They were lined up quietly behind a velvet rope, clutching printouts of e-mailed invitations, preparing their game faces for the furious bout of networking that awaited them inside.
It was 6 p.m., Tuesday, June 11, and hundreds of aspiring Internet moguls and Internet investors had descended on Ohm, a nightclub in Chelsea, for a giant, desperate blind date. The entrepreneurs had come to find money, and the money, in the form of venture capitalists, had come to find entrepreneurs. But what the participants soon discovered, in the close, hot confines of the club, was that mutual need does not always insure mutual satisfaction.
The name of the event was First Tuesday. On the first Tuesday of every month, in more than 80 cities around the world, Internet entrepreneurs and venture capitalists convene for mixers like this one in hopes of speeding the flow of capital from those who have it to those who need it. The first such gathering took place in London two years ago. This was just New York’s second First Tuesday. Its sponsors–a law firm, a headhunter and other companies trawling for fees–had provided the participants with an hour’s worth of free booze.
Inside Ohm, the attendees donned their color-coded name tags–red for venture capitalists, green for entrepreneurs, yellow for the “service providers” who feed wherever capital flows. Then they started drinking and wandering the floor in search of a deal.
The entrepreneurs could smell the money; it was right there, striding around the dance floor–all you had to do was talk to it . Perhaps it wasn’t the best money available; the venture capitalists participating in First Tuesday weren’t all exactly top-notch. But money is money, and in the summer of 2000, after the dot-com shakeout of spring, you take what you can get.
Meanwhile, what the V.C.’s could smell was mostly bad ideas. The club was teeming with dot-com latecomers hawking outmoded business models and clumsy names. Goaded by investors eager to have their money put to work, the venture capitalists were scrambling to find something or someone to invest in. But in the summer of 2000, that something–the mouse that will grow to be an elephant, as the V.C.’s like to say–has become harder to find. All the good ideas, all the good names, are taken.
Nonetheless, it was worth a try.
In the hallway between Ohm’s entrance foyer and the dance floor, Steve Van Natta, chief executive of a new company called Clickfinger.com, was talking about his product, an application that allows Internet users to share bookmarks.
“It’s basically a collaborative filtering tool,” he shouted, bending forward to be heard above the din of hundreds of start-ups being simultaneously pitched. “We hope to be the last word in bookmarks.”
Mr. Van Natta, a big man in a rumpled blazer and thick-rimmed glasses, didn’t seem too worried that previous last words in bookmarking, like Blink.com Inc.–which scored $11 million in financing way back in the halcyon days of March–haven’t exactly been meteoric successes, or that venture money for dot-coms ain’t what it used to be.
“We have a business plan, actually,” he said, as if such a thing had hardly ever existed.
Clickfinger.com is in the process of raising $2 million in seed money, and Mr. Van Natta was hunting for someone who might provide it. But he was unsure how to go about getting into a conversation with a venture capitalist.
A red tag walked by.
“Let’s try it out,” said Mr. Van Natta. He grabbed the venture capitalist by the shoulder and extended his hand. “I’m Steve Van Natta.”
The man with the red tag introduced himself as Chris Kehoe. His firm, the Scion Group, manages the assets–”in the nine figures”–of a private family.
Mr. Van Natta launched into his pitch. It lasted about three minutes. Mr. Kehoe asked a few questions. They exchanged cards, and Mr. Kehoe walked away.
Later, Mr. Kehoe, in a standard-issue casual-day uniform of blue button-down shirt and khaki pants, didn’t seem all that impressed.
“The space he’s in–there are so many big competitors,” he said. “You’ve got to have very deep pockets to survive.” After all, this is July, not March, and you don’t get venture money with a Web site and an idea.
Mr. Kehoe paused and took a sip of his Coors Light. “I think those days may be gone,” he said.
Another Night at the Roxbury
It was hot inside the nightclub. Sweat formed on the upper lips of entrepreneurs as they recited their pitches in a language molded by months–or years–of studying The Industry Standard and Red Herring . They spoke of “media-metric models” and “spaces.” They were “revenue-driven.”
Phillip Karlsson and Jonathan Rosenberg, two Cornell-educated programmers, were standing on the dance floor under a slowly rotating mirror ball. There was some sort of background techno beat.
“We’re very technical people, we came from technical backgrounds,” said Mr. Karlsson. He had a beard and long hair, tied back in a pony tail. “And now we just need to build out the bizdev side of the site.” “Bizdev” is New Economy-speak for “business development,” that whole concept of building margins and revenue streams that, until recently, was subordinated to ideas and dreams.
Messrs. Karlsson and Rosenberg did need some bizdev for their company, MyOrders, which builds e-commerce software for retail merchants, but like everyone else wearing green tags, they also needed money.
“We need to get more merchants involved, we need to get them to use our services, and we also need a little bit more funding than we’ve already got,” Mr. Rosenberg said.
By “a little bit more,” Mr. Rosenberg meant $5 million more than the $500,000 they had raised in a February friends-and-family round.
“What we’re supposed to do,” Mr. Karlsson said, “is find the people in red, go grab them and, like, tell them all about what we do and how cool we are. We’re not good at that, so we look at them and we’re like, ‘We should go talk to that person,’ and then they walk by us, and we’re like, ‘We should have talked to that person.’ So, yeah, we try.”
Yellow spotlights above the dance floor suddenly flashed on. For a few seconds, the two men, alone in the middle of the floor, were awash in light. They looked terribly uncomfortable. “That’s just bad,” Mr. Rosenberg said.
“Annoying as hell,” Mr. Karlsson agreed.
Day Late, Dollar Short
Rob Nardone was leaning against a wall, drinking an Amstel Light. He was wearing a houndstooth check jacket. And a red tag. He had a good tan and sounded optimistic.
He was describing the mentality of his fellow venture capitalists: “They’re willing to put a little money here, a couple million here, couple million there, a little money on a lot of different things because all you need is one triple or home run to make up for five, six, seven strikeouts.”
Mr. Nardone works for the venture arm of EMC Corporation, the data storage giant. His group invests in startup companies that, not surprisingly, need a lot of data storage. He was waiting for people to come to him. “There are more greens than reds,” he said.
On cue, Jeffrey Landers sauntered up, bearing a Coors Light and a pitch for an Internet company with a cumbersome name–Offices2Share.com, a clearinghouse for spare office space. A nod, a skeptical glance, an exchange of cards. Then it was over.
The evening’s Cassandra was blonde and 29 and one of a few women in a cavernous room crammed with men. Her name was Alicia Kossick, the editorial director of a startup called LatinCollector.com.
“Compare this event to last year, like, any event of this nature one, one and a half years ago,” she said. “It’s a totally different story. A year and a half ago, I got invited to some Goldman Sachs events, and they were high -profile. I mean, the finance ministers of certain countries were there, the top people from Morgan Stanley or Goldman Sachs were there. People were eager, people were willing. There was optimism. And now, this year, it’s kind of like a day late and a dollar short.”
John McCormick had just bought drinks at the bar. White wine for Ms. Kossick, a bottle of spring water for himself. He took a sip. He had a red tag and a business card that said he was a principal at BPI Capital Partners Inc., a New York-based private investment firm. He was explaining why his firm doesn’t like Internet businesses that rely on advertising or consulting or e-commerce for revenue.
“It’s not viable,” he said. “We have never invested in those kinds of businesses. We never liked them to begin with. We haven’t had any companies blow up on us. We haven’t had any dot-com problems because we haven’t made those sorts of investments.”
Mr. McCormick said that of every 10 people he spoke to at networking events like First Tuesday, one or two had ideas that interested him enough to warrant setting up another meeting. The others, he said, just don’t have what it takes.
“Most of the people shouldn’t be entrepreneurs to begin with,” Mr. McCormick said. He was speaking slowly and looked stern in a buttoned dark suit, white shirt and red striped tie. “Very often they are not aware of competition that’s out there. Very often they have never run a business before.”
Near Ohm’s entrance, Steven Helmholz, a managing director at Korn/Ferry International, an executive-search firm, was handing out T-shirts as the crowd thinned and people headed off. He had designed the T-shirts himself. He was asked what he what he was doing at the party, besides handing out T-shirts.
“I’m just trying to spread the wealth,” he said. Two women passed by. “Ladies!” He threw them T-shirts. They giggled. “We’re basically putting a flash on the Korn/Ferry brand, just that we’re visible, we’re in the dot-com space.”
Korn/Ferry was one of the sponsors of First Tuesday. They were there because most successful entrepreneurial startups will at some point need experienced professional management. Korn/Ferry, Mr. Helmholz said, wants to be there to help. And take a cut. For bringing a chief executive on board at a company, Korn/Ferry gets one-third of the executive’s first-year compensation–salary, warrants, options and stock.
Not far away, in the Ohm foyer, Clickfinger.com’s Mr. Van Natta and his partner Michael Petersohn were grinning and shaking hands vigorously with a venture capitalist from Emigrant Capital, whose red tag identified him as Gib Dunham.
“We’ve got a deal! We’ve got a deal!” Mr. Petersohn shouted. The crowd in the foyer surrounding them went suddenly, awfully silent. Flashbulbs popped. A woman wearing a green tag nearly choked on her gin and tonic.
A deal? Did they really have a deal ?
“Nah,” said Mr. Petersohn. They were just kidding around. “But we’re trying real hard.”