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Investors Want to See Your Internet Strategy

If your customers and suppliers can't convince you to take e-business seriously, what about your investors? The global investment community has become the main driver behind economic growth, what Thomas Friedman calls the Electronic Herd.22 In The Lexus and the Olive Tree, Friedman gives this name to the anonymous cohort of traders in equities, bonds, currencies, and other financial instruments, connected through international networks and exchanges. It has no organization and no leader, with companies operating independently of and often in competition with each other. By the nature of its electronic existence, it can respond instantaneously to developments in a choreographed way.

Investors, particularly venture capitalists, continue to look favorably on Internet-related vehicles. PriceWaterhouseCoopers (PWC), in its Money Tree survey for the first quarter of 2001, found in the U.S. venture capital investments reaching $10.1 billion, down from $16.8 billion in the previous quarter. Internet-related companies represented 75% of all financing; while down from previous quarters, still the largest single segment. As Tracy T. Lefteroff of PWC noted, "Venture capital firms are reassessing their Internet strategies, just as corporate America is. But the Internet is not going away. It's now an integral part of doing business.... Venture capital will continue to back promising Internet-related technologies."23

Since then, through early 2001, there has been a downturn, but technology investment continues to dominate as a percentage. Venture capitalists (VCs) invested $19.6 billion in the fourth quarter of 2000, more than 30% less than the $28.3 billion they invested in the previous quarter. In fact, it was the lowest infusion of new VC money since the third quarter of 1999, according to the National Venture Capital Association (NVCA).

What if your product or service is not technology related? In May 2000, Wayne Rash reported in Internet Week on a meeting with investors that he attended. These investors favored companies in more traditional businesses, rather than the high-flying dot-coms. Nonetheless, they want to see a serious Internet strategy, not just a web site. Rash said that investment "...depends on a company's plans to compete in the battlefields of the future, even if that means restructuring the company so that e-commerce tools can be used effectively. No longer is the use of the Internet or e-commerce something that's nice to have. In the minds of these investors, it's mandatory."24

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