Myth 3: Smart money makes you smart

REALITY CHECK: Smart money doesn't come unless you're already smart

Cramer: You need smart people who are bonded to your company. You want to be able to call them and say, "I may do this venture in Uruguay. Do you know anybody down there?" They can make calls, and they don't consider you a moron for asking for help.

Morgan: The reality is, you're almost always better off taking smart money. If you're 28 years old and starting your own cool company, you don't have the skills. But early investors are often enthusiastic -- they're either technologists or just rich -- and they pay a valuation that is not sustainable. A million dollars for 5% of a company? Unless it has cold fusion or perpetual motion, it isn't worth it. Everybody loses.

Randall: It's always easier for CEOs to think that someone else will solve their problems. With our board, what I keep in mind is that they don't run the business. They are a resource I draw on.

Rich: In the end it comes down to the entrepreneur. You can augment that with the right strategic partner, but ultimately, a bad product or service won't resonate with customers, no matter how much smart money is put behind it.


THE TRUTHMONGERS

To help us deconstruct the myths of the Web, we turned to expert observers of the Internet phenomenon. Their comments can be found after each of the case studies we presented. Here are their credentials:

Martin Anderson , management professor at Babson College, in Wellesley, Mass., advises executives who are transforming their traditional companies into "click and mortar" businesses.

James J. Cramer is the brash cofounder of and columnist at TheStreet.com. He has built successful careers as both a journalist/pundit and a hedge-fund manager.

Kathleen Eisenhardt is a professor specializing in competitive strategy at Stanford's School of Engineering. She recently coauthored Competing on the Edge: Strategy as Structured Chaos.

Chip Hazard is a general partner and E-commerce specialist at the venture powerhouse Greylock, in Boston. He helped launch the e-Steel exchange.

Tod Johnson , chairman and CEO of Media Metrix Inc., based in New York City, is a widely recognized expert on brand loyalty.

Ted Leonsis is president of AOL Interactive Properties Group. In his first three years at America Online (starting in 1994), it grew from about $100 million in revenues to $1.5 billion.

Kelly Mooney is director of intelligence at Resource Marketing Inc., a technology-marketing firm in Columbus, Ohio. She has helped companies such as Victoria's Secret develop their on-line strategies.

Allen Morgan is a general partner at Mayfield Fund, in Menlo Park, Calif. He has been involved in more than 350 venture-capital investments and public offerings.

Bo Peabody is a cofounder of Tripod Inc. and vice-president of network strategy at Lycos Inc. When he was still in college, Peabody founded Tripod, which helps people build their own home pages. In 1998 he sold the company to Lycos.

Scott Randall is founder and CEO of Internet-auction hosting service FairMarket Inc. Randall has been involved in E-commerce since 1995, when he launched an on-line store. He has been president of the Internet Shopping Network and Yahoo Marketplace.

David Rich is vice-president of marketing and brand guru at Bigstep.com, which provides on-line services to small businesses. He previously orchestrated brand campaigns for Walt Disney, Pepsi, and Jamba Juice.


THE 7 MYTHS OF THE WEB ECONOMY

Myth 1:

Myth 2:

Myth 3:

Myth 4:

Myth 5:

Myth 6:

Myth 7:

Plus:

Back to Intro, " I Was Seduced by the Web Economy"