With relatively few experts inhabiting the E-commerce industry, many Web-company CEOs exchange ideas, council, and competitive secrets by sitting on each other's boards.
Growth Strategies
They're competitors who sit on each other's boards, invest in each other's companies, and ask each other's advice. E-commerce has been changing all the rules
"These aren't companies that make underwear."
Johan Liedgren is touting Internet start-ups like his Seattle-based Honkworm International, which bills itself as an on-line entertainment agency. The company creates Web-based animated advertising for corporate clients in the form of "streamed" electronic images spun into eye-catching stories it calls "webisodes."
As edgy as that seems, there is another radical element to Liedgren's scene that sets his burgeoning industry apart from its more traditional predecessors. Liedgren is just 34, but he sits on the board of directors or advisers of seven other Internet-commerce companies--some of whose CEOs, in turn, sit on his. They know one another's forecasts, marketing plans, and new-product launches. They even share their financials, which ensures that scarcely a competitive secret escapes the group's notice.
The sharing of time, counsel, and ideas has become the norm among E-commerce companies racing to break open the cyberlode. In fact, openness seems to be a badge of membership. "I'd talk to anybody about my business plan and financials," vows Derek Doke, CEO of Seattle-based AccountingNet, an on-line resource for accounting information. Doke's pledge of openness is based on an ingrained faith that the free flow of information--mimicking the imprint of the Web itself--drives the industry, and his company's fate. "If I see a press release from some company and it looks interesting, I'll call them," says Doke.
Mark Goldstein, CEO of Impulse! Buy Network, an on-line shopping network based in Burlingame, Calif., shares Doke's fearless communal drive. He says that Net companies are highly interdependent and even "interoperable." They work best in a loose and open configuration, with their CEOs in regular and habitual contact via E-mail. "What each of us has to do is be the best at what we do, and to do that you have to be willing to work with others," Goldstein says. Asked if he worries about revealing too much to competitors, Goldstein shrugs off the question. "If you don't give, you don't get back. And if I don't get back in this life, I will in the next," he says.
By sitting on one another's boards, entrepreneurs like Liedgren, Doke, and Goldstein are taking out a form of start-up insurance. They can network and gather intelligence on where things are headed in one hot yet volatile industry, best known these days for its astronomical multiples--such staggering numbers as the market value of Amazon.com's stock ($6.06 billion at press time) or the volume of business expected to be transacted over the Internet by 2002 (an estimated $220 billion, compared with just $10 billion in 1997).
Liedgren, like his peers, expresses an evident esprit de proletarian corps related to being present at the fiery creation. "We're not an old-boy network of people who just sit around and invest," he says. "We're workers in this industry, so as advisers we know what we're talking about. We can support the management team and give it real advice when there's a hard decision to be made."
So Few Experts, So Much to Know
The popular image of high-tech entrepreneurdom calls to mind the cowboy culture of Silicon Valley's near past, in which scores of companies that manufactured semiconductors, PCs, and disk drives trampled one another in the hard-bitten battle for not just primacy but survival itself. Few rivals then acknowledged one another, let alone deigned to converse. So what makes this generation different? What lies behind its drive for mutually assured survival?
David Wamsley, CEO of Adauction.com, a San Francisco-based broker of Internet-ad space, says there has been a sea change in business. "What we now see among individuals is first and foremost a loyalty to their networks, because tenure in the private sector is rarely if ever seen anymore," he says. For Wamsley, the rock in the storm is not the individual, nor even his organization. It's his peer group. "The only thing I can bank on is many people continuing to be part of my professional network," he says. "The network is the constant. It's what we can count on."
Wamsley spends a quarter of his time touching base with the two dozen or so people who matter most in his network. The network lends structure and perspective at a time when "the space," as E-entrepreneurs dub their industry, is expanding in a dizzying fashion. The industry is so young that it has no real history, no codified body of knowledge. Its rules and norms are carried around in the heads of a handful of "experts" whose tenure seldom exceeds five years. "Tapping into whatever relevant experience you can find is very important," stresses Alan Salzman, a managing partner at VantagePoint Venture Partners, a Silicon Valley venture-capital firm, who has seen fit to shovel some $325 million into the E-commerce/communications maw.
The search for experts has certainly driven Wamsley, who started his Internet-ad company in September 1997. "One of the first things I did was elect eight advisers to the advisory board," he says. The group instantly dwarfed his staff of three. "That gave us extended resources in the field across key areas of the business," he adds. Adauction has since grown to 24 employees, while the advisory board now numbers 15--and still counting.
Asked what would draw advisers to such an unproven company, Wamsley offers a one-word reply: "Stock. They can share significantly in the upside, for a relatively modest amount of effort." At the same time an adviser, through a phone call here or an introduction there, "can add a lot of value," Wamsley says.
One adviser who has delivered for Wamsley is Jody Sherman, vice-president of business development at BuyDirect .com, which sells software on the Net. "He helped us negotiate a relationship with HotWired [ Wired magazine's news site on the Internet]. With one phone call he got that deal to within an arm's length of closing," says Wamsley. Another adviser he leveraged was Neil Cohen, vice-president of marketing for Sega of America. "I was able to bring Neil in on strategic review meetings on Saturday mornings," Wamsley recalls. Eventually, he hired Cohen. The arrangement worked for both parties: Cohen didn't have to leap into Adauction at its riskiest stage, and Wamsley was able to gauge how Cohen would mesh with the company's culture.
Staying Dry in White Water
Internet companies occupy a strange universe inhabited by relatively few experts amid huge industry potential. E-commerce companies tend to be run by cadres of modest-seeming people in their thirties--people who are all competing to divine the code that will crack open global markets with the click of a mouse. And yet technological proficiency is merely the ante. Skip Franklin, the founder and chairman of MountainZone.com, which sells outdoor equipment and apparel, says that winning at E-commerce entails being well versed in the traditional domains of the suits--sales, marketing, and finance--rather than being a crack "techie." MountainZone.com's advisory group has two people from E-commerce, two from retailing, and one each from computer software, computer hardware, telecommunications, and travel. Says Franklin, "When you navigate white water, you need specialists on all sides."
