lots of smart people. And not fun to compete
with. But, now that I own stock [he said later it was 1 million
shares], I kinda like 'em! And with MSN, now that Internet Explorer
has won the browser war, they'll be the gatekeeper. They need to
monetize that, but they're on the path.
Q: The subject of our talk was "startup style." You describe yourself
as a rifle-shot VC. What gets you excited?
A: I'm passionate about what I do. Then I put all the wood behind the
arrow. I invested in Shutterfly because I knew the people. I considered
forming a VC firm with Tom Jermolik, but that seemed too much like work.
So Tom did something.
Q: So it's people that you invest in?
A: Yes, those with high integrity.
Q: Who's the best entrepreneur and best CEO in your opinion?
A: Steve Jobs -- he's my idol. I really look up to him. Also Larry
Ellison. The good ones share two traits: they're passionate, and
they have a lack of fear about the unknown. Tom Jermolik is my
protypical great manager. But, then, John Chambers is hard to touch.
Q: Your negative view of VCs--has it changed?
A: Well, now that I am one, I think they're pretty good guys. But every
business has its excellence [and the opposite, he implied]. All of
them should have guidance, especially in how they structure the
equity share. I got the shaft at SGI, but I'm okay now.
Q: And what about boards?
A: Well, they're often making CEOs look good, who end up taking
the credit.
Q: What are things to avoid in starting up?
A: Get money from quality people, who have been in businesses and
operated them. Angel investors is not the best way to go--it's like
getting money from a bunch of doctors. You need people who can come
in and run the business after the passionate guy [has run his course].
Q: Here are some stocks--tell us whether you'd buy, sell,
or hold....AOL?
A: Sell. Microsoft has the advantage.
Q: Yahoo?
A: Hold.
Q: Amazon? A: Buy. They will win.
Q: eBay?
A: Don't know.
Q: Excite@Home?
A: Buy.
Q: Priceline?
A: Not at all interested in.
Q: SGI?
A: The patent portfolio is worth something.
Q: Microsoft?
A: Buy.
Q: Napster?
A: Weird.
Q: Why?
A: I'm not sure. Why don't the record companies do something?
They've been sitting on their hands for five years.
Q: Interactive television?
A: The web will evolve into that.
Q: So, I hear you're building another boat?
A: Sure--need one for every ocean. [laughs and applause]

Audience question: Regrets about Netscape?
A: No. I did that with SGI. Don't do that anymore.

Audience question: How will the bioscience industry deal
with peer-to-peer file sharing?
A: I'm not sure, but it's an important area.

(end of session)

Session #17: Bill Joy's Talk on "The End of Technology"

This was one of the stranger sessions of the conference--about as short, sweet, and informal as they get. But, then, Bill and most of the rest of us are operating in different worlds, anyway, right? Since it was so brief, it didn't net me many good pages of notes to pass along. But a few good nuggets.

His talk was listed as "The End of Technology," but I never did get what the hell that title was supposed to mean. Bill stood center stage and basically "wung it"--without notes or slides. And, as you may know, he can talk kinda fast. So, the following is about all I was able to get from what seemed like sort of a chat with a friend in the hallway-- who just happens to be the founder & chief scientist of Sun Microsystems.

Bill talked about how there are or will be "many different modality webs"... mentioning "PC, PDA/phone, embedded (as in autos), voice-activated, the e-businessweb (companies talking to companies), the pervasive computing web, a wireless replacement for bar codes." And he said there will be "at least one trillion dollars in wealth created for each of these."

On the subject of "other disruptions," he noted that Moore's Law is running out of gas. And he talked about how "molecular electronics" will take us to about 2030. "It will be a factor of one million times faster than today," Joy said. "And there will be several cycles of invention in computing resulting from this."

Another thing Joy said he's positive about is the way people work together now in developing technology standards. "Sun feels healthy," he said, "The way we're getting people together who have similar values and stakes. There's enough 'openess' to make people feel that the processes are participatory."

With open systems, Joy said, you publish your interface and evangelize it, but allow others to develop the proprietary applications.

At the end, one audience questioner focused on a remark Joy made about a lack of resources in Silicon Valley -- "Did you mean talent?" he asked. Answer: "The Valley is getting tapped out -- in real estate, in many ways. Companies like Sun and Cisco are growing at unprecedented rates."

(end of session)

Session #18: An Interview with Yahoo! CEO, Tim Koogle

The closing session of the two-day event was an interview by co-hosts Mary Meeker and Bill Gurley of Tim Koogle, CEO of Yahoo! Although Koogle was fresh, having just arrived prior to this session, everyone else was pretty tired-- including (perhaps most of all) the moderators. But, while this was not the highest energy interview of the conference, it did provide some interesting insights, as Mary Meeker (especially) pushed hard for some answers.

Q: What are your three biggest opportunities?
A: Our advertising platform, our footprint, and commerce--the latter about enabling merchants, which we've been working on for more than a year.
Q: Regarding the wireless market--what's your end game?
A: We don't think of it as a market. We do things to work across devices-- so we're agnostic to the device. No one owns digital distribution on the 'Net--as opposed to physical distribution. The analogy to the latter is the relationship with the user or customer. I think of preferences, personalization, the things the consumer does on the site, as the 'investment' he or she makes in Yahoo. That creates high switching costs. I find the wireless space extremely interesting. DoCoMo is a proprietary system, but has thousands of partners.
Q: Will the carriers become players?
A: Yes, as partners. They have to have services, to create switching costs. Because the cost of voice is going to zero.
Q: For a company that started as a free database, your looking like a company with a lot of technology. Challenges?
A: Well, in search, we were impressed with our recent benchmarks of Google, which showed increasing relevancy. And, despite what you may think, we did not hook up with them just because their name sounds like mine.
Q: Let's switch to advertising--what about the talk of it slowing?
A: This medium has more capability to drive awareness through to a sale than any other--ever.
Q: In the heady world of 1999, you could charge darn near anything. Are you now more emphathetic to your partners' ROI?
A: We always have been. We consider it part of our basic business model.
Q: Is the industry now on a trend to be more prudent?
A: The sources of consumers, like us, can only take it so far. Then, hand it off.
Q: Is it true that many partners have been booted because transaction revenue was not coming through?
A (reluctantly): Yes.
Q: So what about music and Napster?
A: Downloading will be huge, because it's so practical. And music is a repeat-use medium.
Q: So, when can we expect a big play from Yahoo?
A: Well, we're not just sitting back. I can't be specific about our plans, but we're in active dialogs with the major labels.
Q: When we get clarity from Napster, can we expect a move?
A (when pushed): Yes.
[Ed. note: For those of you keeping score, since this interview Yahoo has added a new category called "Digital Distribution" and a subcategory called "Peer to Peer File Sharing." And you thought it was illegal.]
Q: Open instant messaging in Europe is very successful. Can we expect that in the U.S.?
A: We're in favor of it--very supportive.
Q: Can we expect a Time-Warner type acquisition by Yahoo?
A: No, it's not on our immediate docket.
Q: Is there a Yahoo culture?
A: Yes, definitely!
Q: Give us your two-word descriptions of the following people....Jerry Yang?
A: Wise, gifted.
Q: David Filo?
A: Smart, understated.
Q: Jeff Mallet?
A: Tough, good manager.
Q: Masayoshi Son (the founder of Softbank)?
A: Fearless, intuitive.
Q: What's the biggest question facing you now?
A: How broadly 'Net adoption will play out worldwide.
Q: And what's the biggest potential global surprise?
A: The slowing of global consumption.

(end of session)

Hope you enjoyed these conference session recaps....maybe they contained some perspectives or comments that clicked with you.

In closing, some final thoughts from The Internet Summit...specifically, features I try to include in most of my reports (which I promised in my first email--see, I remembered!)...

Terms I Heard Most Often at the Event:

- "execute" (as in what firms must do to survive, not what VCs do to them when all hope is lost)
- "peer-to-peer" (or P2P) networking or file-sharing--as in, of course, eBay and Napster (in case you've been, uh, napping)

and those perennial favorites (gee, they sound so...*solid*...rolling of the tongue--don't they?):
- "infrastructure"
- "wireless"

Interesting People and Old Acquaintances I Met and Talked With:

- Kelly Conlan, CEO of IDG....hooray for the Upper Midwest! Kelly is one of the few media moguls I know, and bar-none the nicest (but, what do you expect? he's from North Dakota!)
- I also chatted again with many of the great folks from The Standard... Cheryl Lucanegro, Joe Walowski, Mickey Butts, Sue Ellen Wohlers, Alissa Neil, and lots of the dedicated staffers who make these things run so well (I continue to be amazed at what a huge amount of work it is to put one of these things on)
- Narry Singh, former partner of The McKenna Group, now having a ball as an independent
- Mark Goldstein, CEO of Bluelight.com, whose previous company, ImpulseBuy.net, was acquired by Inktomi
- George Goldsmith, CEO of a new McKinsey unit, TomorrowLab (shhhh.... you didn't hear it here, gang)
- Sheldon Laube, the well-regarded former cofounder & CTO of USWeb, now CEO of Centerbeam, which is growing nicely
- Jean-Luc Valente of Atlas Venture in Menlo Park...the smartest techie Frenchman I know...vous et "da homme," mon ami!
- Jeremy Verba, President & COO of HearMe, another technology platform company to watch...formerly of E-Online and CNet, Jeremy was definitely the most high-energy guy I met here!
- Gary Bolles, my editor at Conferenza.com, who also hosts a great show on ZDTV...and knows absolutely everybody from his perch in the City by the Bay
- Hans Bukow, CEO of eWork Exchange in SF (another one of those great eCompanies-funded startups, also making good progress)
- a couple friends from eBags in Denver: Jon Nordmark, CEO, and Peter Cobb, VP-marketing...part of the band of Samsonite studs who left to start this great company (hey, guys--was that front-row-seat lobster & fireworks thing on the beach the best, or what!?) they lent their expertise, again, for the official conference briefcase -- gotta be one of the best sponsorship gigs in conferenceville
(the great fireworks thing was kindly sponsored by eCal by the way)
- Morgan Yaping Wang, Founder, AsiaDemand.com (who raised a VC round recently led by an top-notch East-coast firm, when his company is located in SoCal...way to go, Morgan! so much for that rule)
- Pam Alexander, CEO of Alexander Ogilvy PR, still as high-energy as ever leading this much-in-demand shop (which was a co-sponsor)
- Kevin Jones, NetMarketMakers, who amazed many by managing a successful acquisition of his fast-growing conference/publishing business by Jupiter Communications earlier this year, after launching it only a year or two ago (at least it only seems that long)
- Gail Bronson of the IPO Monitor, who follows Twin Cities software firm Net Perceptions, among many others....and who never seems to miss a hot conference like this
- J. Roger Moody, a nice gentleman who recently retired to AZ from his tech-company CEO position, and is now an angel investor...okay all you entrepreneur readers, go get him: rogmoody@ieee.org (sorry, Roger, can't help myself)
- Leigh Anne Lindsey, Partner & Chief Catalyst with Global Business Communications in Los Gatos, CA -- one of my favorite towns...in fact, I told her I'd work for free there--just give me an unlimited expense account at the restaurants
- Marcus Witte, Director of Business Development for Xuma in SF (which I'm learning is a hot EC platform company)...Marcus is a Wisconsin boy, ones of those crazy UW-Madison grads...hey, man, if you really do know a place to gets brats and beer in SF -- I'm there! (but do they have a Polka band?)
- Michelle Yeh, VP-marketing for China.com in San Jose....whose firm runs a conference series you can read more about at www.OpportunityAsia.net (next one soon in the Bay Area)
- Tom Carrier, a bright young-turk investment banker from Morgan Stanley in Menlo Park, about to relocate with them to London
- Jim Hake, CEO of LA-area startup Big Buttons.com, based in the very cool little town of Pacific Palisades...sounds like kind of a retro Digital Coast family thing happenin' there
- Walt Borland, VP of eBusiness for Convergys in San Francisco, one of the best informed and eloquents guys at the event...and I love it when smart guys tell me they like my reports so much... :-)
- Ken Fosina, Founder and EVP of bus dev for LendX.com in SF, "the premier online business-to-business exchange serving the corporate- lending industry"....see, Ken, I got it! (backed by NEA, Mohr Davidow, and Angel Investors LLP)
- Kip Parent, CEO of Palo Alto-based RightsCenter.com, which seems be in the right place at the right time -- i.e., the burgeoning new field of digital rights management
- Lloyd Taylor, a longtime Internet infrastructure guy, now VP of operations for San Mateo-based Keynote Systems..."the Internet performance authority"....I think Lloyd was one of the few guys, like me, who sat through every last session

So, once again, thanks for reading. And watch for my coverage of The Industry Standard's "Net Returns" conference in Aspen, September 7-9, 2000. Far out! (A return engagement for me.) More on that event here.

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