IPO Hopefuls Try to Stand Out From the Crowd

U.S. Bancorp Piper Jaffray's recent Net conference showcased the next generation of tech firms, which will duke it out in a crowded space after an IPO-heavy year.
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BOSTON -- The focus was on public companies here at the

U.S. Bancorp Piper Jaffray Internet Conference

last week, so the private companies were relegated to a tiny, tucked-away room. But investors still found their way there, at times spilling out into the hallway.

They were looking for something different, a company that would stand out in the public markets.

"You have to find someone who has a true innovation, not just convenience," says Kevin Harper, a research analyst with

Downtown Associates

, which runs a hedge fund in Kennett Square, Pa. "Innovation, in my mind, means they've found a whole new way to squeeze out efficiency."

And in this market, that's awfully tough. By year-end, 74 companies are slated to get out the door, according to

CommScan

, a New York investment banking data firm. An estimated 534 deals will hit the public markets this year, compared to 364 last year.

The IPOs this year have even started to blend in with one another, as more and more

copycat companies hit the market.

So how does a company stand out in the saturated sectors? Take advantage of that glut. "Companies that do well aren't trying to come up with a clever new product, but are really in tune to users," says Piper Jaffray analyst Safa Rashtchy. Some of the brighter prospects for the Class of 2000 IPOs, those that haven't even registered with the

Securities and Exchange Commission

, are attempting to do just that.

BizRate.com

, a customer-driven rating site that will likely go public in the next six months, is headed by Farhad Mohit, who was a ponytailed, jeans-clad standout among the suits and ties here. When a shopper comes to BizRate and wants to buy, say, the latest

Fiona Apple

CD, BizRate will search the Web and spit out a list of all the vendors selling that CD in the order in which customers rank the companies.

BizRate doesn't accept money from vendors, although a vendor can offer BizRate customers a rebate, which serves as an incentive to come back to the site. The amount of the rebate doesn't reflect a company's rating. BizRate generates revenue by selling market-research reports it compiles through consumer surveys.

Another IPO hopeful is the highly anticipated

Snowball.com

. Ranked No. 39 on

Media Metrix's

list of top Web sites, Snowball targets the 12-to-29 age group -- a demographic that grew up on the Web. Snowball has a network of over 120 sites aimed at teens and twentysomethings.

Mark Jung, Snowball's charismatic, well-spoken CEO, bowled over a roomful of investors by describing Snowball's business -- it collects, but doesn't buy, Web sites under its four networks: girl site

chickclick

, student site

PowerStudents.com

, college site network

InsideGuide.com

and games and entertainment network

ign.com

.

"Think of it as a

GeoCities

but with Web sites instead of home pages," Jung says, who also offered the analogy of an interactive "artist's collective." Advertising and e-commerce sales are split, and Snowball provides technical and operations support for affiliated sites.

Snowball is expected to brave the IPO waters in the next three to six months.

While consumer sites like Snowball and BizRate duke it out for eyeballs and clicks, companies in the infrastructure sector could continue to thrive next year.

One promising software infrastructure company was

2Bridge

, a San Francisco-based firm that makes customized portals for companies that want to develop a strong Web presence. It takes "old companies" and makes them into "e-companies" by creating personalized online hubs for employees, suppliers and clients. It has an impressive customer list, including

J.P. Morgan

(JPM) - Get Report

,

Goldman Sachs

(GS) - Get Report

and

DuPont

(DD) - Get Report

.

And according to Piper Jaffray analyst Hany Nada, who covers infrastructure companies, there will be plenty of room for these types of companies. "We're in the first or second inning in this space," Nada says.