Doug Brown, Inter@ctive Week
29 May 2000 - Like most promising ideas, the Venture Compass Web site came about because John Malone, chief executive of management and marketing consulting firm The Eastern Management Group, couldn't find something that he needed. So he decided to make it himself.
What he wanted was a constantly up-to-date catalog of information technology (IT) venture capital investments. Now, about a year-and-a-half after Malone began working on the project, the Web site - a database of "every dollar of venture capital that has ever leaked into" a high-tech or Internet start-up, as Malone describes it - is scheduled to launch by July 1.
"It's a database that contains important information on all start-ups in the field of technology, which would account for everything in communications, information technology, the Internet and e-tailing," Malone says. "The only thing it probably doesn't contain is information on new shoe stores, unless they are e-shoe stores."
The impetus behind the idea was Malone's stable of about 400 current clients, many of whom wanted to keep track of new developments in their fields — and wanted to try to mirror the developments with their own labor — but didn't want to spend the time and money to be the idea developers.
Malone's telecommunications clients, particularly carriers, were especially vigorous in their quest for constant technology intelligence, he says.
"The carriers were requiring that we find everything under development in alpha and beta testing in information technology," Malone says. "We found that half of everything we were finding was in start-ups. We would identify for them products that were under development, in alpha or beta tests, and that way we could alert the carriers to the products, and they could run fast and develop their own products. Or they might use these companies as distributors of technology, so the carrier wouldn't be the first to the market with the product, but they wouldn't be third, either."
Eventually, the daily hunt for new information led to the creation of an internal database. And now, a Web site.
The site will offer the standard menu of information about each business getting venture capital funding, from the names of officers and directors to descriptions of the products. The focus, of course, is on the venture capital funding, and the site stops tracking the money the second the company has its initial public offering of stock.
Keeping the site up-to-date will be tough, says one experienced venture capital researcher.
"It's difficult to track where all the money goes," says Tracy Lefteroff, managing partner at PriceWaterhouseCoopers' U.S. private equity and venture capital practice. "If [the venture capital funds] don't tell you where [the money] is going, you're just not going to know."
According to a new study by PriceWaterhouseCoopers , a record $17.2 billion in venture capital was spent in the first quarter, up significantly from the $14.2 billion invested during the same quarter last year. Of that, about two-thirds — $10.8 billion — was spent on Internet companies.
The Venture Compass business model? Use of the Web site will be free. The point of the site, Malone says, is to draw prospective new clients to the business and to encourage existing clients to first explore the database and then turn to The Eastern Management Group to better use the information strategically. The 21-year-old, New Jersey company specializes in management consulting services, particularly in marketing and sales.
Demand for venture capital intelligence has never been higher, Malone says, with about $500 million in high-tech venture capital and 15 new IT start-ups saturating the economy every day. Not only venture capital companies, but many corporations are also just now getting into the venture capital world.
"There is so much venture capital money available that venture capitalists have a need to identify very quickly where there are start-ups, so they can ask, 'Is that an area where I should be targeting?' " Malone says.
Anybody would be able to unearth the same information that is in the new venture capital database, Malone says, but it would take a lot of work. Analysts in his company consult about 25 different information sources per day, and they examine an additional 100 or so periodically.
"We are doing the heavy lifting," Malone says. "Think of it as pigs finding truffles. We are gathering information that is available, but only at an enormous expense."