Gordon Connell, Director of institutional sales, Knight Securities International
Jimmy Treybig is a veteran in a young man's industry: venture capital investing in technology companies. He has worked in the field for over 25 years, really making his name in 1974 by founding and running Tandem Computers, the inventor of non-stop high-performance computers, which he grew from nothing into a $2.3 billion company employing 8,000 people by the time he retired in 1996. Under his leadership, Tandem was the fastest-growing public company in the US. Treybig was showered with awards from American business schools.
Treybig has moved from Silicon Valley to Austin, Texas. He likes Austin. He likes the live-music scene and claims Austin is America's live-music capital. He has a ranch with a river running through it and keeps cows. But he has not given up the day job. The cows are a tax break. If you keep cattle around Austin there's a tax advantage - the authorities see cattle-keeping as a way of preventing excessive urban development. His real love is still technology companies.
Treybig is a venture partner in Austin Ventures. And he reports stunning changes in the US venture capital industry, many related to internet companies. "There's been an awesome change in venture capital. The amount of investment in e-commerce is beyond belief." Of the 50 best-performing venture-capital firms in the US, most are dedicated to technology. The returns are huge. Treybig mentions Internet Capital, a private-equity portfolio of 36 technology companies, which recently floated. The fund, started some three year ago and then worth $200 million, floated with a value of $10 billion. "In Austin in the last five months, five companies have gone public, creating 1,000 millionaires, many people worth $10 million and several individuals worth $100 million," he says.
Such awesome returns have attracted enormous sums to venture investing in technology. "If you're starting a company today, you don't ask for $1 million, you ask for $25 million. You might even start up with $100 million. And companies use that money to dominate their sectors, to buy market share and to wipe competitors out."
But Treybig spots a problem for many internet companies. Ironically, many are technologically backward, having been set up by business people with enthusiasm for a product but with little technological expertise. "Most .com companies have no documented software or systems architecture. So when they get big, they hit problems." Treybig says: "47% of people who encounter failure on an internet site immediately go elsewhere and 9% never go back. That really hurts internet companies because their market values are all based on eyeballs." In the worst case, an e-commerce company might corrupt all its data and fail.
Treybig has the answer. His latest venture, Tantau Software, founded in March, designs systems for websites that enable them to avoid bottlenecks that cause their systems to seize up. It also enables legacy systems to side-step such problems. "We can detect failure, make sure you don't lose data and keep you running," promises Treybig.
So does Treybig worry about Y2K? Well, he's got running water, he's got his cattle and - this is Texas, remember - he's got his guns. Peter Lee