October 6, 2000

It takes e-preneurial fervor to be CEO of e-business

BOULDER ? While stock options and job security may lure leaders in some industries, the draw of e-business is something entirely different.

Operating in a medium whose full potential has not been realized, e-business offers a vast space for the existence a variety of business models.

The draw of running an Internet company is much the same as running any other start-up. For Alan Stevens, chief executive officer of Boulder’s Productbuzz.com, an online developer of industry-specific, informational Web sties, the idea of building something from scratch is exciting, but there is also the draw of the medium itself and its potential.

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Not since the dawning of television has there been a new medium with the potential of the Internet, said Stevens. It’s not only the development of a new business; for him, it’s the development of a new industry.

“The thing that jazzes me is being on the forefront of a revolution,´ said John Cochran, chief executive of e-Greenbiz.com, an online exchange for the “green industry” based in Boulder.

Executives at Internet companies can expect to put in long hours in the beginning. Stevens said there were many times when he would work until 2 a.m. or 3 a.m. when ProductBuzz first started.

But managing an early-stage, Web-centric company, they say, is the same as managing any other start-up business. “At an early stage, the fast pace and high risk tends to make all businesses feel equally challenging,´ said Rob Kaufman, chief executive officer of Boulder-based e-book provider netLibrary.

The distinction is between technology companies and non-tech companies, he added. “The pace of change at a technology company is different, as is the cost of capital and competition for resources.”

Since the medium is based on speed, being the first to create a niche on the Internet and build a profit-yielding business model is key. “Internet speed moves faster than other industries,” Cochran said. And as a result, leaders of Internet companies have to be more adaptable. “You have to do all the same things. The difference is the time frame,” Stevens said.

But it isn’t just maintaining high-tech speed. CEOs have to be able to communicate the necessity of keeping that sort of pace to their staff, he added.

There are two things that are essential to running a technology company: the ability to think strategically and managing people internally, said Kaufman. Employees at technology companies are pushed more than staff working in other industries, he said, and executives need to be aware of this.

“People are motivated by satisfaction of what they build everyday,” Kaufman said of employees at technology companies. “Sensitivity to what the employee base is experiencing is critical. You can’t afford to make a mistake.”

When netLibrary started two years ago, the company had eight employees. It now has more than 450.

“The ability to be part of creating something” is the main draw of working for a technology company, said Kaufman. “In technology, the incubation period is shorter. Old, stodgy businesses take longer to grow.”

“The Net is high-energy. You have to be responsive fast,” Cochran said. When e-Greenbiz launched in July 1999, Cochran said, “We were the only guys doing business-to-business. Now, there is a massive proliferation of sites.”

But even though the novelty of the medium points to possibility, results mean more than innovation, and in the end, experience is needed to achieve returns for investors.

“There is a euphoria built around Internet companies managed by youth,´ said Cochran, who spent more than 20 years in business development, and sales and marketing in the aerospace industry before deciding to try his hand at e-business.

Before moving to the Boulder area in 1995, Kaufman was a partner in the technology practice of the Wallach Co. in Denver. His focus was raising equity for technology companies. Matchlogic, brainchild of iBelay founder Peter Estler, was one of his clients.

Stevens brings 10 years in banking and publishing to his position. Before heading Productbuzz, he was the vice president of credit card marketing for First Union in Charlottesville, N.C. He’s also launched multiple product-focused publications.

When Productbuzz first launched, the plan was to profit according to a pay-by-the-click revenue model. Since then, the company has made changes to its selling model in response to changes in the market. Stevens said the company is now in the second stage, working on validating its model, seeking a second round of funding and deciding which direction it will take next.

Kaufman said technology companies in the preliminary stages must determine the viability of their product or service. Does it make sense in terms of financial support and customers, not just technical merit.

“In a tech environment, people often forget about customers in their enthusiasm for the technology,” Kaufman said.

Another key element is a company’s ability to bring together a compelling management team.

“You have to be able to envision where the company can be and where it is going,” Stevens said. “As you get positive feedback, that gives you motivation. (But) you have to be able to deal with a high level of uncertainty.”

Cochran said there are two things a dot-com company needs to adhere to in order to be successful: customers and capital. First and foremost, he said the company needs to be responsive to the needs of the customer. And secondly, “(investors) want to see that you can get to cash flow in a clear time frame.”

e-Greenbiz did not scrap its original business model in response to industry pressures, but Cochran said it has made adjustments. “People have to be able to adapt a business model based on what they learn in the marketplace.”

This, said Stevens, requires humility. “The entire market is changing,” he said, and leaders of Internet companies can’t go into the industry thinking that they know exactly how it will work. CEOs have to have conviction, but they also have to be open to change and the possibility that their original idea may be wrong, he added.

“If you ask the wrong question and get a right answer, you are still wrong,” Cochran said.

Cochran said Internet companies must have a balance of technology and marketing to progress. “Creating awareness on the consumer market is incredibly expensive,” he said. In some cases, it can cost a start-up millions of dollars to get its name out.

Before launching its marketing campaign, e-Greenbiz worked on strengthening its Web site. The site has more than 2,000 registered users, Cochran said.

“Last winter, money was free-flowing,” Cochran said. But by spring, “the euphoria changed dramatically. The businesses that are getting funded now have clear models for achieving profitability.”

With constantly changing market conditions and adjustments to business plans, Cochran said running an Internet company requires patience and perseverance. “It’s not easy anymore,” he said.

BOULDER ? While stock options and job security may lure leaders in some industries, the draw of e-business is something entirely different.

Operating in a medium whose full potential has not been realized, e-business offers a vast space for the existence a variety of business models.

The draw of running an Internet company is much the same as running any other start-up. For Alan Stevens, chief executive officer of Boulder’s Productbuzz.com, an online developer of industry-specific, informational Web sties, the idea of building something from scratch is exciting, but there is also the draw of the medium itself and its…

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