Re: @d:tech World - The Experts' Secrets of Viral Success

From: Peter Hupalo <hcmpublishing.com_at_hcmpublishing.com>
Date: Mon 04 Dec 2000 11:37:15 -0500

ALEC ELLIS <alece_at_glopro.com> WROTE:
> With the hysteria of dotcom success over the
> past year and dollar signs in the eyes of small hopeful
> investors, it was easy for Entrepreneurs to "con"
> people out of their money

TO WHICH JANET ATTARD REPLIED:
> I'd strongly disagree with you that the Entrepreneurs
> have been out to "con" people out of their money! While
> everyone would love to get rich overnight, those
> entrepreneurs who get as far as actually seeking and
> getting funding are, for the most part, believe
> passionately that their ideas WILL work

Two people see a guy running down a street. One thinks
he's running to meet his date. The other thinks someone
is probably chasing him and he's trying to escape. Only
one is right. Attributing motivation to actions is
difficult. I think we see a little of both. There are
real Internet Entrepreneurs and there are
financially-savvy people who saw a way to make a quick
buck in a redistribution-of-wealth process.

If the "entrepreneur" cashes out many of his shares
asap after an IPO and, resigns from the company, I
don't attribute passion to his actions.

If VC's were required to hold positions 15 years after
IPO before they could liquidate their position, they
would be much more selective about the companies they
take public. John Train has an expression from his book
"The Craft of Investing," said between people who
profit from taking speculative companies public and
selling shares to naive investors: "When The Ducks
Quack, Feed Them!"

You can always fill market demand for new companies.
Quality companies, that's another thing. Many VC's
don't profit by backing successful businesses. They
profit by the process of taking companies public.
(then, what's even worse, is that mutual fund managers,
who fear short-term underperformance relative to the
market, buy these companies, and they find their way
into the 401(k) retirement portfolios of hard-working
people.)

However, there are truly great businesses also, some of
which I have misjudged, myself, as only a quick attempt
to make a buck. An interesting book, "From .com to
.profit : Inventing Business Models That Deliver Value
and Profit" discusses two key factors of success,
branding and intermediation, which I highly agree with.

The authors claim that because customer acquisition
marketing cost and cost in establishing brand awareness
has real potential to create future company value, that
modern accounting for some marketing expenses is flawed
in not capitalizing it. However, such investment is far
too uncertain to be capitalized.

But, companies can usually generate more and more
revenue via marketing. Can they do it profitably (my
favorite way)? And, most interestingly, will there be
any future benefit in establishing of a powerful brand
? Will it pay off big, or fail dismally? To which,
unfortunately, long-term investors in such companies
must add : "Are those guys trying to generate revenue
via aggressive marketing at a loss to try to establish
a brand, or are they trying to generate revenue to show
they are a 'growth' company for the sake of selling it
to investors?"

Peter Hupalo
Author of
Thinking Like An Entrepreneur
How To Make Intelligent Business Decisions
That Will Lead To Success
In Building And Growing Your Own Company
http://www.hcmpublishing.com





Received on Mon Dec 04 2000 - 10:37:15 CST