The NetSuds Monthly Report - January 1, 2001

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        1.0 Heard on the Net
        2.0 Jobs in the "com and .com" Market
        3.0 NetSuds on Tour - Nextel and Sander
        4.0 Minnesota Entrepreneurial Solutions
        5.0 Calendar of Events
        6.0 Are Minnesota VCs Active in Minnesota?
        7.0 Guest Writers for This Report
        8.0 Apply to Present at a NetSuds Entrepreneurs Breakfast
        9.0 Entrepreneur of the Year

        Please email: people@netsuds.com to report a change in your
        job status if you are moving from or to a company in the
        "com or .com" space.

        NetSuds has heard of a VP Manufacturing and COO position available
        at a Southern California fiber optic component start-up. If you
        know of someone interested in this opportunity, contact Matt Noah
        at matt@netsuds.com. The new CEO of this start-up is a NetSudser.
        The company is currently 15 people and is now expanding to about
        40 as marketplace acceptance has hit.

        Mark Ahlstrom has joined SSESCO as CEO. Shoreview-based SSESCO
        is the provider of the local weather forecasting technology to
        Digital Cyclone. mark@kellergroup.com

        Chandler Carlson has started as an e-Business & Multimedia Strategist,
        Project Manager, and Multimedia/Web Designer for KDG InterActive, an
        e-business solution provider in Richfield, MN. chandler@kdg.com

        There are some good folks from VirtualFund who are now looking for new
        jobs as a result of the nasty control fight taking place. Contact
        Matt Noah at matt@netsuds.com if you need a contact.

        If you are a tech worker or executive looking for your next "big thing"
        consider interning at the NetSuds office. NetSuds sees lots of great
        opportunities every day in the start-up AND public company markets.

        Please email: start-ups@netsuds.com to report (1) the
        formation of a new start-up, (2) momentum change at an
        existing start-up, (3) addition of key hires, or (4) a funding
        event at a start-up. Please give details on the above
        including any information you do not want made public. We
        are very discrete.

        Gearworks Closes Series A Financing Round (12/13/00): Gearworks, a
        developer of innovative infrastructure software platforms for the
        mobile Internet, announced the closing of a Series A financing
        led by BlueStream Ventures. Seed investor Carlin Ventures also
        participated in the round. The investment will be used to rapidly
        expand Gearworks' mobile product development teams, proliferate the
        company's etrace(TM) tracking and messaging application, and
        accelerate the launch of several key new products in the coming year.
        In conjunction with the investment, BlueStream will take a seat on
        Gearworks' Board of Directors.   http://www.bluestreamventures.com -
        BlueStream Ventures is a venture capital firm focused exclusively on
        next-generation software infrastructure and networking technology
        companies. Headquartered in Minneapolis, Gearworks has offices in
        Boston, San Francisco, and Northfield, Minnesota. For additional
        information on Gearworks visit http://www.gearworks.com or call
        Rob Davis, Gearworks, 952-857-2516.

        JP LaMere of StoreItOnline.com is looking for a talented Java
        programmer and a CTO who knows Apache and Linux. 612.419.1322
        or jp@StoreItOnline.com.

        Abroad Technologies is a new start-up based in Edina, MN. Abroad
        specializes in business development in Brazil and other major South
        American countries. With offices and distributors already set up
        around Brazil, Abroad can create brand new business and product
        branding in one of the fastest growing marketplaces. If you have a
        "com" oriented hardware or software product call Alan Ainsworth at
        952.252-1977 or send e-mail to alana@abroadtech.com

        Great office space on - yes, ON - Lake Minnetonka is available in
        Spring Park. If you need about 1400 square feet and can work while
        looking out over the Upper Minnetonka Yacht Club, this is the place.
        It is start-up heaven! Contact me at matt@netsuds.com for more info.

        Please email: jobs@netsuds.com to report job openings in the
        "com and .com" Market. In the body of the message, give the
        name of the company and a URL link to the job postings.

	Visit Rauenhorst Recruiting at http://www.rauenhorst.com/ "Helping to take you where you want to go."
	If you would like to place an ad in a NetSuds email, contact Matt.Noah@netsuds.com by email or 952.934.5424

NetSuds loves on-site tours! Email me if you want to show off your
company. I can be reached at matt@netsuds.com

        Nextel doesn't have a gee-whiz site to visit but I want to thank
        the good folks at Nextel for the complimentary use of some of their
        i1000 Plus cell phones/Wmodems/2ways. The Nextel phones are full-
        featured phones with a unique 2-way messaging service which is very
        useful for those of you with a network of folks you like to be in
        nearly constant communication with. It also has a nifty wireless
        modem interface which worked very easily with my NetSuds laptop PC.
        The phones can be set up with a broadcast voice messaging service
        as well - very nice if you need to give marching orders to the
        troops or hold good-size audioconference calls. There are some
        challenges in the user interface as one would expect with so many
        features. It is not the most intuitive phone to operate. The
        coverage area is not as wide as *some* other operators. Nextel is
        working on the second challenge but the first challenge is really
        only overcome by training and use. In any event, the more we at
        NetSuds use the phones, the more we like them! Contact Anita
        Legacy at anita.legacy@nextel.com for more info.

        NetSuds visited a commercial property - again, not much of a
        gee-whiz site visit but informative nonetheless. Not all buildings
        are created equal and this Sanders-owned property at 1620 Central
        Avenue NE in Minneapolis has some nice features for a potential
        LEC/WebSite hotel. Many of you have heard of the brown-outs and
        black-outs feared in Silicon Valley. It is a real problem. This
        Sanders property claims to have plenty of XCEL power; multiple sources.
        The other feature of the property is the claim that fiber is running
        right past the building; runs from Qwest, MCI and Onvoy. Contact
        Jon Sander at jon_sander@sanderco.com for more info.

        On December 14 the Star Tribune published a story on the solutions
        proposed by the 21-member panel commissioned by U of M President
        Mark Yudof. I have participated in formal and informal discussions
        with members of the 21-member panel. If the Star-Tribune article is
        accurate, the panel is recommending the following expenditures:

        $75M - To fund the NorthStar Research Coalition
        $199M - To fund additional science and technology at the U of M
        $20M - To fund college scholarships
        ---- - Unstated amount for out-of-state tuition breaks for 1000
        ---- - Tax credits for R&D expenses for startups in high-tech

        The problem is serious enough that careful consideration of proposed
        solutions is mandatory. The amount of money under consideration for
        taxation is also serious and warrants careful consideration.

        It is clear that the 21-member panel is looking at the U of M as the
        primary driver of high-tech start-up business creation. The
        expenditures being considered weigh very heavily towards the "U".

        The best model to follow is the Silicon Valley/Stanford model where a
        great research university and its professors have forged tremendous
        ties in the high tech business world. It is the swinging door between
        the business community and a professor's door that has helped create
        the most dynamic, wealth-creation coalition in the world today. It
        is estimated that 85% of Silicon Valley start-up companies have a
        Stanford graduate on the founding management team. San Jose State
        University does not compare, even though it is a few cities and a few
        miles down the El Camino Real.

        Without question, it was the shackle-less private university
        environment and successful entrepreneurs from decades past
        (Hewlett, Packard, etc.) which started this juggernaut.

        In an era where silicon processing technology was king, Silicon Valley
        was (and still is to an extent) Emperor. Now, the beneficiaries of
        multi-MIP chips - the operating systems, software, Internet, wireless,
        networking world commingle with one another in the most symbiotic,
        chaotic and efficient business environment for technology in the world.
        Technology pockets forged by powerful personalities exist elsewhere -
        operating systems (Redmond, WA), wireless (San Diego), telecom (Dallas),
        networking (Boston), storage (Minneapolis) but all pale still to
        Silicon Valley.

        As Minnesotans, we are all stewards of our tax dollars. First, should
        we tax more and second, if so, how to spend those dollars. Until a
        solid plan with measurable results can be proposed, I say "Absolutely
        No" to more money for the "U". Considering what good things I have
        seen in Minnesota's private colleges, I see more hope for successful
        entrepreneurial coalitions between businesses and professors in that
        system than I do at the "U".

        The 21-member panel has some interesting ideas. I applaud the concept
        of the Northstar Research Coalition but I want details. And I want
        small, entrepreneurial companies and organizations (a la NetSuds) on the
        governing board of the Coalition. It will fail if only state schools
        and large public corporations control the Board. I like targeted tax
        credits which encourage entrepreneurism and which encourage successful
        business leaders to reinvest in Minnesota. We also need a tax system
        which does not encourage our successful business leaders to relocate
        to low-tax states.

        In a related Star Tribune article on December 13, St. Paul Venture
        Capital General Partner Michael Gorman was quoted as saying, "Business
        activity isn't dictated by government. It is ultimately an individual
        who starts a business." I wholeheartedly concur.

        Ultimately, this will get done IF AND ONLY IF the private sector - and
        not the State - does it. We need less political solutions and more
        entrepreneurs like Mark Cree, Wade Myers, Tom Kieffer, Phil Soran,
        Mack Traynor, Steve Larsen, etc. etc. etc.

        March 22 Entrepreneurs Breakfast - Phoenix, AZ (as part of Spring 2001 VON)
                (This will be the first EB outside Minnesota. 3000 people are
                expected at the Spring 2001 VON. To be considered for a presentation
                slot or even to attend, you must register for the the VON Conference -
                http://www.pulver.com/ No extra charge to presenters or attendees will
                made at this inagural event. If you would like to sponsor this event,
                contact matt@netsuds.com or call 952.934.5424. This will be a hot
                ticket at the Spring 2001 VON).
        pulver.com Schedule of Events - http://www.pulver.com/conference/
        Spring 2001 National Entrepreneur Conference, May 6-8 in Boston (not open yet)

        I hear quite frequently about VCs in Minnesota and how they are not
        doing their share to create a better high-tech funding climate in
        Minnesota. Usually those comments come from unfunded entrepreneurs.
        Those who have been funded have had great things to say about the
        Minnesota VCs.

        Every VC has what they jokingly refer to as their "anti portfolio".
        This is the group of companies who they were approached by for
        funding but who they passed up; usually to their detriment. Let's
        face it, VCs are not immune to bad judgement in some cases. But
        there is a reason that their ranks are replete with successful
        entrepreneurs and executives; they generally know what it takes to
        build a successful company.

        There are some good reasons Minnesota start-ups don't always find
        investment dollars in Minnesota. The foremost reason is "mismatch".
        The VC is looking to invest in "XYZ-type" companies and the start-up
        is an "ABC-type" company. Don't approach a VC who is only funding
        telecom start-ups even if you have the greatest med-tech start-up.
        The marriage won't work. To entrepreneurs, the answer is easy. Do
        your homework and find out who is funding companies in your space.
        Try to pick the top VC firms who currently are not funding one of
        your competitors. Then find out who, in particular, at the VC firm
        would likely champion your deal. Then find out which boards he sits
        on. Make friends with executives at those companies. Get a referral.
        Referrals are the means by which start-ups get funded in about 98% of
        the cases.

        The second most common reason you might not find money at home is
        that you have no current connection to the VC firm. As stated in
        the previous paragraphy, VCs like referrals. No referral? SOL.

        The third most common reason is that you are not fundable. It doesn't
        mean you are a bad person, or a stupid person, or that your idea is
        not a good one. You might not have a "team" put together which is
        attractive enough to be fundable. I experienced this once when I put
        together a cracker-jack engineering team but failed to assemble a
        cracker-jack sales/marketing/operations team. Lesson learned. You
        might not have a big enough market to attack even if you get 100%
        market share. You might not have defensible technology ... or a high
        barrier to entry ... or be first, second or third in your market.

        But take heart. Getting funded is alot like dating. There are lots of
        VCs out there and your match may just be waiting for you. Don't take
        no for a final answer but try to learn from each encounter you have
        with a VC. While they are not in the business of educating entrepreneurs
        they don't fund, they will probably provide some pearls of wisdom as to
        the primary reasons they did not fund you. Listen. Ponder. Learn.
        I have great relationships with the VCs who have turned me down in the
        past. Some even forgot the reasons they rejected me but remember me as
        a guy they can talk to and like to keep in touch with.

        In conclusion, I believe we have some great Minnesota VCs and angels.
        We do need more because it will (1) create more of a sense of
        competition and (2) it will help entrepreneurs who are not finding the
        right kind of VCs in the area. The Minnesota VCs are active in
        Minnesota to the extent it is in their self-interest. We can't expect
        them to make investments based on factors other than sound business
        principles.

        We can probably attract more VCs as we show more leadership in categories
        like med-tech, networking, storage, eLearning, optics, etc. We can most
        definitely get more VC attraction as we gear our college/university
        system to be more business-friendly. Note that connection between
        Stanford University and Sand Hill Road. And then look at the plethora
        of start-ups in Silicon Valley. I have heard that 85% of Silicon Valley
        start-ups have a Stanford graduate on the founding team. I know we are
        years away from having a similar situation occur in Minnesota but the
        sooner we start, the sooner we win.

        I want to open up the Monthly NetSuds Report to guest writers. If
        you have a passion for a topic, and you can write (at least no worse
        than me), send an email to me at matt@netsuds.com You can even send
        copies of your work. It needs to be on "com and .com" topics and can
        include entrepreneur/investor activities. Good information from our
        service providers and vendors is also welcome so long as it is not a
        "commercial" for any one company or individual.

        NetSuds will be expanding its Suds Report nationally in the coming
        weeks. We will hopefully go from about 4000 readers to at least
        40,000. We will consider both sponsored and unsponsored columnists
        and guest writers.

        Every month since Autumn 1999 NetSuds has had an Entrepreneurs
        Breakfast (see http://www.netsuds.com/eb/ for past and current
        events). If you are a pre-IPO "com or .com" start-up, you can apply
        to present your company to the investment community at a future
        breakfast event. Apply online at http://www.netsuds.com/eb/
        Our next Entrepreneurs Breakfast in January 9. See
        http://www.netsuds.com/eb/2001/January/ for details and to register.

        The team at NuSpeed led by CEO Mark Cree. This was not a 1-man effort
        so the award goes to "the team". Recap - Last time this year, NuSpeed
        was settling in to office space for the first time, looking for their
        first dollar. By Summer, "the team" had sold to Cisco for $450M in
        Cisco stock. Investors got 85X their money. Founder and employee
        shares were not diluted. And the product was well-conceived and
        superbly marketed. It doesn't get much better ... or much faster.

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