Tomorrow's Entrepreneur

The dot-coms crashed, the Nasdaq is dipping -- but new trends and companies are rising from the ashes anyway. After all, the Internet is still with us, and the Web is one of the more revolutionary technologies in recent memory. But what will the near-term future look like? Here are some perspectives from an investor, an analyst, and a start-up entrepreneur.

The venture capitalist
Institutional and individual investors alike have experienced the flu-like symptoms (nausea, cold sweats) brought on by watching their favorite tech stocks take a dive. But E. Floyd Kvamme, a partner at venture-capital firm Kleiner Perkins Caufield & Byers, in Menlo Park, Calif., and cochairman of President Bush's advisory committee on science and technology, says to relax: the Internet is just getting started. "One of the next hot areas will be the Internet infrastructure area," he says. "Usage of the Net is still continuing to increase in terms of people coming online....Plus, lots of areas of the world don't have Internet infrastructure yet, so you can bring it to the rest of the world."

The pundit
"Anytime anybody says there's going to be a next big thing, it's usually going to be one of several" big things, says John Jordan, a principal at the Cap Gemini Ernst & Young Center for Business Innovation, in Cambridge, Mass., and an expert on trends in business and information technology. Here's Jordan's list of the next big things in the Internet space:

  • Dot-com tango. Dot-coms want to be acquired, but big companies have something else in mind. "A lot of dot-coms right now are hoping to be bought, and big companies are saying, 'We don't have to buy you. We can partner with you and give you a revenue stream, but we don't want to deal with the fact that your stock price is a dollar," says Jordan. "People who would have sneered at the idea of being bought by a big company a year and a half ago are now begging to be bought."
  • Bundling up. Companies will try to bundle their services with those of others. Jordan says, "There will be new kinds of partnerships as people realize (a) we don't have the money to buy each other and (b) this may not be an eternal opportunity. They can [come together to] realize an opportunity and then part ways. This is a huge opportunity for small companies to find niches in which they can work with larger companies."
  • Customers in charge. Customers will continue to increase their market power. "People have power through their recommendations and word of mouth. It's very easy for them to avoid companies that they want to avoid," says Jordan.
  • No more IPOs. Entrepreneurs will shun Wall Street. "Companies are exploring ways to get capital without going to the public markets, because they realize now that if you have one bad quarter, your stock tanks," explains Jordan. "With the insane valuations we've seen in 1999 and 2000, the only place you can go is down."
  • Going back to the future. Long-term planning will be back in style. Jordan says, "We'll see a return to 'I'm building the company for the next five years' instead of 'I'm building the company for the next five months.' The Amazonian customer-acquisition curve is an aberration, and for people to expect that is just lunacy."

The entrepreneur
As discovered, people hesitate to buy big-ticket items like furniture online. But what about small-ticket items -- really small-ticket items -- that cost less than $10? Neil Evans is betting that they are one path toward the Web of the future. Now the president of WebCredit Inc., a Boston-based company that processes microtrans- actions, Evans used to be in the entertainment industry. He came up with the idea for WebCredit when thinking about old nickelodeon movie theaters. He figured if people were willing to pay small amounts of money for entertainment, they would probably dole out $1 or $2 on the Internet for a recipe, an article about hotels in the Caribbean, or perhaps a song or a film clip.

Right now few businesses provide merchant accounts for such tiny transactions. That's where companies like WebCredit and Seattle-based Qpass Inc. come in. Both provide payment services for small and large companies alike; for example, Qpass facilitates the purchase of articles from the New York Times Web site. All those little purchases add up; in a report last December, Jupiter Research estimated the 2001 market for paid online content (such as articles, games, and music downloads) at $1.1 billion. The company predicts the market will reach $5.7 billion in 2005.

The 2001 State of Small Business issue

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