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SEPTEMBER 14, 2001

MANAGEMENT

For Some, Dot-Coms Remain the Next Big Thing
Even today, there are execs willing to trade bricks-and-mortar security for the promise and potential of young Internet companies


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What would it take for a capable, highly regarded executive who has spent 20 years working his way up the chain of command at solid, Old Economy companies to walk away from it all and join a young Internet business? Could he be trying to roll back the clock to 1999?

Although such leaps of faith are not as common as they were when the Internet was king of the hill -- uh, bubble -- they're still happening. Today, though, executives leaving a Fortune 400 fortress study the terrain longer and harder before taking that jump across the moat to the Internet world.

"What has changed, quite dramatically, is the criteria bricks-and-mortar executives use in evaluating early stage opportunities," says Scott Gordon, managing director of the Internet practice at Spencer Stuart executive search firm. Two years ago, he notes, if a young company was backed by a top-tier venture capital firm, had some real estate on the Web, and perhaps a prominent member or two on the board of directors, it could attract an experienced executives with Old Economy backgrounds. "There were no discussions about revenue or profitability," Gordon says. "Today, their first questions are always how much money do they have in the bank and what's their burn rate?"

Once the money questions are answered, he says, the bricks-and-mortar exec scrutinizes the team and its wares. Are they winners? Do they have a successful track record? Are they selling a core product that people would buy, or just a bells-and-whistle concept no one needs?

It was the team that lured Ephraim Feig away from IBM after 20-plus years and over to Kintera Inc., an 18-month-old company in San Diego that helps nonprofits conduct online fund-raising campaigns.

"A year before I started, I never would have thought I'd do this," says Feig, 53, who had been program director for emerging technologies -- writing patents and creating technology -- at IBM's research center in Yorktown Heights, N.Y., which he fondly calls one of the best labs in the world. "I was going to retire eventually from IBM, maybe be a professor at a university...then I got the call."

"STATE OF MIND."  The call was from Harry Gruber, medical doctor, inventor and founder of several successful companies, ranging from biotech to Internet media ventures. Feig had met Gruber shortly after the entrepreneur had founded INTERVU, which delivered audio and video over the Web and was sold to Akamai Technologies early last year. Feig, who had explored developing a relationship between IBM and INTERVU, admired Gruber's track record, his innovation and his passion.

"He's innovative, creative...I admired his ability to deliver his services," says Feig. "He's a brilliant gentleman. When the opportunity came to work with him in this brand new entity, I thought about it for about 30 seconds." At Kintera, Feig is chief marketing officer, which he says is not as much of a stretch as it might sound. "At IBM, I was pushing tech ideas within the company, marketing internally. Now, I am marketing for Kintera. It's just a state of mind," says Feig.

When Feig signed on last summer, Kintera had five employees. Now it has 70. "Our trajectory is phenomenal," he says, sounding like a blast from the Internet-boom past. At first, Feig's wife, Jeane Chen, who was a senior manager in charge of multimedia production at IBM, was nervous about her husband's move. But a six weeks later, she joined him at Kintera, where she is executive vice-president of engineering. Although she could have stayed with IBM when they moved to San Diego, she had become convinced that Gruber and his ideas were winners, her husband explains.

ANY VACANCIES?  Not only does Feig have no regrets about the couple's move across the country and their big pay cuts in return for part ownership in the company, he says he has no regrets about the steep slide in the economy, which he credits for vanquishing Kintera's competitors and funneling talented workers to his way.

And if his gamble doesn't pay off? "The worst that could happen is not a bad thing," Feig says. "I could survive that." Still, he notes, "coming from 20 years at IBM, one doesn't do this unless he is optimistic."

No matter what the economy, there will always be executives willing to make the same kind of bet as Feig. "It was always a minority of executives who would do this," Gordon says. "It's a smaller minority now, but there are always those individuals who will, when they see the right thing, take a chance."

After two decades of being recruited by ever bigger bricks-and-mortar companies to ever higher positions, Adam Bauman resigned as chief global e-commerce officer of Deloitte Consulting two months ago to become CEO and chairman of IsoSpace in New York, which provides technology for Internet-based, real-time collaboration.

AFTER THE DELUGE.  Keeping track of collaborative technology was part of his job at Deloitte, and he was looking into IsoSpace with the idea of aligning with the company on portal-building projects for major corporations. Bauman, who knew all the software on the market, had not seen anything as sophisticated as IsoSpace's technology. When he visited in June, he says, they had been in business for 3 years, had 15 employees, and were putting the finishing touches on a million lines of code. Says Bauman: "It was amazing to me that they were still on the beach after the big tsunami had come and gone."

He figures the reason IsoSpace survived was because it was funded by its founders rather than VCs. It was founded by Wall Street denizens Abbas Shah, a former hedge-fund manager and trader, and Ron Keush, a former trader, who teamed with Alan Nathan, whom Bauman describes as the architect of many of the Internet technology systems on Wall Street today.

"I love the technology so much, I felt compelled to resign and come over here," explains Bauman, 43, who has long seen collaboration "as the next big thing." Although he has never before been a CEO, his career has seen him assume increasing responsibility for ever-larger teams of people during his career, which included stints at American International Group, Young & Rubicam, DreamWorks, Universal Studios, and Times Mirror.

ANY VACANCIES?  Now that the million lines of code are finished, IsoSpace has started selling its product at a time when most companies are loathe to spend. "Technology isn't on their list of top purchases when they're worried about travel cuts, head count," Bauman said. "But when you demonstrate you can reduce costs, that's a very powerful sales pitch in today's world."

Bauman's friends and colleagues raised their eyebrows, for a moment, when he told them he was leaving Deloitte to join a software enterprise. "When I said collaboration software, then they understood," he says. "Now, I get calls from friends and colleagues wondering if we're bringing on more people."

That's a risk Bauman is not quite ready for, even though he expects the staff of 18 will have tripled by this time next year. "We're a software company. I don't believe in hiring before sales."

That's the kind of attitude one would expect from a tsunami survivor.


By Theresa Forsman in New York
Edited by Robin J. Phillips
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