Venture Capitalists on 'Net Seek Top Product, Management, Plan

Article excerpt

Sky Dayton and Charles Conn aren't exactly household names, but they're superstars on the Internet start-up circuit.

Dayton is the wunderkind founder and chairman of EarthLink Network (http://www.earthlink.net), in Pasadena, Calif., which in three years has become country's No. 3 Internet service provider. EarthLink raised $27 million in an initial public stock offering in January following nine rounds of private investments.

Conn, a Harvard graduate, Rhodes scholar and former McKinsey & Co. consultant, is co-founder of CitySearch (http://www.citysearch.com), also in Pasadena, an online city guide that has raised more than $23 million from private investors since its inception two years ago. Dayton and Conn were guests of honor at the recent VentureNet investment forum in Long Beach, Calif., held out as prime examples that Internet start-ups still can strike gold with venture-capital investors if they've got a top-notch product, management, business plan and the luck to be in the right place at the right time. In fact, venture financing continues to pour into Internet companies at an unprecedented rate, encouraging entrepreneurs eager to follow EarthLink and CitySearch's trajectory to Internet fame and fortune. Right now, venture capitalists are realizing enormous returns on previous investments and reinvesting that money, said Massoud Entekhabi, a VentureNet speaker and managing partner at Big Six accounting firm Coopers & Lybrand. In the first quarter of 1997, U.S. venture-capital firms sank $2.4 billion into 586 deals, a 9-percent increase from the same period last year. If investments continue at their present rate, 1997 could top last year's record high of $10.1 billion, said Entekhabi, who tracks U.S. venture-capital financing. Internet start-ups and middle-stage companies looking for second and third rounds of financing are attracting a sizable chunk of those investments, according to Entekhabi. …