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Movers & Shakers By Peter Burrows April 14, 1999


Fred Wilson's $50 Million Bet on Info Appliances
Co-founder of venture firm Flatiron Partners, Wilson has won big with Net stocks. Now, he's after the Next Big Thing

You've heard about information appliances -- that emerging class of gizmos that are supposed to relegate the PC to the trash heap of digital history. Well, at least that's what Fred Wilson, a 37-year-old partner with New York-based venture capital firm Flatiron Partners, is betting on. "Once people get connected to the Net, they want to be connected more and more -- not just when they're sitting at their PC," says Wilson. "It's hard to imagine what may result, but we're willing to dive in and figure it out."

If that sounds like a risky dive, consider this: Flatiron, an affiliate of venture capital firm Chase Capital Partners, has earned roughly 10 times the $150 million it has invested to date. That includes a $400 million-plus profit on Marina Del Rey (Calif.)-based GeoCities (which was bought by Yahoo! for $3.6 billion on Jan. 28) and a $280 million gain on Multex.com, an online service for the investment community that went public in March. In all, 2 of the 12 companies Flatiron has funded have gone public, one was sold, and three more -- The Street.com, iXL Corp., and Starmedia -- have registered to go public within the next few months.

 

On Wilson's radar: Companies with technology to let him call up a personal weather report no matter where he is
 

But those are just Internet stocks -- yesterday's news, to hear Wilson tell it. Now, Flatiron is setting aside $50 million of a new $300 million fund supplied by Chase Capital Partners to focus on companies developing the software and services that will make the new generation of information appliances useful. "I hate the fact that to get the weather report, I have to go downstairs, boot up, log on, and then go to weather.com or myyahoo.com. It's still a lot easier to go out my front door and get the paper," says Wilson, a father of three who lives in Chappaqua, N.Y. "But the paper doesn't know if I'm traveling that day. The paper can't know to tell me the weather in Boston."

Instead, he's looking for companies with technology to let him call up that personal weather report no matter where he is, regardless of whether he's using a notebook computer, handheld device, or smart cell phone. He's also hunting for startups working on software for data synchronization, so Netizens can read voice mail on their pagers or listen to E-mail on their cell phones.

UNIVERSAL VIEW And via "profile management" software, he envisions a day when any Web site you go to would be able to find your personal data. That way, investors with accounts at Fidelity or Charles Schwab, for example, would be able to see their portfolios where ever they are on the Web--whether it's on a personal page or on myyahoo!. "I don't care if a stock is held with E*Trade or whomever, I just want to see what I own," says Wilson. "That kind of capability will need to exist for computing to become truly pervasive. Today, it's all too hard."

Of course, figuring out how this nascent information appliance market will develop is no easy feat. That's why Wilson is careful to weed out star-struck entrepreneurs who believe they've figured out the future. Of the 50 business plans he has seen since launching the info-appliance focus in January, Flatiron is seriously considering only four. "We preach flexibility -- in the business plan, in the business model, in everything," says Wilson. "And we look for experienced management that knows when to move to something new."

 

Wilson vows: "We'll be careful not to bet the farm on any one company"
 

Clearly, Wilson is betting that he has that ability as well. After getting a mechanical engineering degree from MIT, he decided he needed more excitment than life as an engineer would provide -- and so he set his sights on venture capital. He earned an MBA from the University of Pennsylvania's Wharton School and, in 1986, joined Euclid Partners, a N.Y.-based venture capital firm. Ten years later, having caught the Internet bug, he co-founded Flatiron.

"WE'RE NOT GENIUSES." His venture capital firm isn't the only one that's investing in info-appliance technologies. St. Paul Venture Capital, for one, has already invested in 17 companies doing similar work. But Flatiron is clearly on the leading edge. "We might be a little early [on the info-appliance trend], but we are looking across a two- to four-year time horizon. And we'll be careful not to bet the farm on any one company," Wilson says.

Indeed, he's refreshingly modest in his approach. "Our returns [from the Internet fund] have been fantastic -- but we'd probably have done better just by buying Amazon, eBay, Yahoo!, and America Online. We're not geniuses. We've just been in a great environment in which to make money." But if Flatiron hits it big again, the geniuses may be watching to see where Wilson looks next.

Peter Burrows cover information technology from Business Week's Silicon Valley bureau


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