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A chicken in every garage
In May 1999, I wrote about online grocers and recommended Streamline.com (SLNE-NASDAQ), based in Westwood, MA. The company installs a closet (outfitted with a refrigerator) in each customer's garage, enabling Streamline.com to make weekly, unattended deliveries of everything from milk to coffee to video rentals to drycleaning. Unlike other online grocers (which have to deliver your order on the same day), the unattended delivery allows Streamline.com to ensure that perishables stay fresh while optimizing delivery schedules. Streamline.com customers place orders by hand (leaving a check list in the closet), fax, phone or via the company's Web site.
The company's prices are competitive with grocers -- but that's not the point. Streamline.com is selling the convenience of never having to run out to the store at the last moment for basic food items... kind of like having overdraft protection on your checking account. At US$30 per month, the service costs approximately the same as cable television.
Streamline.com's June IPO suffered from unfortunate timing. The market was just entering its summer correction, but the company was fortunate to get its issue priced and out the door. They've used the money well, opening their Washington, DC, regional center, but the stock has languished, by Internet standards, rising just 20 percent above the offering price.
Enter Webvan (WBVN-NASDAQ). The highly anticipated online grocer's November IPO was postponed three weeks due to chit-chat during its quiet period. With high-profile former Andersen Consulting partner George Shaheen at the wheel, Webvan is viewed by many in the industry as the odds-on favorite to master the art of same-day delivery of goods purchased on the Web.
Who wins remains to be seen, but I stand behind Streamline.com and its still-unique business plan. Webvan and other online grocers approaching IPOs only draw attention to Streamline.com. Plus, Webvan's current market cap of US$6.5 billion makes Streamline.com look grossly undervalued at US$182 million.
In September 1999, I recommended Vignette (VIGN-NASDAQ) at US$50, based on the company's supremacy in the high-end Web software space and the late August expiration of its six-month lock-up period. The stock is currently at US$180.
Follow the same thinking with AppNet (APNT-NASDAQ) and Viant (VIAN-NASDAQ), both of which went public in June. Both companies provide Web design, programming and consulting services and face the wonderful problem of not being able to keep up with demand for their services. Positive fall earnings announcements from both companies have sent their stock prices skyward. Come early January, watch as exhausted employees cash out once lock-up agreements expire. Swoop in by the end of January and ride either one for all it's worth through 2000.
Brain drain
When people walk away from millions of dollars in stock options, you have to figure that they're either on to something much bigger, or they're really stupid. That said, there's not too many stupid people working at Yahoo!. The company's sustained growth and leadership as the portal of choice for both new and experienced Web surfers is a testament to its employees' knowledge of and dedication to the Internet. So as we move into 2000, the company Desktop.com, brainchild of a band of former Yahoos, shapes up as one of the most watched startups on the Internet.
Yes, they walked away from millions in stock options. And no, they're not stupid. Their plan is to build a Web site that goes beyond delivering stock quotes, weather, sports scores, news and links to other Web sites. No, their Web site will actually let you do work, save it, and access it again from any Web site on any computer in any location. So far they've raised US$29 million in funding by Accel Partners, Kohlberg Kravis Roberts, and Sequoia Capital. Watch for an IPO in late 2000, if they don't get bought first.
What happens when you combine Priceline.com, GeoCities and Office Depot? You get a Web site where you can purchase just about any office item known to man, where you get preferred pricing, and where you can build a personalized profile of your business so any of your employees can purchase goods as they need them and still credit your company.
The company that offers this unique proposition is called Works.com, and it offers a new take on purchasing office supplies, providing customers with direct access to wholesalers and manufacturers and managing business purchases online. Works.com currently provides businesses wholesale direct prices on more than 20,000 office products. The company plans to add technology products (software, computer accessories and peripherals), growing its selection to more than 90,000 items. The company attempts to bridge the gap between store and accounting application through its Web site. Much like GeoCities and other permissioned communities, Works.com's "stickiness" is its utility. Instead of calendars, chat rooms, personal home pages and games, the company offers:
- distributed online purchase requesting and ordering for multiple employees from each customer company;
- order tracking from purchase approval through shipping;
- reporting tools providing valuable data on customer company buying habits;
- user-specified "cabinets" to identify preferred products;
- robust security features such as user roles, passwords and encryption.
To date, Works.com has secured nearly US$30 million in venture capital from Merrill Lynch, Hummer Winblad, Trellis Partners and Bowman Capital Management. The Hummer Winblad investment brought Bill Gurley to the company's board. Gurley was a top research analyst at both DMG Technology Group and CS First Boston. As an analyst, Gurley worked with Amazon.com and Dell. Works.com is yet another well-credentialed Internet startup with the tools and talent to lock up an attractive market segment. The company will most likely seek an IPO by mid-2000.
Bring it on
We're still in the first quarter of the Internet game. We are witnessing an era in which the most educated, largest, wealthiest generation of workers in history is peaking in terms of productivity. They'll earn and spend more money as a result.
The financial markets have made capital more accessible and fluid than ever before. And on a global level, democracy and free markets are more prevalent than at any time in history. Economic growth is no longer limited to but a few geo-political spheres.
Technology is bringing it all together, delivering new information and communications capabilities that are transforming our culture and commerce. What a great time to be alive.
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