March 16, 1998

A SILICON ALLEY PITCH TO THE VALLEY: SNICKELWAYS GEARS UP

They've refined their business plan, even gussied up their snazzy, computer-animated slide show. Now Paul Cimino, Michael Meyer, and Andy Howarth -- three clean-cut thirtysomethings who operate Snickelways Interactive in New York City's "Silicon Alley" -- are taking their pitch to the headwaters of modern computing: Silicon Valley.

Web-commerce firm Snickelways (it's a medieval word for narrow, vendor-lined streets) is part of the first-ever "Alley to the Valley" conference, which starts today in San Francisco and which will introduce New York's growing new-media industry to the old guard of the Digital Age. While the conference will feature the usual menu of panelists and speakers, the real attraction is nearly six hours of scheduled company presentations, in which 24 of New York's top tech firms will appeal to the Valley's digerati for venture capital, strategic alliances, or just plain recognition.

For many of the small companies, the trek out West has an almost Oz-like quality. New York and Silicon Valley share dozens of natural connections -- through Wall Street and Madison Avenue ad agencies, software development projects, and the entertainment industry -- but they remain two distinct business cultures. What goes on inside the Valley's geek-ridden corporate campuses may not fly with the Alley crowd, many of whom are self-styled "creatives" -- artists, designers, and all-around hipsters.

At Snickelways, the three entrepreneurs have spent some 25 hours honing their 30-minute pitch till it sings. Their seven-year-old, 25-employee company is hunting for $5 million in fresh capital, money that will be used to build a sales force and expand product offerings. Having plied the Manhattan venture-capital scene -- which they call "not as tech-savvy" -- they're hoping California investors will have a better grasp of their business. Snickelways has built electronic commerce systems for such companies as Fruit of the Loom, Chase Manhattan Mortgage Corp., and Cablevision Systems.

"The West Coast venture-capital community is very much in touch with the technology," says Chief Financial Officer Meyer, speaking in an airy conference room in the firm's Tribeca loft. "And they're able to fund deals much more quickly." Snickelways has never taken on debt, and it recently landed $615,000 in VC money from East Coast investors, but Meyer says the company is not locked into dependence on New York. One reason for this trip, he says, is to "let the New York community know that if we have to, we'll find money elsewhere."

Of course, New York City is bent on keeping firms like Snickelways. It sees Silicon Alley -- a catchall term for an estimated 1,100 new-media firms clustered in downtown Manhattan -- as a vital part of the city's economic future. According to a recent Coopers & Lyrband study, new media in the New York metro region is thriving, with revenues climbing 50%, to $5.7 billion, since yearend 1995, and total employment up 48%, to 106,000. There is a catch: Most companies have yet to generate any real wealth -- 83% of New York-area new-media outfits produce less than $1 million in revenues, and an estimated 17% of new-media firms flopped from 1995 to 1997.

To move capital, and thus expansion, New York City's economic development office is co-sponsoring Alley to the Valley. As Mayor Rudolph W. Guliani declares in a message spread across the conference brochure: "We want investors all over the world to know that we're dedicated to the continuous growth of the Silicon Alley community."

But just how good a reception will come from Silicon Valley investors? The traditional knock against Silicon Alley is that its businesses are too content-oriented. As the logic goes, building Web sites, publishing online magazines, and repurposing traditional print products may be profitable, but these businesses aren't nearly as lucrative as a genuine breakthrough such as a new microchip or communications router. "Right now the community has a black eye," says CEO Cimino. According to the Coopers & Lybrand survey, only 12% of the area's computer companies can be considered real programmers or software developers. That may help explain why during the third quarter of 1997, California received over $1.2 billion in venture capital, and New York State just $91 million.

Dylan Charles, a San Francisco-based manager in KPMG Peat Marwick's Information, Communications, & Entertainment division, says the Valley might be slowly warming up to the Alley's content-driven companies. "It has a lot going for it," he says. "You can't overlook its proximity to the big ad agencies and the big media companies"

Snickelways falls somewhere in between content-creator and software developer. Although it designs electronic commerce Web sites using off-the-shelf software, it has also authored some of its own scripting tools. In its presentation tomorrow, the company is billing itself as a "general contractor," able to take nearly any business -- be it Fruit of the Loom's back-end distribution or Rand McNally's maps -- and convert it to an electronic model. E-commerce is a competitive field, especially in Silicon Valley, and that's why Cimino is expecting a skeptical crowd. "They ask tougher questions out there," he says with a laugh. "But we like challenging audiences." He returns to the slides, making last-minute fixes. "This is as important as any presentation we've ever done," he adds.

Whatever the investing winds, the Alley to the Valley debut might be remembered as a bellwether for New York's new-media enclave. "This is serious stuff," says Meyer. "The Alley has outgrown it's cuteness. It's a business."

By Dennis Berman, Staff Reporter, Business Week Online

For a conference follow-up read: "Alley to the Valley: A Modest Succes," Mar. 24