Tech Veteran: Bad Times Breed Strong Companies
As dot-coms fall by the wayside and the high-tech sector continues its deluge of layoffs, Davis contends this is the time for strong business teams and solid technologies to take hold. Basically, he's mimicking Sinatra's famous mantra -- if you can make it here, you can make it anywhere.
And Davis is one to know.
He was the first employee at Lycos in 1995, back before the Internet boom and the high-tech craze. Under Davis' management, Lycos went from being the fastest IPO in Nasdaq history to a member of the Nasdaq 100. He was still reigning over Lycos when it merged in 2000 with Terra Networks S.A., a global Internet company and the leading provider of Internet access to the Spanish-speaking and Portuguese-speaking world -- becoming Terra Lycos.
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NewvineToday, Davis, who will be speaking at the Boston User Group's MegaMeeting Wednesday night at the Sheraton Tara in Framingham, is a venture partner at Highland Capital Partners. In this exclusive interview with Datamation, he talks about what it takes to succeed in this economy, what technologies grab his interest and VC dollars, and whether he'll dive back into the role of CEO.
Q: With dot-coms continuing to shut down and high-tech layoffs dragging on, what does it take to be a successful high-tech company these days?
It takes a strong value proposition -- same as it's always been. It's the same as it took to be a successful company 10 years ago. The Internet bubble distorted reality. We're back to reality. You need to take care of the customer, whether it's an individual buyer or a Fortune 500 company. Clearly, we had for a long period of time companies that had no focus on the bottom line. We're losing those companies now. It's clearly a difficult time. The economy is in the worst state it's been in in years. The world is on the edge of war. IT budgets are being slashed in a way that people have never seen before. It's a challenging climate for the best IT companies.
Q. As a venture capitalist, what companies or ideas interest you?
More than anything we're looking for the people. We look at people first and ideas second. Companies are all about teams, people and leadership. We would never invest in a great idea without leadership. We would invest in great leadership while they come up with a great idea.
Q. What high-tech sectors interest you as an investor?
We focus on technology and health care. Within tech there are a few areas of concentration -- digital media, security, wireless, application software and data centers. I'm always leery of the next big thing. There are a lot of great things coming up though -- innovative data storage technologies, employee performance management software. Security...We have a new investment in a company with a fingerprint logon system.
Q. Are you interested in jumping back into a CEO's seat?
No time soon. I'm very comfortable with what I'm doing. I'd never rule it out over the long term, but for the foreseeable future I'm dedicated to my role as venture capitalist. There is an abundance of great people looking to start companies. It's not like it was in 1999 when there were two jobs for every person. Now there are two people for every job.
Q. How different is it to build a high-tech company today than it was 10 years ago?
I built Lycos in the pre-Internet boom period. I lived through the first Internet winter in 1996 when Internet stocks were inexpensively valued and people questioned our future and viability. 2002 revisits 1996, and then some. We had to focus on profitability from our first day. We were making money in 1997 when it wasn't in vogue to be profitable. If companies return to investment and focus on share holder, they'll do well.
Q. If you had one piece of advice for high-tech administrators and executives, what would it be?
Persevere. Now is not the time to retreat. Now is the time to hunker down and believe in yourself and build the business. I think many are giving up. They see the challenging economic environment. People are disillusioned. There is no path to instant riches as there was in the late '90s. They become frustrated with that. Once again, all that spells is opportunity for those who are capable and talented. As others fall around you, that creates the time to hold your head high and create opportunity. The companies that come out of this will be very strong.
