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 Can I Trade Now For A Decade Ago?
Do you remember? It was ten years ago in September. No, I am not quoting Kool & The Gang. Sep 24th, 1998 was a bellwether day. Long Term Capital Management had just suffered a massive loss in New York and was about to famously go tango uniform, capping off a brutal run in the financial world that had lasted over a year. In summer 1997, Asian stock markets collapsed and currencies went into free fall. A malaise had been over the global financial markets for a year. Sound familiar?
In our technology world, there had been no IPOs in nine months and the few Internet companies that were public included Yahoo, Amazon, Netscape, and AOL. People were generally worried that these new Internet businesses were not really businesses at all. After all, no concrete advertising model had materialized.
Amazon was losing tons of money as an on-line store, and had yet to figure out the complex logistics that make it profitable today. Netscape was being hammered by a free version of the browser by Microsoft (do you remember paying $49 to Netscape for a browser? I do).
Back to September 24th. It was a sunny day in Palo Alto, CA where I was talking with Rich Osborn and plotting to start a venture fund. We were meeting with a bunch of US VCs and investment bankers who were looking for leads to connect the Silicon Valley to our Canadian fund. In meeting after meeting, people were getting notes passed to them (remember, this was pre-Blackberry) or were being interrupted.
I asked what was going on. eBay had just gone public on the NASDAQ and it was quadrupling in price on the first day. Why? eBay actually had an Internet business model that made, egad, profit. Tired, battered investors fell in love with eBay that morning and, how can I say this with enough hyperbole, the biggest bull run in stock market history was off and running.
Yes, you can thank eBay for the ridiculous dotcom IPOs that followed. eBay is still among the largest Internet companies with $2.2B in quarterly revenue and a $30B market value. It has swallowed PayPal and Skype among others, and was run by one of the most successful female entrepreneurs of all time, Meg Whitman. EBay was a runaway success that day and has continued to be for a decade.
Here in 2008, we have a yearlong financial crisis continuing. We have a venerable bank (Lehman) about to collapse. We could all use an eBay IPO about now, right? While there is exactly zero chance of an information technology IPO in this month of September, there are some interesting clean technology companies filed and at the starting gate.
Perhaps the next boom will be sparked by companies that fundamentally change our energy infrastructure and remove our dependence on fossil fuels. To me, that sounds like a bellwether opportunity.
By Brent Holliday, Technology Practice, Capital West Partners. Brent can be reached at: brent@capwest.com
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