A lot of companies, their PR people and the occasional freelance journalist ask me about how we select the companies to feature in VC Watch columns.
We’ve got a pretty straight-forward formula that goes like this:
- Start with a problem that’s widespread, affects many people and is therefore worth writing about.
- Tell the story of a hot new company with a cool idea of how to solve that problem.
- Talk about their financing. After all this tracks venture capital and that means the full details: how many rounds, how much from whom and when. There are few hard and fast rules, but if we can’t get finance details, there’s no story. With one exception: all our regulars: M.A. Mills, Charlie Bermant, David Needle and I all get to pick one story — one — per year that we feel is so compelling or interesting that we can tell the tale without the numbers. Otherwise, no story. Angel rounds need not name the individuals.
- Our own judgment needs further credibility and in this way, we find an industry analyst — Yankee, Forrester, Zona, Jupiter, and preferably NOT a brokerage type analyst since their judgments are so frequently warped by their firms’ underwriting interests.
- We look for unheralded gems — if other media outlets have written about a company, we don’t write about them unless we have a significant new take on them. Also, we don’t write about public companies, subsidiaries of public companies or any company which has filed or is preparing to file an S-1 for its IPO.
Finally, the company — in our best judgment — needs to be one that has a chance of succeeding and on that score, we try to think like a venture capitalist: Do they have good people with the right backgrounds, do they have a killer idea, killer patents, an “unfair” market advantage, are they well-financed, and are they playing in an area that is big enough for a potential home run to make a difference?
Some of our previous picks have done reasonably well as evidenced by the following six companies which have attracted the interest of investors and others since we first wrote about them.
Neoforma.com’s (NEOF) IPO took off on Jan. 24: priced at $13, the stock opened at $39.875 and climbed as high as $60.975 before closing at $52.375. The seven million shares offered raised $91 million for the company. VC Watch first wrote about NeoForma.com on June 25, 1999.
FogDog.com (FOGD) has had a shakier time since its IPO on Dec. 9, 1999. The 6 million shares were priced at $11, opened at $19.50 and then slowly sank to $8.50 by the end of the year. The stock soared to $22 on Jan. 3 when J.P. Morgan (one of its underwriters) issued a “buy” recommendation and a $25 target price. But the lift was temporary as they plunged once again into a recent trading range of $10-$13. VC Watch first wrote about FogDog on Aug. 19, 1999: Fogdog Sports: Looking For The Winning Goal
Other updates include:
DirectHit which filed for an IPO on Dec. 23, 1999, to raise $57.5 million. But before the shares could start trading, AskJeeves (ASKJ) snapped them up instead, trading 5.12 million shares worth about $545 million at their $109.125 close on Jan. 26. VC Watch first wrote about DirectHit on August 12, 1999: Search Popularity Contest Almost a DirectHit
Frictionless E-Commerce received $7.5 million in its first real VC round on Jan. 10 from Intel, Polaris Venture Partners and others. VC Watch first wrote about Frictionless on Sept. 8, 1999:Looking For Frictionless E-Commerce
Onvia closed an additional $23.5 million on Jan. 11 from a consortium that included Van Wagoner Capital Management, Amerindo Investment Advisors Inc, Aman Ventures Inc, and previous investors Internet Capital Group, Mohr Davidow Ventures, GE Capital, Comdisco, and Riverside Ventures. VC Watch first wrote about Onvia on July 22, 1999:Onvia: Good People, Fuzzy Focus Aim at Small Business B2B
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