2001 Review: Four CEOs Who Slipped Through the Net

Been there, done that.

Stock market investors who lost money in companies like Excite@Home, Women.com Networks and NBC Internet probably want to put the whole experience out of their minds as the new year approaches.

Don't do it. At least, not just yet.

There's room yet for a few more lessons to be learnt from the bursting bubble -- this time, from the executives and analysts who lived inside it. Where are they now? And what did they take with them, other than a pile of shares worth not much more than their weight in kindling? What did they learn about investing in the Internet for the long haul? Here's a glimpse at their answers.

Flight to Quality: Marleen McDaniel

Six months after stepping down as chairman and CEO of the Internet company Women.com Networks, Marleen McDaniel is researching new investments in the stock market.

But not among Internet companies resembling the one she left.

Formerly: CEO, Women.com Networks

Now: 'Happily unemployed'

It's a question of safety, says McDaniel, who came to Women.com in 1992, oversaw its sale to iVillage in June, and now describes herself as "happily unemployed." Once a stock falls below $5 a share, many institutions want no part of it, she says. "There's no market for the security."

This is something McDaniel learned up close. Women.com, which once traded north of $23 a share, was fetching about 72 cents by the time it announced its deal to be acquired by iVillage.

Characterizing Women.com as "probably on the borderline" of being big enough to be a public company, McDaniel wonders about the wisdom of it going public, despite the $39 million netted from its 1999 IPO. "I think taking my company public is what killed it," she says.

So now McDaniel is playing it safer, as far as the Internet goes, focusing on the biggest companies, such as eBay (EBAY Quote) and AOL Time Warner (AOL Quote). "Like my other investor counterparts," she says, "I wouldn't like to own stocks under five bucks. ... It makes you uncomfortable."

But she hasn't lost her taste for all little stocks. McDaniel says she's fascinated by biotech -- the innovation and perhaps value arising from new science and new companies. "I'm attracted to that -- new new things," McDaniel says.

George Bell: The Power and the Passion

Formerly: CEO, Excite@Home

Now: CEO, Upromise

George Bell, who stepped down as chairman and CEO of Excite@Home last April, says what he has learned from his experience on the Internet is the value of having a mission that can be defined "simply and passionately."

A challenge at Excite@Home, he says, was that, though the 3,000-employee company wasn't a huge organization, it had too many elements -- including its Excite portal, ad targeting, high-speed Internet access and business services -- to get a sense of its mission. "It was hard to draw a single thematic thread through those various businesses," says Bell, "that allowed the employees to say, 'Great! That's what we do. I can connect with that and I can feel passionate about that.'"

If a consumer-focused business can't explain its mission in terms a layman can easily understand, that's probably not good for employees and customers, says Bell -- nor for investors. (Bell says his public market investments are primarily in bonds because so much of his net worth has been tied up in Excite@Home stock.)

Bell says Upromise, the company of which he's now chairman and CEO, passes this simplicity test: Its loyalty program, he explains, helps kids fund their college education.

Though there's plenty to be unhappy about with the collapse of so many Internet companies, Bell says the bright side is that a generation of dot-commers have learned valuable, if painful, lessons they'd never have learned in any business school. From his experiences over the past half-decade, "I know that I am 100 times better equipped to be a CEO," he says. "There's no way, even in a 10-year period, I could have gotten that kind of experience in any other environment."

Lise Buyer: Taking the Long View

Formerly: Internet analyst, Credit Suisse First Boston

Now: Partner, Technology Partners

Amid the Internet stock debacle of the past two years, there's at least one silver lining for Wall Street, says Lise Buyer.

"Honest to goodness, financial analysts should be rejoicing," says Buyer, an Internet analyst who left Credit Suisse First Boston in mid-2000, becoming one of the first Net sell-siders to join a venture capital firm. "Because financial analysis will tell you something [now]. That process didn't work for the past three years."

The problem with being a public market investor during the Internet run-up, says Buyer, was that one could find numerous companies where the math didn't work out and the stock went up anyway. "And eventually you had to throw in the towel," she says.

Now, of course, things have changed. You've got to look at the balance sheet of even the largest Net companies, says Buyer, keeping in mind that no firm is too big to fail once it burns through its money. "Homework really pays off," she says.

As for herself, Buyer is now a partner at the venture capital firm Technology Partners.

Though she declined to talk about her current investments in publicly traded tech stocks, Buyer says the present tech market is showing signs of euphoria, but not to the degree that Net stocks did in 1999.

Like others, Buyer sees a new crop of Internet companies growing off the remains of old ones. Her firm recently decided it would change from a generalized approach to venture investing to focus on two specific areas. One is energy; the other is real-time enterprise, or using the XML Web language and other technologies to improve business processes, covering everything from content distribution for entertainment companies to inventory management.

But she's advising a venture capitalist's multiyear time frame. "There will be some really interesting new Internet companies popping up," she says, "But it will take a while, and investors are going to have to be patient."

Chris Kitze: 'That's Called the Market'

Formerly: CEO, NBC Internet

Now: CEO, Yaga

The Internet IPO isn't dead, says Chris Kitze, former CEO of NBC Internet. It's just in hibernation.

"By the end of 2002, you'll see the next wave of public offerings of what people would have called Internet stocks," says Kitze. "But now they'll be called businesses."

In the meantime, Kitze says, it's an interesting time to look at the remaining Internet companies that have cash flow, because when Internet advertising bounces back, the survivors will reap huge benefits just by being there. "There's nowhere else to go," he says. "They're the only game in town."

That being said, Kitze's investment in Net stocks is minimal; his public market investments are based in a conservative portfolio of bonds, real estate investment trusts and "boat anchor" stocks.

Those holdings are a counterweight to his private market investments, chiefly his role as CEO of Yaga, an online marketplace for buying and selling digital content, including games, books and videos.

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Yaga meets Kitze's criteria for what he think will work on the Internet -- a transaction-based site, one that opens the possibility of advertising revenues. It's a site that combines distribution of goods and payment and fulfillment all on one site. That's better than eBay at its launch, says Kitze, given that fulfillment of eBay purchases usually can't be managed in the nonelectronic world.

But that doesn't necessarily mean an eBay-caliber payoff for executives or investors. "The irony is that people who create real businesses now may not be paid as well as people did for creating businesses that have already folded," Kitze says. "Sometimes you get paid less for creating more, and sometimes you get paid more for creating less," he says. "But that's called the market."