Top 10 Internet Financing Companies
IF the INTERNET is a sleek rocket ship moving at the speed of light, then cash is the fuel that makes that rocket go!
Yet with Internet companies, some dollars are definitely greener than others: it’s not how much money a startup
has, but which venture capitalists coughed up the dough, and which investment banker is doing the IPO. Financial
partners are now often strategic partners, too. As firms ranging from VC kingpin Kleiner Perkins Caufield & Byers to
Japanese renegade Softbank build networks of companies that are often referred to as Keiretsu.
In deciding on the 10 most important financiers, we started with the venture capitalist - and we found a surprising
degree of consensus about which ones have the most clout. First, there’s Kleiner Perkins, whose backing of
Netscape, Amazon, AtHome, Excite and countless others has put it far ahead of the pack. Then there’s Benchmark
Capital, which more than any other firm has captured the buzz that was once reserved only for Kleiner. With
investments in companies like eBay, Ariba and Critical Path, Benchmark is building the same kind of network Kleiner
has. Sequoia Capital boast a high-profile partner in Michael Moritz, who since investing in Yahoo has climbed into the
first tier of VCs.
There’s also a new breed of investment firm that’s starting to give the VCs a run for their money. Companies like
Vulcan Ventures, Idealab ansd Softbank invest in companies and, like Kleiner Perkins, they work to build and exploit
mutually beneficial relationships between portfolio firms. But, unlike traditional partnerships, these investment
companies center around one person.
At Vulcan Ventures, that’s Microsoft cofounder Paul Allen. At Idealab, it’s Bill Gross. And at Softbank, it’s Masayoshi
Son. All three have a huge influence on which Net companies get funded. (CMGI could be here too, but, with its
acquisition of AltaVista, we’ve classified the firm as a portal.)
Once companies are funded, of course, the next milestone is going public. And that’s where having the right
investment bank comes in. Goldman Sachs and Morgan Stanley Dean Witter go head to head for every premium
Web company that wants to go public. Morgan has analyst Mary Meeker; Goldmann has lead tech banker Brad
Koening. Others have the ineffable something that can make a deal hot.
Just a notch below tees two is Credit Suisse First Boston. Led by Frank Quattrone, the firm has won its own share of
great deals. Meanwhile, Hambrecht & Quist, one of the last technology “boutiques,” is ubiquitous to a second banker
on may big offerings and a lead on small deals
TOP 10 (As of Sep 99)
Benchmark Capital
HEADQUARTERS: Menlo Park, California
URL: www.benchmark.com
LEAD PARTNER: Bob Kagle
EMPLOYEES: 7 Partners
Benchmark Capital is the Up-and-comer of the ventures-capital set. No firm has made a more convincing run at
challenging Kleiner Perkis Caufield & Byers as the most influential venture-capital company.
Benchmark first broke from the pack with its early investment in eBay, and now it’s on something of an IPO roll, with
investments like 1-800-Flowers, Red Hat, Wink and Ariba all going public successfully within the last several months.
The big winners were Red Hat, whose IPO in August offered shares at $14 and closed its first day of trading at
$52.06 a share, and Ariba, which in June offered 5 million shares at $23 each and saw them close at $90 the same
day.
Of course, it’s not all roses for Menlo Park, California-based Benchmark. In August, a much-heralded deal with “Toys
“R” Us, in which Benchmark was to invest in the company’s online venture fell apart over how much equity
Benchmark would get.
While the failure of that deal is undoubtedly embarrassing in the short term, Benchmark’s status as one of the few
firms that can make or break a Net play hasn’t suffered. Benchmark obviously still sees benefits in teaming with
offline retail stores: the company has signed a deal to help launch an online store for Nordstrom.
Credit Suisse First Boston
HEADQUARTERS: Zurich, Switzerland
URL: www.csfb.com
CEO: Allen Wheat
EMPLOYEES: 14,000
In the battle for Silicon Valley investment-banking business, a lot of the attention is focused on the competition
between Morgan Stanley and Goldman Sachs. But there’s a third key player in the mix: Credit Suisse First Boston.
And that’s in large part due to the influence of Frank Quattrone.
Quattrone, CS First Boston’s lead technology investment banker, made his mark at Morgan Stanley, fled for a bigger
payday at Deutsche Bank and then led his Deutsche Bank team on a mass exodus to his current employer.
Quattrone’s biggest claim to fame was his Morgan-era work on the Amozon.com IPO. Some rival bankers grumble
that the deal was his one shining moment, that he’s a one-hit wonder. But his record suggest otherwise.
Over two days in July, for instance, Quattrone and company lead-managed IPOs for MP3.com and Gadzooz
Networks. On July 20, Gadz
oox went public at $21 a share and more than tripled on the first day of trading. The next day MP3.com went public
at $28 and immediately soared past $63. And there’s plenty more where that came from: still-pending are CS First
Boston-led deals for Web marketing company Epiphany and Net security company InterTrust.
Goldman Sachs
HEADQUARTERS: New York
URL: www.gs.com
CEO: Henry M. Paulson, Jr.
EMPLOYEES: 13,033
MARKET CAPITALIZATION: $29.6 billion
Rattle off the names of Internet IPOs for which Goldman Sachs has been the lead underwriter in just the last coupe
of months and you get a virtual greatest hits of the online world - everything from Internet backbone firms to the
hottest new players in electron commerce an software. Companies like Linus-specialist Red Hat, fast growing portal
LookSmart, along with E-Loan, Engage and Tibco have all enlisted the help of the No. 1 underwriter in the Internet
Economy.
It’s not hard to see why: Among Goldman’s earlier Internet deals were IPOs for both eBay and Yahoo. A lot of
people would lke to see the magic rub off on them.
But Goldman’s biggest coup in the past year was a different sort of IPO: its own. The legendary Wall Street firm this
year succumbed to the lure of vast riches and went public. Meanwhile, Goldman has held its strong position in the
IPO market, even as a host of rivals - from big, established investment banks to boutiques and regional underwriters
to new Net-based players - have tried to steal its thunder.
More big Goldman deals are coming, including the highly anticipated $345 million initial stock offering of Webvan, the
Net-based grocer. Which means more gold for Goldman.
Hambrecht & Quist
HEADQUARTERS: San Francisco
URL: www.hamquist.com
CEO: Dan Case
EMPLOYEES: 827
MARKET CAPITALIZATION: $1 billion
LAST 12 MOS. REVENUES: $502.5 million
LAST 12 MOS. NET INCOME: $78.7 million
It’s nice to know there’s still room for boutiques banks. The buyouts of Robertson Stephens, Montgomery Securities
and other small investment banks in recent years have led some observes to predict that boutiques would go the
way of the hula hoop. But Hambrecht & Quist has been happy to prove them wrong, at least so far.
H&Q makes its living acting as co-banker in some of the biggest and best initial public offerings on the Web -
showing that you don’t need to lead every issue to have influence.
In the last couple of months, the firm has assisted in IPOs for companies like Liberate, Red Hat and Look Smart. It
will have a hand, as well, in the upcoming offering for Epiphany. And the firm doesn’t only ast other banks in
offerings. In July, H&Q handled the public sale of Net2Phone shares, which went from an offering price of $15 a
share to close at $26.50 on the first day of trading: shares have since soared as high as $92.63. H&Q also boast
strong research and an active private placement business.
Though there are no guarantees that H&Q will stay independent - there have been rumors for years that Merrill
Lynch is keen to snap up Hambrecht & Quist - as long as it remains on its own, the company will have a niche play
as a savvy, strong second. And that’s not a bad business.
Idealab
HEADQUARTERS: Pasadena, California
URL: www.idealab.com
CEO: Bill Gross
EMPLOYEES: 35
Bull Gross’s Idealab has made the incubator investment method chic. Gross, the serial entrepreneur, has
transformed himself into idea man, savvy investor and Net mogul all wrapped together in one package. The last
year has seen him consolidate his position within the Internet Economy.
For instance, Gross has been one of the chief architects of the Free-PC business model, in which companies give
away computers, and, in exchange, consumers agree to become sitting ducks for online advertising. If that idea
seems a little goofy, Gross additionally dabbles in a little serious investing on the side. Well, maybe “dabbles” is an
understatement. Idealab has put money into several companies that have had lucrative IPOs in the last year,
including MP3.com, Goto.com and others. The company has also invested on both sides of the online-ticketing fence:
Idealab holds about 10 percent of Tickets.com and about 18 percent of Ticketmaster Online - CitySearch.
One of Gross’s biggest scores of 1999 was with eToys, which went public in May with an offering price of $20 a
share. At the close of its first day of trading, eToys shares were $76.56 and the company has a market cap of about
$8 billion. Idealab’s share after the first day of trading: a cool $645 million.
Kleiner Perkins Caufield & Byers
HEADQUARTERS: Menlo Park, California
URL: www.kpcb.com
LEAD PARTNER: John Doerr
EMPLOYEES: 17 partners
CAPITAL RAISED: $1.7 billion
ASSETS ON HAND: $4.3 billion
While the Internet can create a red-hot venture capital firm with one well-timed IPO, the bar remains high when it
comes to defining the best Net investors in the business. That’s because Kleiner Perkins Caufield & Byers still invests
in Internet companies.
Simply put, Kleiner Perkins plays on a level that others only dream about. Witness its involvement in the broadband
access wars via an investment in ExciteAtHome. Or look at its role in the Microsoft antitrust trial through an
investment in Netscape.
What’s even more remarkable is that the firm still has time to invest in so many different companies. In June,
Kleiner joined with rival Sequoia Capital to invest in search engine Google, and more recently made an investment
in Martha Stewart’s Omnimedia, with Kleiner’s indefatigable lead partner John Doerr taking a seat on Stewart’s
board. Over the span of two months this summer, Kleiner backed two of the hottest offerings of the year: juniper
Networks, which in June soared from an amazing $34 opening price to $98.88 at the close of the day; and
Drugstrore.com, in July , which shot up from its opening price of $18 per share to hit $50.25 at the close of tis first
day. It’s no wonder observes look at current Kleiner investments as the hot IPOs of the future.
Morgan Stanley Dean Witter
HEADQUARTERS: New York
URL: www.msdw.com
CEO: Phillip J. Purcell
EMPLOYEES: 49,987
MARKET CAPITALIZATION: $53 billion
LAST 12 MOS. REVENUES: $32.6 billion
LAST 12 MOS. NET INCOME: $4 billion
Morgan Stanley Dean Witter is the second most powerful bank in the Internet Economy today. That really hurts.
Morgan would very much like to be No. 1 - the perch that archrival Goldman Sachs now occupies. And it isn’t for
want of trying on the part of Morgan Stanley.
Just recently the firm has taken public not only Ask Jeeves and Marimba, but also arguable one of the most
important companies to hit the public markets this year, Drugstore,com (which is backed by Amazon.com and
Kleiner Perkins Caufield & Byers).
And, of course, the bank still has Mary Meeker, one of the most influential franchises in the Net underwriting
business. It didn’t seem possible, but Meeker has probably gotten more influential in the last year, after a flattering
profile appeared in the New Yorker.
In May, Meecker released a report that stated that there were too may IPOs in the pipeline. Soon after, Internet
IPOs began to lose steam.
Morgan Stanley thinks the reason it’s taking second place to rival Goldman Sachs is that it’s more selective in the
deals it accepts. Morgan Stanley, of course, also prides itself on getting and keeping the most important business.
Earlier this year, it underwrote Priceline.com’s IPO. In August, Priceline filed for a $420 million secondary offering
led by, of course, Morgan Stanley.
Sequoia Capital
HEADQUARTERS: Menlo Park, California
URL: www.sequoiacap.com
LEAD PARTNER: Michael Moritz
EMPLOYEES: 15 partners
Sequoia Capital investments have been at the heart of some of the great success stories of Silicon Valley. Through
deals with such companies as Apple Computer and Cisco Systems, the firm has had as much to do with wealth
creation from San Francisco to San Jose as almost any venture capital firm around.
Sequoia’s International Partners arm focuses exclusively on foreign-bred companies, while the Capital Seed branch
targets Israel.
And the rise of the Web hasn’t slowed down Sequoia one bit, thanks to the work of Michael Moritz and others. Moritz
guided investments in Yahoo, eToys, PlanetRx and Webvan, amontg others. Just recently Moritz invested in and took
a board seat at search engine Google, along with rival John Doerr from Kleiner Perkins.
Of course, Moritz isn’t the firm’s only partner. Partner Mark Kvamme, legendary as a founding employee of Apple, is
chairman of the board of USWeb/CKS, as well as a director of Macromedia.
Sequoia has had an IPO success or two of late. In July, MP3.com went public at the offering price of $28 a share and
closed on its first day of trading at $63.31 a share. And in August, shares of Sequoia investment Agile Software
nearly doubled on its first day of trading, going from the offering price of $21 a share to close at $39.88.
Softbank
HEADQUARTERS: Tokyo
URL: www.softbank.com
CEO: Masayoshi Son
EMPLOYEES: 1,025
There are actually people out there who will still tell you that Softbank has been lucky, than Masayoshi Son could not
possibly have known when he made his famous investment in Yahoo that Web stocks would do what they have done.
It’s academic speculation at this point. Softbank has invested in plenty of other companies besides Yahoo, including
E-Trade, USWeb/CKS and Geo Cities, just to name a few.
This increasing broad web of companies look after each other. For example, InsWeb, an online insurance company
and a softbank investment, has a licensing arrangement with Softbank investment Yahoo, which makes InsWeb the
exclusive insurance site on Yahoo. InsWeb estimated in an SEC filing that in the first quarter of this year that more
than 20 percent of its traffic came from the partnership with Yahoo. In July, Ins Web went public at an offering price
of $17 a share and closed the day at $31.56. Just another day’s work for Son and company.
Softbank is now in a position to pick up some top talent. In July, Softbank Tech Ventures added Rex Golding, former
co-head of the tech banking group of Morgan Stanley Dean Witter, as a managing director to the fund. And in
August, Bill Burnham, a former analyst with CS first Boston, joined as a general partner.
Vulcan Northwest/Vulcan Ventures
HEADQUARTERS: Seattle
URL: www.paulallen.com
CHAIRMAN: Paul Allen
EMPLOYEES: 5
Microsoft co-founder Paul Allen has quite a diverse portfolio. How many other investors mix online buys into sports
franchise (he owns the Portland Trailblazers and the Seattle Seahawks) with Web investments? And how many start
a venture fund to manage their labyrinthine investments (Allen founded Vulcan Northwest in 1986)? What’s more, he
doesn’t have mere ties to a cable company - he owns one: Charter Communications, the fourth-largest cable
operation in the United States.
How Allen plans to apply his cable company to broadband Web access is the $1 billion question. He took a first step
when he acquire about 35 percent of Web portal Go2Net, and announced that the company would become the front-
end to any broadband service Charter rolled out.
Vulcan has a compelling set of investments that it could leverage in a broadband environment. Allen’s investment
firm owns about 19 percent of CNET, 9.2 percent of Drugstroe.com and 7.3 percent of Liquid Audio, among other
companies. In November, Allen invested $10 million in Wink: Vulcan Ventures says it plans to Wink’s technology in
its cable-TV systems.
Perhaps more than any other investor, Allen is tying together the wired and offline worlds with his investments.
IF the INTERNET is a sleek rocket ship moving at the speed of light, then cash is the fuel that makes that rocket go!
Yet with Internet companies, some dollars are definitely greener than others: it’s not how much money a startup
has, but which venture capitalists coughed up the dough, and which investment banker is doing the IPO. Financial
partners are now often strategic partners, too. As firms ranging from VC kingpin Kleiner Perkins Caufield & Byers to
Japanese renegade Softbank build networks of companies that are often referred to as Keiretsu.
In deciding on the 10 most important financiers, we started with the venture capitalist - and we found a surprising
degree of consensus about which ones have the most clout. First, there’s Kleiner Perkins, whose backing of
Netscape, Amazon, AtHome, Excite and countless others has put it far ahead of the pack. Then there’s Benchmark
Capital, which more than any other firm has captured the buzz that was once reserved only for Kleiner. With
investments in companies like eBay, Ariba and Critical Path, Benchmark is building the same kind of network Kleiner
has. Sequoia Capital boast a high-profile partner in Michael Moritz, who since investing in Yahoo has climbed into the
first tier of VCs.
There’s also a new breed of investment firm that’s starting to give the VCs a run for their money. Companies like
Vulcan Ventures, Idealab ansd Softbank invest in companies and, like Kleiner Perkins, they work to build and exploit
mutually beneficial relationships between portfolio firms. But, unlike traditional partnerships, these investment
companies center around one person.
At Vulcan Ventures, that’s Microsoft cofounder Paul Allen. At Idealab, it’s Bill Gross. And at Softbank, it’s Masayoshi
Son. All three have a huge influence on which Net companies get funded. (CMGI could be here too, but, with its
acquisition of AltaVista, we’ve classified the firm as a portal.)
Once companies are funded, of course, the next milestone is going public. And that’s where having the right
investment bank comes in. Goldman Sachs and Morgan Stanley Dean Witter go head to head for every premium
Web company that wants to go public. Morgan has analyst Mary Meeker; Goldmann has lead tech banker Brad
Koening. Others have the ineffable something that can make a deal hot.
Just a notch below tees two is Credit Suisse First Boston. Led by Frank Quattrone, the firm has won its own share of
great deals. Meanwhile, Hambrecht & Quist, one of the last technology “boutiques,” is ubiquitous to a second banker
on may big offerings and a lead on small deals
TOP 10 (As of Sep 99)
- Benchmark Capital
- CS First Boston
- Goldman Sachs
- Hambrecht & Quist
- Idealab
- Kleiner Perkins
- Morgan Stanley
- Sequoia Capital
- Softbank
- Vulcan Ventures
Benchmark Capital
HEADQUARTERS: Menlo Park, California
URL: www.benchmark.com
LEAD PARTNER: Bob Kagle
EMPLOYEES: 7 Partners
Benchmark Capital is the Up-and-comer of the ventures-capital set. No firm has made a more convincing run at
challenging Kleiner Perkis Caufield & Byers as the most influential venture-capital company.
Benchmark first broke from the pack with its early investment in eBay, and now it’s on something of an IPO roll, with
investments like 1-800-Flowers, Red Hat, Wink and Ariba all going public successfully within the last several months.
The big winners were Red Hat, whose IPO in August offered shares at $14 and closed its first day of trading at
$52.06 a share, and Ariba, which in June offered 5 million shares at $23 each and saw them close at $90 the same
day.
Of course, it’s not all roses for Menlo Park, California-based Benchmark. In August, a much-heralded deal with “Toys
“R” Us, in which Benchmark was to invest in the company’s online venture fell apart over how much equity
Benchmark would get.
While the failure of that deal is undoubtedly embarrassing in the short term, Benchmark’s status as one of the few
firms that can make or break a Net play hasn’t suffered. Benchmark obviously still sees benefits in teaming with
offline retail stores: the company has signed a deal to help launch an online store for Nordstrom.
Credit Suisse First Boston
HEADQUARTERS: Zurich, Switzerland
URL: www.csfb.com
CEO: Allen Wheat
EMPLOYEES: 14,000
In the battle for Silicon Valley investment-banking business, a lot of the attention is focused on the competition
between Morgan Stanley and Goldman Sachs. But there’s a third key player in the mix: Credit Suisse First Boston.
And that’s in large part due to the influence of Frank Quattrone.
Quattrone, CS First Boston’s lead technology investment banker, made his mark at Morgan Stanley, fled for a bigger
payday at Deutsche Bank and then led his Deutsche Bank team on a mass exodus to his current employer.
Quattrone’s biggest claim to fame was his Morgan-era work on the Amozon.com IPO. Some rival bankers grumble
that the deal was his one shining moment, that he’s a one-hit wonder. But his record suggest otherwise.
Over two days in July, for instance, Quattrone and company lead-managed IPOs for MP3.com and Gadzooz
Networks. On July 20, Gadz
oox went public at $21 a share and more than tripled on the first day of trading. The next day MP3.com went public
at $28 and immediately soared past $63. And there’s plenty more where that came from: still-pending are CS First
Boston-led deals for Web marketing company Epiphany and Net security company InterTrust.
Goldman Sachs
HEADQUARTERS: New York
URL: www.gs.com
CEO: Henry M. Paulson, Jr.
EMPLOYEES: 13,033
MARKET CAPITALIZATION: $29.6 billion
Rattle off the names of Internet IPOs for which Goldman Sachs has been the lead underwriter in just the last coupe
of months and you get a virtual greatest hits of the online world - everything from Internet backbone firms to the
hottest new players in electron commerce an software. Companies like Linus-specialist Red Hat, fast growing portal
LookSmart, along with E-Loan, Engage and Tibco have all enlisted the help of the No. 1 underwriter in the Internet
Economy.
It’s not hard to see why: Among Goldman’s earlier Internet deals were IPOs for both eBay and Yahoo. A lot of
people would lke to see the magic rub off on them.
But Goldman’s biggest coup in the past year was a different sort of IPO: its own. The legendary Wall Street firm this
year succumbed to the lure of vast riches and went public. Meanwhile, Goldman has held its strong position in the
IPO market, even as a host of rivals - from big, established investment banks to boutiques and regional underwriters
to new Net-based players - have tried to steal its thunder.
More big Goldman deals are coming, including the highly anticipated $345 million initial stock offering of Webvan, the
Net-based grocer. Which means more gold for Goldman.
Hambrecht & Quist
HEADQUARTERS: San Francisco
URL: www.hamquist.com
CEO: Dan Case
EMPLOYEES: 827
MARKET CAPITALIZATION: $1 billion
LAST 12 MOS. REVENUES: $502.5 million
LAST 12 MOS. NET INCOME: $78.7 million
It’s nice to know there’s still room for boutiques banks. The buyouts of Robertson Stephens, Montgomery Securities
and other small investment banks in recent years have led some observes to predict that boutiques would go the
way of the hula hoop. But Hambrecht & Quist has been happy to prove them wrong, at least so far.
H&Q makes its living acting as co-banker in some of the biggest and best initial public offerings on the Web -
showing that you don’t need to lead every issue to have influence.
In the last couple of months, the firm has assisted in IPOs for companies like Liberate, Red Hat and Look Smart. It
will have a hand, as well, in the upcoming offering for Epiphany. And the firm doesn’t only ast other banks in
offerings. In July, H&Q handled the public sale of Net2Phone shares, which went from an offering price of $15 a
share to close at $26.50 on the first day of trading: shares have since soared as high as $92.63. H&Q also boast
strong research and an active private placement business.
Though there are no guarantees that H&Q will stay independent - there have been rumors for years that Merrill
Lynch is keen to snap up Hambrecht & Quist - as long as it remains on its own, the company will have a niche play
as a savvy, strong second. And that’s not a bad business.
Idealab
HEADQUARTERS: Pasadena, California
URL: www.idealab.com
CEO: Bill Gross
EMPLOYEES: 35
Bull Gross’s Idealab has made the incubator investment method chic. Gross, the serial entrepreneur, has
transformed himself into idea man, savvy investor and Net mogul all wrapped together in one package. The last
year has seen him consolidate his position within the Internet Economy.
For instance, Gross has been one of the chief architects of the Free-PC business model, in which companies give
away computers, and, in exchange, consumers agree to become sitting ducks for online advertising. If that idea
seems a little goofy, Gross additionally dabbles in a little serious investing on the side. Well, maybe “dabbles” is an
understatement. Idealab has put money into several companies that have had lucrative IPOs in the last year,
including MP3.com, Goto.com and others. The company has also invested on both sides of the online-ticketing fence:
Idealab holds about 10 percent of Tickets.com and about 18 percent of Ticketmaster Online - CitySearch.
One of Gross’s biggest scores of 1999 was with eToys, which went public in May with an offering price of $20 a
share. At the close of its first day of trading, eToys shares were $76.56 and the company has a market cap of about
$8 billion. Idealab’s share after the first day of trading: a cool $645 million.
Kleiner Perkins Caufield & Byers
HEADQUARTERS: Menlo Park, California
URL: www.kpcb.com
LEAD PARTNER: John Doerr
EMPLOYEES: 17 partners
CAPITAL RAISED: $1.7 billion
ASSETS ON HAND: $4.3 billion
While the Internet can create a red-hot venture capital firm with one well-timed IPO, the bar remains high when it
comes to defining the best Net investors in the business. That’s because Kleiner Perkins Caufield & Byers still invests
in Internet companies.
Simply put, Kleiner Perkins plays on a level that others only dream about. Witness its involvement in the broadband
access wars via an investment in ExciteAtHome. Or look at its role in the Microsoft antitrust trial through an
investment in Netscape.
What’s even more remarkable is that the firm still has time to invest in so many different companies. In June,
Kleiner joined with rival Sequoia Capital to invest in search engine Google, and more recently made an investment
in Martha Stewart’s Omnimedia, with Kleiner’s indefatigable lead partner John Doerr taking a seat on Stewart’s
board. Over the span of two months this summer, Kleiner backed two of the hottest offerings of the year: juniper
Networks, which in June soared from an amazing $34 opening price to $98.88 at the close of the day; and
Drugstrore.com, in July , which shot up from its opening price of $18 per share to hit $50.25 at the close of tis first
day. It’s no wonder observes look at current Kleiner investments as the hot IPOs of the future.
Morgan Stanley Dean Witter
HEADQUARTERS: New York
URL: www.msdw.com
CEO: Phillip J. Purcell
EMPLOYEES: 49,987
MARKET CAPITALIZATION: $53 billion
LAST 12 MOS. REVENUES: $32.6 billion
LAST 12 MOS. NET INCOME: $4 billion
Morgan Stanley Dean Witter is the second most powerful bank in the Internet Economy today. That really hurts.
Morgan would very much like to be No. 1 - the perch that archrival Goldman Sachs now occupies. And it isn’t for
want of trying on the part of Morgan Stanley.
Just recently the firm has taken public not only Ask Jeeves and Marimba, but also arguable one of the most
important companies to hit the public markets this year, Drugstore,com (which is backed by Amazon.com and
Kleiner Perkins Caufield & Byers).
And, of course, the bank still has Mary Meeker, one of the most influential franchises in the Net underwriting
business. It didn’t seem possible, but Meeker has probably gotten more influential in the last year, after a flattering
profile appeared in the New Yorker.
In May, Meecker released a report that stated that there were too may IPOs in the pipeline. Soon after, Internet
IPOs began to lose steam.
Morgan Stanley thinks the reason it’s taking second place to rival Goldman Sachs is that it’s more selective in the
deals it accepts. Morgan Stanley, of course, also prides itself on getting and keeping the most important business.
Earlier this year, it underwrote Priceline.com’s IPO. In August, Priceline filed for a $420 million secondary offering
led by, of course, Morgan Stanley.
Sequoia Capital
HEADQUARTERS: Menlo Park, California
URL: www.sequoiacap.com
LEAD PARTNER: Michael Moritz
EMPLOYEES: 15 partners
Sequoia Capital investments have been at the heart of some of the great success stories of Silicon Valley. Through
deals with such companies as Apple Computer and Cisco Systems, the firm has had as much to do with wealth
creation from San Francisco to San Jose as almost any venture capital firm around.
Sequoia’s International Partners arm focuses exclusively on foreign-bred companies, while the Capital Seed branch
targets Israel.
And the rise of the Web hasn’t slowed down Sequoia one bit, thanks to the work of Michael Moritz and others. Moritz
guided investments in Yahoo, eToys, PlanetRx and Webvan, amontg others. Just recently Moritz invested in and took
a board seat at search engine Google, along with rival John Doerr from Kleiner Perkins.
Of course, Moritz isn’t the firm’s only partner. Partner Mark Kvamme, legendary as a founding employee of Apple, is
chairman of the board of USWeb/CKS, as well as a director of Macromedia.
Sequoia has had an IPO success or two of late. In July, MP3.com went public at the offering price of $28 a share and
closed on its first day of trading at $63.31 a share. And in August, shares of Sequoia investment Agile Software
nearly doubled on its first day of trading, going from the offering price of $21 a share to close at $39.88.
Softbank
HEADQUARTERS: Tokyo
URL: www.softbank.com
CEO: Masayoshi Son
EMPLOYEES: 1,025
There are actually people out there who will still tell you that Softbank has been lucky, than Masayoshi Son could not
possibly have known when he made his famous investment in Yahoo that Web stocks would do what they have done.
It’s academic speculation at this point. Softbank has invested in plenty of other companies besides Yahoo, including
E-Trade, USWeb/CKS and Geo Cities, just to name a few.
This increasing broad web of companies look after each other. For example, InsWeb, an online insurance company
and a softbank investment, has a licensing arrangement with Softbank investment Yahoo, which makes InsWeb the
exclusive insurance site on Yahoo. InsWeb estimated in an SEC filing that in the first quarter of this year that more
than 20 percent of its traffic came from the partnership with Yahoo. In July, Ins Web went public at an offering price
of $17 a share and closed the day at $31.56. Just another day’s work for Son and company.
Softbank is now in a position to pick up some top talent. In July, Softbank Tech Ventures added Rex Golding, former
co-head of the tech banking group of Morgan Stanley Dean Witter, as a managing director to the fund. And in
August, Bill Burnham, a former analyst with CS first Boston, joined as a general partner.
Vulcan Northwest/Vulcan Ventures
HEADQUARTERS: Seattle
URL: www.paulallen.com
CHAIRMAN: Paul Allen
EMPLOYEES: 5
Microsoft co-founder Paul Allen has quite a diverse portfolio. How many other investors mix online buys into sports
franchise (he owns the Portland Trailblazers and the Seattle Seahawks) with Web investments? And how many start
a venture fund to manage their labyrinthine investments (Allen founded Vulcan Northwest in 1986)? What’s more, he
doesn’t have mere ties to a cable company - he owns one: Charter Communications, the fourth-largest cable
operation in the United States.
How Allen plans to apply his cable company to broadband Web access is the $1 billion question. He took a first step
when he acquire about 35 percent of Web portal Go2Net, and announced that the company would become the front-
end to any broadband service Charter rolled out.
Vulcan has a compelling set of investments that it could leverage in a broadband environment. Allen’s investment
firm owns about 19 percent of CNET, 9.2 percent of Drugstroe.com and 7.3 percent of Liquid Audio, among other
companies. In November, Allen invested $10 million in Wink: Vulcan Ventures says it plans to Wink’s technology in
its cable-TV systems.
Perhaps more than any other investor, Allen is tying together the wired and offline worlds with his investments.
AllenWeb Site - since 1995
Article; Top 10 Internet Financing Companies - Dec 1999
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