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BizReport : Internet : June 08, 2000


Exclusive Interview with Esther Dyson, Edventure Holdings

Anyone who follows technology has heard of Esther Dyson. Not only does she sit on more than a dozen boards and committees, but she chairs the Internet Corporation of Assigned Names and Numbers (ICANN), a new international agency that tries to set policy for the Internet's core infrastructure. Since graduating from Harvard in 1974, she has become an expert on everything from artificial intelligence to wireless technologies. Dyson also has traveled extensively throughout the world, especially Eastern Europe, giving her a decidedly global perspective. Her company, Edventure Holdings, backs several Central and Eastern European startups.

by Michael Grebb, Special Correspondent

With such credentials, it's no wonder that Dyson is a busy woman. In fact, she's so busy that she the only time she had to squeeze in an interview was a Sunday, and she ended up putting it off twice during the day because she was stuck in meetings. Did we mention it was Sunday? Eventually, Dyson gracefully found some time to chat and give BizReport her take on the ever-changing world of technology investing.

MG: The stock market has been even more volatile than usual over the last couple of months. How do you think this crazy market will effect access to private capital?

ED: Actually, I think the market was nuts last year. Now it has come to its senses, and that's good. It's easier to hire good people. Way too many businesses got started, and they didn't have much point to exist. They didn't have enough management. I was waiting for the market to go down. I'm sorry for all of the people who lost money, but I'm actually glad it went down.

MG: Some analysts are predicting that 80 percent of the dot coms won't exist in a couple of years. How bad will it get?

ED: It depends on how you define it. Eighty percent sounds high, but if you include everybody who thought they were starting a company and couldn't get funding or people, then it could be 80 percent.

MG: Even with the recent downturn, are tech stocks still overvalued?

ED: It varies. The real issue is that a lot of companies that were started can't now get financing to grow, and that's a problem.

MG: Is that a function of the stock market or just a new scrutiny of business plans?

ED: I think people are looking much more carefully at whether the business has a sustainable model. There's the old joke about the economist walking with his grandson, and they see a ten-dollar bill, and the boy wants to pick it up. The old economist says, `Don't pick it up. If it were real, the market would have picked it up already.' Until recently it was the other way. It was like, `Well, if he takes $40 million for it, then it must be worth $50 million.' So people were basing frivolous valuations on other people's frivolous valuations.

MG: So how do you gauge a sound business model in this new environment?

ED: First of all, the model is only a small part of it. It's the people who are going to carry it out. Yes, there are a lot of business models that clearly don't make a whole lot of sense, and we've seen quite a few of them. But there are a lot of business models that do work. It's just that there's nobody to carry them out. You're much more likely to fail because of poor implementation than because of poor strategy. You can change your strategy, but it's much harder to change your people.

MG: So when you have companies going out of business…

ED: It's good for the people who are left.

MG: You've done a lot of work in Europe and eastern Europe. What are the trends over there? Are there more investment opportunities?

ED: I think it's different. There is a lot more mobile commerce and wireless services. There are also a lot more good and bad examples to learn from, which is an advantage. And the markets are a lot more inefficient, so the effect of the Net in the long-term is going to be greater. You have encrusted labor practices and encrusted retail practices, so if you actually got to friction-free commerce it would be a huge revolution.

MG: Will Europe be where the U.S. is now in a couple of years?

ED: No. I think they'll be where they're going. I really don't believe in this notion of Europe following politely in the U.S.'s path. It simply is a different marketplace. There are different issues having to do with language, government regulation, and how people operate. They will learn from the U.S., but they won't necessarily follow everything the U.S. has done.

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