A Netpreneur Program event, produced by
Morino Institute at the Mid-Atlantic Venture Fair. November 12, 1997
© 1997 Morino Institute. All Rights Reserved.
Mario Morino, Chairman, Morino Institute
Robert Pittman, President & CEO, America Online Networks
John Sidgmore, CEO, UUNET; Vice Chairman & COO, WorldCom
Alan Spoon, President & COO, Washington Post Company
Mark Warner, President, Columbia Capital Corporation
Mario Morino: a time of convergence
First of all, I think we've heard some great insights and some wonderful advice, and I would like to give a very special thank you to Alan, John, Bob, and Mark. You have been a great panel.
On Saturday evening, NBC Nightly News ran a story calling Northern Virginia the next Silicon Valley. That story may have been a surprise to some of you, but we have known for a while that this region will be the leading center for opportunities of the digital age. Its importance to the venture community is here today and will only continue to grow.
Why? Because many of today's and tomorrow's most exciting opportunities are coming from a new convergence of communications, computing and content. Although the computing technologies have been the predominant opportunity engine in the last few decades, what we are witnessing in convergence will supplant that and provide a far greater opportunity. Mark is hitting it head on, and we are seeing the convergence with Alan's company, John's company and Bob's company. They are living the convergence.
In addition to the opportunities in each converging sector, we are seeing the creations of hybrids, of new business models like AOL, of cross-industry alliances like MS/NBC, of new products coming to be integrated like the Internet and telephony. Examples like these are going to open up wildly unimaginable new opportunities. As investments and as an economic case, they will fundamentally outstrip what we witnessed in the revolution around personal computers and work stations of the 1980s. Simply put, the context of this opportunity is far larger.
Greater Washington is at the center of this convergence because it's one of the few places in the world where we have strength in all three sectors--communications, computing and content. Most importantly, we would offer you the idea that we could own the bookends of the convergence, the communications and content which surround the computing platform.
The region already possesses a remarkable concentration in communications and is arguably the hub of the telecommunications industry. This distinction will only grow as deregulation satellite/wireless innovation redefine telecom as we know it today.
Then, look at the enormous, literally unmatchable opportunity at the other book end, the content, where the region will become the dominant producer of digital information products--databases from the government, online news and entertainment, bioinformatics, distance learning-based education are just a few of the slices we will see. That's because we are home to one of the richest sources of information and cultural objects in the world and a work force with a legacy and a talent that can develop it.
As the convergence continues and innovation flourishes, this is one of the few places in the world where you will find the people, the expertise and the critical mass in all three sectors, but with a distinct edge in the book ends of communications and content. It is in the convergence that we will witness the greatest innovation, the largest venture opportunities and where we will best play out the potential of the region.
Consider for a moment some of the hottest investment sectors and the region's strengths in each. In communication and telecommunications, the region is rich in all varieties of wireless, satellite, DBS, land-based carriers and communications adapters and services. This sector will see a solid decade of high growth, especially for the first five years. It will see new IPO opportunities, with Yurie, ACE*COMM and Ciena simply giving us a hint of what is yet to come.
I think what John said is right on the money. We don't know where the next Cisco will come from. Ciena was virtually unknown years ago, yet it broke the market cap on Wall Street. This sector, the communications sector, may be the region's most prolific investment opportunity as telecom deregulation hits and the momentum of critical mass continues to build.
The next area is Internet products and services which is already a solid area of investment and one that will continue to grow with the success of MCI, WorldCom, AOL, the strong concentration of ISPs and the formidable government underpinning that will play out in the long-term impact and potential of the region. Indeed, you have to factor in the very positive effect of the throw-off of the government and its Internet concentrations in DARPA, NSF and the FCC. It comes to bear in actions such as the recent IPO of Network Solutions which demonstrates the confluence of these forces.
There are our significant large niche areas that represent strong venture investment opportunities such as e-commerce with companies such as TNSI and CyberCash; health information with MMS in Charlottesville; global positioning systems (GPS) with Spatial Opportunities, OrbImage, OrbCom; security with Trusted Information Systems and IRE; and new mode integrators such as Proxicom, Electric Press and Concept Five to name a few. All are slices in which we have very distinct competencies.
Longer term we will see enormous growth and opportunity on the other book end, content--the digital information products and services sector. Although still in the formative stages, the digital mining, packaging and marketing of the region's information resources represents an evolving and massive investment opportunity that will span at least 20 years. The companies and investors who stake out this terrain will be well positioned for the future.
What do we watch in this area? It starts with the mining of the information banks of the federal government, areas like health, space, agriculture, commerce, environment, tourism, arts and humanities. This will be a massive market in and of itself, which is fundamentally business-to-business, but a distinct consumer market as well. For example, DC-based Aristotle Industries is an entrepreneur mining federal voter information for the direct marketing industry. You've seen the types of examples, how the federal infrastructure will spawn new entrepreneurship.
With the region's concentration in biotech, and with bioinformatics fast becoming an information products industry, the region will be a clear leader. Fueling the growth is the DNA R&D enabled by NIH, Johns Hopkins University and the new Maryland Information Technology Institute.
Publishing, media, and entertainment products are coming from the national news bureaus located here, from media giants like The Washington Post, Thomson Publishing, the new powers of AOL, Discovery, Black Entertainment Television and the burgeoning base of new entrepreneurs--netpreneurs--such as Motley Fool, Net.Capitol and Women's Connection Online.
Think about education products from over 40 major colleges and universities, the dozens of federal laboratories, research centers and education vendors from Computer Learning Center, Gestalt and the Learning Tree, all of which will be enabled and delivered by distance learning systems from Sylvan, America Online, University Online and newcomers like Blackboard and UOL Publishing, all centered here.
It is also clear that the growth and opportunity occurring in the region is sustaining. It reflects a systemic change that has transformed this region from the home of the federal contractors into a vibrant center of communications and Internet commerce. Three trends have driven this transformation and will continue to remake the region's reputation.
First, there is a distinct change in the region's personality that has its roots in the corporate and government restructurings of the '80s and '90s. I came here in the late '60s. It was very entrepreneurial in those days, believe it or not, but it died.
Today what is so pleasant is that you go into a restaurant and people from all walks of life are thinking new businesses. Terms like equity, stock options, start-up, entrepreneurs are actually once again spoken in this region. A new breed of successful individuals--Steve Case, John Sidgmore, Mark Warner--and successes-in-the-making--Susan DeFife, Bob Nelson, Rob McGovern--are inspiring people across this region to strike out on their own and create their business.
Second, an entrepreneurial social fabric is evolving quickly, one which is conducive to business start-ups and rapid growth. Silicon Valley has long benefited from such a social fabric where, as one person put it, you can have a great idea at breakfast and by late dinner you'll have a business plan and angel funding set up.
While not quite that fluid, Greater Washington is seeing a younger, faster breed of businesses and executives evolve. Ideas, people and deals are flowing more freely, at a faster pace and in a more open manner. It's making the region much more conducive to the start-ups and venture minds that we need to drive this region.
Third, we are a vanguard of high-tech companies like AOL, Discovery, Nextel, Teligent and scores more that are the beachhead of an entirely new entrepreneurial base and rapid growth. Like throwing a rock into a lake, the ripples are spreading, just like they did many years ago around HP and Intel in the Valley and, more recently, around Microsoft in Seattle.
With such transformation will come great opportunity. As you know, the greatest venture returns come from spotting a trend or an opening ahead of somebody else. Today in Greater Washington, that edge comes from being at ground zero in what Mark called the convergence. There are also some not-so-obvious reasons that provide a clear edge.
One, we have an abundant and growing pool of talent that is still coming to appreciate the importance of equity. What does that mean? I was with a leading publisher who said, "It is easier for us to acquire the talent here than any other place in the country today because we can get the people at a different equity cost and they will stay longer." It's a very significant point today.
Two, while some large firms feel the crunch of the work force shortage, I argue that the region's talent pool is very attractive to start-ups and the relocation of companies to this region.
Three, the deal intensity and competition is certainly growing, but it is still a long way from the almost stifling, highly competitive venture wars in the Valley. That's not meant to be critical. That's a fact. It's intense. The chance to find promising yet unknown opportunities remains quite high in this region, and with the growing volume and activity it will stay that way for a time to come.
Greater Washington is becoming a region of choice as our reputation grows. There are more and more firms locating here, especially in communications, for example Nextel, Teligent and Coherent. We are becoming a job Mecca, attracting communications, Internet, new media and computer workers who know that their opportunities, choices and safety net are almost unlimited because of the demand for their skills.
Those opportunities are helped by the entrepreneurial social fabric. That's what the Potomac KnowledgeWay and its innovative Netpreneur Program are all about--helping to crystallize this region. The Netpreneur Program was launched less than seven months ago and has already reached thousands of people, created a score of partnerships and directly touched over a thousand netpreneur businesses, many of which have participated here at the MAVA Fair. We welcome your involvement in the Netpreneur Program, to offer the chance to help you learn more about the region's opportunities and to better connect you with the exciting activity underway here.
Clearly, there is a new age of entrepreneurship and venture involvement occurring in Greater Washington. For a moment, I want to take you back to September 1994, when April Young convinced me to give a speech in which I tried to describe to a group of business people that this region would be the base for what we called network information products and services. Most people in that room thought I was a little crazy.
What can happen in three years? Well, let's suppose in 1994 I had told that audience that in 1997 America Online would control nine million subscribers to the 'Net. What if I had suggested that Rick Adams and UUNET were going to cook up some way to acquire MCI? What if I told them that the 'Net would be growing at the rate of 1000% a year? What if I told them that 800 people would show up for a venture capital conference in this region? Then, they would have really thought I was crazy!
That was 1994. If we saw that kind of change in three years, just imagine what we have ahead of us in the next five. It's all there for the taking. As one CEO recently put it at one of our conferences, "We are at the right time in history. We are at the right time for our markets and we are in the right place to make it happen."
Good netpreneuring, good investing and thank you.
1997 Mid-Atlnatic Venture Fair
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