Follow The Money

Capital Exports - Return to Sender

By Anthony B. Perkins

It's not all dollars and cents in my line of work. While dodging attendees of "The Big Picture," Variety magazine's entertainment business conference, I plowed right into the barbarian himself, Arnold Schwarzenegger. Not wanting to let a good opportunity go to waste, I asked Arnie for his thoughts on how the major studios distribute films around the world. Said Schwarzenegger: "If American studios put as much energy into promoting and marketing their films in Europe as they do in the US, they could generate a lot more revenue."

There you have it: cinematic wisdom from the Terminator.

Global investments

There's a new headache for venture capital firms in Silicon Valley: too much money and not enough deals. If money's cheap and deals are scarce, the price for private company stock will become inflated and start to pressure VC returns on investment. One strategy many VC firms are pursuing in this era of bloated coffers is global investment. England, France, and Germany are littered with a new generation of private interactive content and multimedia tool companies aching for growth capital. Paul Dali, general partner with New York-based Nazem and Company (415/854 3010), recently confided at a venture capital press briefing in Menlo Park, California: "We are now co-managing an international venture fund with Banexi Corp., a Parisian merchant bank, and this gives us the inside track on funding some of the hot European start-ups.

It also provides us with a European beachhead to help our US portfolio companies establish relationships with overseas partners."

Even some of the old-time Silicon Valley VCs are joining the investment scrimmage abroad. Northern California-based venture heavyweights New Enterprise Associates (415/956 1579), Oak Investment Partners (415/854 8825), and Sequoia Capital (415/854 3927) joined 4C Ventures L.P. (a venture arm of the Ivrea, Italy-based Ing. C. Olivetti & Co. S.p.A.) in throwing money behind ATM Ltd., a two-year-old concern with a second-generation networking software product, based in Cambridge, England. When you dig deeper into the deal however, you learn that ATM Ltd. has just opened headquarters in Northern California. "In every deal we fund, we would like to see the CEO and VP of sales located somewhere on the West Coast so we can regularly visit and help them out," says Douglas Leone, general partner at Sequoia Capital. "It doesn't matter if manufacturing and engineering are overseas."

All in all, most financial insiders agree that this VC trend bodes well for at least the short-term health of the European new-business environment. "Just two years ago, the thought of a European technology start-up raising early-stage venture capital was pure fantasy," says Ovid Santoro, a corporate development manager who raised capital for Argonaut Software Ltd., a privately owned game company outside of London. But with all the US money now available, it isn't as hard for a young start-up to find the financial fuel to get off the ground.

Power Mac's alter ego

While US VCs are busy exporting cash, Olivetti is exchanging lire for stock in private Silicon Valley companies. Olivetti Ventures (212/371 5630) is operated by its burly and highly energetic vice chair, Elserino Piol. Piol has been actively investing in private technology companies for more than 30 years. "He keeps four secretaries busy," says Alexandra Giurgiu, who operates Olivetti Ventures's portfolio in the US. Piol's latest brainchild - Power Computing Corp., the Milpitas, California-based company that recently licensed the Macintosh operating system - is ramping up to graft the IBM clone-maker model onto the Mac market. This company will make money at 20 percent gross by building cheap computers with off-the-shelf parts, a redesigned motherboard, and a simple case - and by selling them by mail order from a warehouse in Austin, Texas. To run the show, Piol signed on Stephen Kahng, the engineer famous for taking $200,000 and coming up with the design that made Leading Edge a top-selling IBM clone maker in the '80s. Also involved in the deal are Enzo Torresi, who co-founded Businessland and helped get Milpitas-based NetFrame Systems Inc. off the ground, and Carlton Amdahl, a co-founder of NetFrame. All eyes are on Power Computing as it begins to ship in volume.

New trades for TWIT$

I'm going to hold onto most of the stocks in the TWIT$ portfolio this month. But I'm so miffed that the price of Applied Digital Access has tumbled, I'm going to cut my losses and run over to pick up stock at Global Village Communication Inc. instead. Global Village, based in Sunnyvale, California, is an established player in the Macintosh modem business - it has recently diversified into the Windows market and has also introduced a hot-selling Internet access software package. Bolstered by a top-flight management team, growth prospects look superior at Global Village.

The Wired Interactive Technology Fund (TWIT$)
Company Primary Business Symbol Shares Price Apr.3 Since Mar.1 Action
Brøderbund Software CD-ROM swBROD110050 1/4 - 4 hold
The 3DO Company Games hd/swTHDO300013 7/16 + 1/16 hold short
Silicon Graphics Inc. Multimedia hwSGI270037 7/8 + 3 hold
Wavefront Technologies Inc. Multimedia swWAVE 520017 1/2 + 7/8 hold
Mobile Telecom Technologies Corp.Mobile computingMTEL330023 1/2 + 1 hold
Motorola Inc.Communications/hwMOT160056 3/8 + 2 1/2 hold
Cisco Systems Inc.ConnectivityCSCO250039 3/8 - 1/4 hold
Microsoft Corp.SoftwareMSFT50082 1/8 + 12 1/8 hold short
Apple Computer Inc. Hw/swAAPL600038 1/4 + 2 3/4 hold
Oracle Systems Corporation Database swORCL600030 1/16 - 2 1/16 hold
NETCOM Online Comm.Service Inc. Internet providerNETC3000024 5/8+ 1 3/8 hold short
Applied Digital Access Digital access networkADAX400013 1/4- 1 3/4 sell
ADC Telecommunications Digital access networkADCT400032 7/8+ 2 7/8 hold
New Stocks
Global Village Communications Inc. Communications hw/swGVIL380014 1/8 buy
Portfolio Value  $1,201,806.25  (+20.18% overall)     -1.95%
Legend: This fund started with US$1 million on Dec. 1,1994. We are trading on a monthly basis, so profits and losses will be reflected monthly,and profits reinvested in the fund or new stocks.

Information in Follow the Money combines public data, professional insight, and street gossip gleaned from within a crowd of Schwarzenegger fans at Variety's Big Picture conference in New York, from the free cocktails line at mFactory's launch party at SF MOMA, from hardware and Wiredware booths at the spring COMDEX, and from the Net. Wired readers who use this information for investment decisions do so at their own risk.

Anthony B. Perkins ( is editor and publisher of The Red Herring, a monthly investment magazine published in San Francisco.

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