Two VCs took different approaches, both of which have since changed drastically. Institutional Venture Partners' Ruthann Quindlen believed the next big wave would be PC-based, real-time, multiplayer games, and she incubated Mpath Interactive to create them. Today the company, now known as HearMe, enables voice chat over the Net. Its stock has plummeted from $40 to $3 this year.

Back in 1995, Kleiner Perkins Caufield & Byers's Vinod Khosla backed Total Entertainment Network (TEN), a multiplayer-game network, whose content would come from another Kleiner Perkins company, Spectrum HoloByte. TEN's pay-to-play model backfired, so it switched to free family-friendly games. It later changed its name to Pogo.com and was acquired by Excite@Home this August. Spectrum HoloByte was bought by MicroProse (later bought by Hasbro) and was merged out of existence.

To date, edutainment has not caught fire (witness Mattel's botched purchase and sell-off of the Learning Company) as VCs ultimately realized that it was not so wise to gamble on kiddie gamers.

Established four years ago in London, the NCR Knowledge Lab is an official extension of the Dayton, Ohio, company's financial services division. Stephen Emmott, a Brit who returned to his homeland in 1997 from Lucent Technologies, heads up the lab where his team of "relationship technologists" conducts research using a wide range of disciplines, from art to neuroscience.

The lab's core focus is on establishing close relationships between businesses and customers. It has put together an extensive database on consumer behavior to help banks, insurers, and other financial entities accurately predict changes in behavior and anticipate new business opportunities. Knowledge Lab researchers are also devising smarter negotiation and trading strategies for auction- and agent-based e-commerce.

Last year, the lab made its biggest splash yet: the Microwave Bank, a microwave oven with a computer in its door that allows the user to surf the Web, send email, and search for recipes. Both Sharp Electronics and General Electric have used the lab's innovation to announce their own versions of Web-enabled nukers that will appear in stores in the next three years.

The Knowledge Lab has also developed a Smart Trash Can, which sorts and recycles waste and creates grocery-shopping lists based on the items discarded. "It's like the haute couture version of the Internet appliance," says Mr. Emmott.

So why the fascination with kitchen appliances when everyone is talking about networking the TV? Mr. Emmott won't bother to explore the idea: "People watch TV to veg out, not to pay bills or shop online. The kitchen is the center of domestic activity."

But Mr. Emmott's vision extends beyond the kitchen and into mobile life. The lab's most recent gizmo is the M-Bracelet, which can link to ATMs and cash registers for e-cash transactions. It's the first consumer application of flexible circuits (email can be exchanged by shaking hands). Mr. Emmott hopes to give the bracelets away free to teenagers, who can use them to swap secrets, download music -- and spend money.

Getting people to spend money is the reason for the lab's existence. NCR's name may be on the door, but the Knowledge Lab is funded by a consortium of heavy-hitters, including Barclays, Lloyds of London, Procter & Gamble, and Wells Fargo. Mr. Emmott says there are currently plans to spin off the lab into its own entity, showing that NCR may have financial savvy beyond knowing how to put cash registers together.

ADDITIONAL RESOURCES

Tracks the new technological developments in bank cards, credit cards, and similar applications.

That was when the company was still private, had only a dozen employees, and just had received funding from Sequoia Capital. Mr. Yang and cofounder David Filo had to convince their VCs that the best way to market Yahoo was as a free service. "I think we're the only company Sequoia's funding that has a free product," said Mr. Yang. It was also Sequoia's first Internet-related deal. Many of the partners were unsure of what they were getting into. "We still get strange looks when we walk around Sequoia, especially from Don Valentine, who still asks, 'What are you guys doing, again?'" Mr. Yang said, adding that the founding partner only talked to him when he needed help with his browser.

There's no way Yahoo could get funding today; it was pushing a business model based on subscription-based advertising, now taboo. In the interview, Mr. Yang forecast profitability by the end of 1995. It actually took three years longer, but today Yahoo is well in the black; it earned $74 million last quarter. The stock has been hit lately, based on concerns that Internet advertising is slow, yet Yahoo still sports a staggering market cap of $58 billion.

ADDITIONAL RESOURCES

Jerry Yang discusses how Yahoo! raised its first round of VC funding.

A personal bio of Jerry Yang.

The Web site for Yahoo funder Sequoia Capital.

Both sides are spearheading education initiatives that will be on California's voting ballot in November. Both are equally aghast at the bureaucracy running rampant in the system, but each side is approaching the issue in a different way. Mr. Draper's Proposition 38 aims to tear up the current system by steering children into charter schools. The backers of Proposition 39 want to adjust the current system by allowing an easier voting method on construction bond measures to build or improve schools.

While the propositions don't compete directly with each other, there is a rivalry between the two camps. "He's going to have his head handed to him," Mr. Hastings says of Mr. Draper. Mr. Hastings serves on the state's education panel, a post he was named to by Democratic Governor Gray Davis. Mr. Draper served in the same capacity for former Republican Governor Pete Wilson.

THE TEAMS

Based on a review of Prop. 38's Web site, Mr. Draper has had little luck garnering support from top names in the tech and VC industry. The Prop 39 site, on the other hand, has a lengthy list of VC and tech heavyweights, including Jim Breyer, managing director of Accel Partners; James Barksdale, a venture capitalist and former CEO of Netscape; and Donna Dubinsky, CEO of Handspring. (See the bottom of the story for a longer list of supporters.)

"This is really a freedom fight from my standpoint," says Mr. Draper. "There's only a single supplier of education in the U.S. We are torn between socialism and capitalism, and we need to move towards the latter." His plan is to allocate $4,000 in vouchers per child for the school of parents' choice. His data show that the public system spends $7,400 to educate each child, compared to $3,400 at private schools, so the money left behind by departing students could be spent on lowering class size and other benefits.

Mr. Draper has been touring California to support Prop. 38, and he says that parents have been enthusiastic. "Especially in places like Compton where vouchers are their only hope," he says. He expects $40 million to be spent on this campaign, most from well-placed business contacts, half from his own pocket.

But Mr. Draper has been getting flak from critics, especially the Teachers Union, which publicly decried Prop. 38. One complaint is that schools will have to spend more time marketing themselves rather than teaching. What else do you expect the entrenched education system to say? shrugs Mr. Draper. "The Teachers' Union is just trying to throw tomato on it. My response is that it's only fair that every parent have a chance to move their kid out of a bad school."

The general consensus is that Prop. 38 will go down in flames. Mr. Draper, always the risk-taker, replies, "It'll win."

LINE NOT SO FINE

Prop. 39 has much broader support and is expected to pass. But its supporters aren't treating it as a slam dunk. Mr. Doerr, who proudly wears a big yellow "Yes on 39" button on his lapel these days, is on a mission to make sure that voters don't confuse the two. During a visit to Red Herring's offices this week, he took pains to clarify that Prop. 39 is not the voucher initiative.

It would lower the approval vote on education-related bond measures to 55 percent from two-thirds. Mr. Hastings has more experience on how best to influence politicians. As a former president of Silicon Valley lobbying coalition TechNet, he is adept at coalition-building and maneuvering through the halls of political power. But, like Mr. Draper, with his experience on the state education panel and children in school, he felt compelled to do something and has currently spent $10 million of his own money. Even Governor Davis and Governor Wilson are in tandem with their support. (Governor Wilson also backs Prop. 38.)

Regardless of which one wins or loses, both Mr. Draper and Mr. Hastings agree on the fact that Silicon Valley needs to come together to support education reform since it will only benefit them. "This is not just a narrow self-interest issue we're supporting," says Mr. Hastings. "But even though it's good for everyone, high-tech [leaders] should remember how fortunate they are because of their education."

Prop. 39 boasts a lengthy list of supporters who are high-tech investors or executives. A partial list includes Jim Breyer, managing director, Accel Partners; James Barksdale, partner, The Barksdale Group; Daniel Case III, Chase H & Q; Donna Dubinsky, CEO, Handspring; Steve Dow, general partner, Sevin Rosen Funds; Eric Dunn, private investor, Kingston Creek Ventures; Irwin Jacobs, CEO, Qualcomm; Vinod Khosla, partner, Kleiner Perkins Caufield & Byers; Aileen Lee, associate partner, Kleiner, Perkins, Caufield & Byers; Burt McMurtry, partner, Technology Venture Investors; Kim Polese, president and CEO, Marimba; and Frank Quattrone, managing director, Credit Suisse First Boston.

Mr. Draper has had little luck recruiting high-tech supporters for Prop. 38, based on a review of the initiative's Web site. When asked about supporters, Mr. Draper said: "I'm not going to discuss supporters. They'll come out if they want to."

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When he and fellow alumni Rick Sasner and Charles Sanford left the reunion last June, they immediately began to form their idea of an online venture capital network that draws on collegial ties. More than a year later, there are 75 subsites, one for each school, where an alum or a current college student can post a business plan and graduates of the college and professional programs can take a look and decide whether to invest. The online fraternity includes Harvard, Yale, MIT, Stanford, Princeton, Northwestern, and other top-ranked universities.

Money-seeking entrepreneurs post their business plans directly to UniversityAngels, where they're scrutinized for clarity and profit potential. In June, for instance, UA received 2,000 plans, but only accepted 100. Those that make the cut are posted in summary form on the alma mater's subsite. Alum investors, who must have either a certified net worth of at least $1 million or an annual income of at least $200,000, can review the entire plan, but must sign a nondisclosure agreement. After two weeks, a plan is opened up to perusal by any certified investor.

UA does not discriminate against business types (it dared to close a business-to-consumer deal this summer), saying it doesn't scrap yesterday's news, but it does emphasize good business plans. Investment bankers and VCs are hired to give constructive criticism, and UA helps members do rewrites in person, by e-mail, or by phone.

So far, UA has created good deal flow for its 2,500 investors (Mr. Sasner says Wharton School of Business ranks first in terms of activity). It has vetted roughly 3,000 business plans for listing and, from those, has closed five deals. One was Galileo Development Systems, an Atlanta-based applications service provider whose CEO, Rebecca Bass, is an HBS alumna. She pulled in a substantial amount of her $1.1 million in initial funding from fellow graduates, one of whom lives in Cody, Wyoming.

No UA deal has yet made the institutional rounds, but it is highly likely that some of its registered investors are institutional VCs looking to get in early on deals. Mr. Marcus doesn't want UA to act as a cherry-picking filter for institutional deals, yet he doesn't rule out closer collaboration in the future.

As I ponder the best time to hit my bosses up for a raise, I stop to think a minute. Should I really believe this guy?

A lot of people do. Mr. Sun, a 50-year-old computer consultant who does fortune-telling on the side, is revered by a Silicon Valley clientele -- from entrepreneurs to venture capitalists -- that takes his predictions very seriously. Because this is the Valley, Mr. Sun, who goes by just his last name, fields many questions related to startups. Some common ones: "When will I earn my first million from options?" "When should I set my company to go IPO?" "How should I furnish my offices so employees work harder?"

In exchange for his advice, Mr. Sun receives a mix of cash and stock options. He says he can't comment on the particular stocks because he has signed confidentiality agreements.

"I've found it useful for major business decisions," says Victor Sun (no relation), a Quebec-based venture capitalist who's been consulting with Mr. Sun for 20 years. "If I want to place an order on a stock, I call Sun and ask him, 'What are my chances the next week?' He tells me what week or what month looks good. I believe it's useful to have some guidelines. Maybe it's just a Chinese thing but it seems to hold true."

BACK TO THE FUTURE

Westerners may snicker, but the vast majority of Chinese believe in fortune-tellers' predictions and visit them regularly, according to a report done last year by the Chinese Association for Science and Technology.

With so many engineers and programmers crossing the Pacific to work in the U.S., many fortune-tellers are setting up shop here.

For Mr. Sun, it's just a family tradition. His father was a fortune-teller in Hong Kong. As a child Mr. Sun would sit at the table to listen, impressed by the power his father had over his clients' life choices. "They respected his advice and went away happy," he says. "That was cool to me."

Mr. Sun then went on to college in Taiwan and later earned his masters degree in computer science in the United States. Even though he runs a computer consulting firm in San Jose, California, he spends his free time making phone calls and even house calls to his clients. He likes to keep his work and "hobby" separate, so he doesn't get into details about his day job.

Mr. Sun relies heavily on two methods in order to answer questions. The first is I-Ching, the 2,000-year-old Chinese law of the universe, which relies heavily on the theory of Yin/Yang and the five elements -- metal, wood, water, fire, and earth. To find out how these apply to an individual, he asks for the person's date, time, and place of birth, and then uses palm and face reading to fine-tune his predictions.

The second method is the Tao theory of feng shui, which is supposed to increase energy and optimism by changing the immediate surroundings of the individual. Mr. Sun tells people how to rearrange furniture in their home or office in order to get more positive energy flowing. When it comes to business matters, Mr. Sun uses both methods to create a composite chart for a company's prospects. "If I have a management exec as a client, I'll get as much information as I can about the business, but I'll also look at his home and interview his family to see how those factors relate. Many cross-checks mean a near-perfect prediction. If I can get 80 percent of it right, then I'm an expert."

THE TAO OF TECHNOLOGY

Even though Mr. Sun has been predicting fortunes for the 20 years since he moved to the States, his focus on business-related advice has been fairly recent. He was hosting an astrology show on a local Chinese TV station in 1997 when he started getting a lot of questions from employees at Rambus, then a small private chip maker. The employees wanted to know how they would do financially after their company went public. Mr. Sun went on to track the company after its IPO that May and noticed a relationship between the company's stock price and the employees he was advising. "I can read technical [stock] charts but I prefer to look at a stock differently, through the five elements," he says. Rambus has increased its value by 937 percent since its IPO, although its superstitious employees probably were frantically checking their charts last year when the stock was in the tank.

Now that the Valley is mired in job-hopping, Mr. Sun has been asked more often whether a client should switch jobs. "Normally I look at their individual chart but if it's a dot-com company, I also look at the Web page to try and figure out its five elements," he explains. "If there is a picture, I also use it to make a decision."

Regarding a decision to merge one company with another, Mr. Sun tries to find out the exact dates when key people quit or were demoted in each company in order to determine whether it will be a good fit.

Individual and company birthday charts are also used to determine the best time to seek a round of VC funding; feng shui is used to determine where employees should sit in order to get the creative juices flowing. In one case, Mr. Sun helped a Santa Clara, California, "PC-related company" when it moved to new offices in the East Bay, outside of San Francisco. He helped the company's execs determine how the office should be laid out, paying special attention to the CEO's office.

Mr. Sun is considered one of the most credible fortune-tellers in Silicon Valley because of his work experience as a computer consultant. "He's more relevant because he's working in high tech," says Elaine Chen, chief financial officer of a Fremont, California-based startup that she declines to name because she's planning a startup of her own. She's been a client of Mr. Sun's for seven months. "I've seen other people and they have no clue about business. Their responses are out in left field." When she considered leaving her current job to start a company with a partner, she consulted Mr. Sun who concluded that the pair would make beautiful business together. "His advice has generally been good," she concludes. "He can't guarantee everything though -- we're still waiting for the funding he has been predicting."

ALMOST PERFECT

Mr. Sun says he's the first to admit that his predictions are not always correct, but is confident in the fact that they're more bound to come true than not. The reason: he aims to be specific. "The module for determining money is very easy to spot on the chart, and from this I can determine the funding one will get and when," he says. Mr. Sun also "Westernizes" the I-Ching theory by putting in variances for geographic locations, presidential candidates, world economic trends, and, of course, Alan Greenspan.

Speaking of the stock market, Mr. Sun gives annual predictions about the stocks he thinks will do well. Among his current favorities are Cienna, which he has recommended since 1998, and Atmel, which he bought Wednesday because it's "number was up."

If all of this sounds a little far-fetched to you, you're not alone. "If [Mr. Sun] could actually do this, he'd be a millionaire," says Michael Shermer, director of the Skeptics Society in Pasadena, California, and author of Why People Believe Weird Things (W.H. Freeman, 1998).

Fortune-tellers, psychics, and the like are "preying on human greed and desire to get something for nothing or very cheap," Mr. Shermer says.

Is there any actual danger in giving credence to fortune-tellers? "There is a danger in losing time and money and effort that could be spent in other ways," Mr. Shermer says. He adds that his "general advice about fortune-tellers is: 'Stay away. They're flimflam artists. They're in it to make money -- from you, not from predictions.'"

If you're using a fortune-teller, don't look to score any points with VCs. Jim Breyer, managing partner of top-drawer Accel Partners and a VC for 13 years, snickers when asked what he would think of an entrepreneur who consulted a fortune-teller. "It would be a deeply concerning sign," he says. "Luck can and does play a critical role in everything we do, but fortune-tellers as busienss advisors would possibly be the last straw."

Mr. Breyer adds, "Unless they can convince me that they increase the luck quotient of a deal, I'd be deeply skeptical."

Mr. Sun shrugs his shoulders at the many naysayers who dismiss Chinese fortune-telling as hooey. "I'm not in this to convince people to try and use this," he says. "No, it's not foolproof, I admit. But if people don't believe it, I can't help them."

Says Ms. Chen, "People use different motivations to make themselves feel better. This just happens to be the one I use. It's like a positive influence. He ultimately tells me to believe in myself because whatever happens is for the best."

Mr. Sun, the Canadian venture capitalist, has relied on Mr. Sun for more than financial advice. He believes the fortune-teller can predict his health. "Nine years ago, I was having intestinal problems and taking a drug, but it was making me feel even sicker," he relates. "I called him to ask if I should go off the drug. He said to wait until June or July to give it up. In November I would feel ill again but the next year I would feel better. Well, in July I had the liver transplant and in November there was an organ rejection so somehow he seemed to predict it."

As for this reporter's chart reading, the fortune-teller seemed so positive about my future that my skeptical nature demanded some bad news. He paused for a minute, then said, "Well, I see high cholesterol and some skin problems." Hmmm. Not a bad tradeoff for his positive predictions.

To find information about Mr. Sun, see ChineseAstrology.com.

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Jupiter Communications, a market research firm, found that 70 percent of current commerce Web sites plan to upgrade or replace their server software before December 2000. If that's the case, Propel has a big market to woo, although competitors like Allaire, Blue Martini, and Broadvision will be muscling in as well.

Propel's angle is to create a standardized platform that can run and develop customized Web applications for e-tailer sites. The company's offerings are being built from the ground up with a Java-compatible programming language that, according to Mr. Kirsch, enables developers to code much faster than with competitors' programs. The benefit: lower costs and a faster time to market.

In addition to an expected second round of $30 million, Mr. Kirsch is building a strong management team. Among his 50-plus employees are defectors from Apple, Oracle, Symantec, and Sun Microsystems.

The technology is an ultralong-haul optical transport system that is based on dense wavelength division multiplexing (DWDM). Optimight will sell the technology to communications carriers. Mr. Chen says that it will cut millions of dollars off the cost of long-distance voice/data transport. This is accomplished by extending the distance that an optical signal can travel without "regeneration." Because a signal degrades over long distances, it has to be regenerated every 300 miles. "Several companies currently offer standard long-haul DWDM systems, but very few have ultralong-reach capabilities in their product portfolio," says Mr. Chen.

Competitors in his sights include Corvis and Qatar Telecom. He vows that Optimight's products will work with carriers' legacy networks as well as the newest ones that are wired in pure fiber-optics.

Despite the technology's newness, investors are calling up and signing on. In June, Optimight received a $32 million second round of funding from Worldview Technology Partners, Meritech Capital Partners, Vertex Management, Lucent Venture Partners, Hook Partners, Thomas Weisel Partners, and original investors Brentwood Venture Capital and Venrock Associates.

Frustration started brewing when Mr. Kirsch, a former systems programmer who worked with Vinton Cerf on the groundbreaking ARPAnet program, grew annoyed with the mechanical mice he used that were constantly breaking down. So in 1982 he started Mouse Systems, a maker of computer peripherals. Four years later, he started Frame Technology, a document-publishing software company that was sold to Adobe Systems for $500 million in 1995, as a result of the difficulty he encountered attempting to create high-quality promotional materials for Mouse Systems. Then, in 1994 came Infoseek, one of the Internet's first search engines, which was conceived because Mr. Kirsch found it frustrating to surf the Web for information. Walt Disney acquired Infoseek in June 1998 and merged it into its Go Network. Mr. Kirsch stayed on board until November 1999.

Problems with Infoseek's technology were also the inspiration for his latest venture, Propel (see "Prop Shop," below). Mr. Kirsch was annoyed that he couldn't find anybody who could create and integrate the software he needed to fulfill the administrative needs of his company. Mr. Kirsch calls the resulting product-and-service offering "Amazon in a box," an instant online store that can be set up immediately and can be modified and customized by each Propel customer according to its specific needs. Propel's $8 million seed round came from some notable names like Marc Andreessen, Michael Dell, Andy Grove, and Meg Whitman. Mr. Kirsch even lured General Colin Powell into putting up money ("I wanted someone out of the ordinary who would add credibility, respect, and trust. Colin's name kept coming up.") A second round of $30 million from institutional investors is soon to follow.

Propel is entering a field already crowded with companies catering to the needs of e-tailers, but what may set it apart is its stance as a "socially responsible" business. Mr. Kirsch is known in Silicon Valley as having a thing for ethics -- and following through. "A strong set of corporate values is a good motivator and helps a team to work together." On day one of Propel's existence, he and his team drafted a values mission composed of 13 commandments; Mr. Kirsch even hired a former Jesuit priest as the company's chief ethicist. He has also declared that 1 percent of Propel's equity will go to charity and that the company's founders will only receive three to four times the stock options that later hires will get. But will such values really work for a company functioning in hardball Silicon Valley? "Short-term, it may hurt but it will help us in the end," Mr. Kirsch replies, indicating that potential partners will clamor to work with a company that emphasizes ethics. "Microsoft's partnership strategy is aggressive but maybe they would be in a better position today if everyone had gotten the long end of the stick," he says.

True, Propel will benefit from the publicity as well as the tax breaks, but given Mr. Kirsch's strong background as a philanthropist, it's hard to see the ethics push as a public relations ploy. He and his wife, Michele, were cited by Slate as ranking eighth in charitable giving in the United States last year and recently set up a $90 million foundation to fund issues ranging from curing cancer to cleaning up the air. Mr. Kirsch routinely criticizes the 65,000 millionaires in Santa Clara County, California (not counting the value of their real estate) for not giving more of their wealth to charity -- any charity. It's a mission that's bound to frustrate.

PROPEL AT A GLANCECEO Steve KirschLOCATION Santa Clara, CAPHONE 408/562-8300URL www.propel.comOWNERSHIP PrivateFOUNDED 1999EMPLOYEES 70PRODUCT Suite of software and services for e-tailing infrastructureCOMPETITORS Allaire, Blue Martini, BroadVisionFINANCING $8MINVESTORS Individuals

"I'm not the best at running a business with 500-plus employees, and I'm not interested in doing so, either," he says.

Mr. Chen is the classic serial entrepreneur, having either founded or helped to launch 11 networking companies in the last 15 years. His best-known ventures are Cascade Communications (cofounded with Sycamore Networks chairman Gururaj "Desh" Deshpande), which was acquired by Ascend Communications for $2.6 billion in 1994, and router maker Shasta Networks, which Nortel Networks bought in April 1999 for $340 million.

Now Mr. Chen, the tenth child of Taiwanese farmers, is focused on developing cutting-edge telecom equipment in startups scattered throughout the Valley, Texas, and China. Currently, he's acting as devoted father -- that is, chairman and acting CEO -- to four newborn companies: OptiMight Communications, a maker of ultralong-haul optical transport systems based in Mountain View, California (see "In It for the Long Haul"); Geyser Networks, a maker of Synchronous Optical Network products for metropolitan broadband networks; Dallas-based Santera Systems, which just introduced its cutting-edge SuperClass switches; and Navini Networks, a Santera spin-off that will focus on broadband wireless access equipment.

In addition, Mr. Chen is still on the board of Cwill Telecommunications and Beijing-based Beijing Gaohong Communications Equipment, two joint ventures he founded with the Chinese government to build ATM switches and wireless local loops for the country's telecom system.

The longest Mr. Chen has stayed at any one company has been one year; his average time span is about six months. "The value I bring to a company is getting a company started, building the right team, and focusing its business opportunity. Once that process is finished, my value is lessened, so I step out."

Yet speed is the main component that Mr. Chen emphasizes these days. "Bandwidth demand is growing so fast, if your product takes two years to develop, your technology is two years behind. The longer it takes to get to market, the harder it is to see the market clearly." What helped make Mr. Chen a Valley legend was his ability to make cheaper products and get them to market faster than his competitors. Case in point: the routers that Shasta Networks made run on the same chips found in Apple computers.

Most of his companies have sold themselves off (four were purchased just two to six months after inception), but Mr. Chen denies that he sets them up in order to cash out. "I tell my teams not to plan on an acquisition or else they won't do certain things, like build a sales force," he says.

Industry observers will recall, however, that this is the man who engineered the Nortel purchase of Shasta just four months after he started it. "If there's an attractive offer that comes your way, you look at it," Mr. Chen concedes.

Skeptics may wonder how a company can function with a CEO who's only devoting one-quarter of his time to it. "I'm asking myself that same question more often right now," laughs Mr. Chen, adding that he plans to withdraw relatively quickly from his CEO positions and become more of an adviser. His latest project: an incubator named Acorn Campus, which will start up to 15 fiber-optic, wireless, and telecom companies in its Cupertino, California, offices.

Even with less of an active role, Mr. Chen believes his Midas touch will still prevail. "In fiber-optics, for example, the demand is three to four times the supply, so it's a field that will support many mistakes. If you do a reasonably good job, you will do well here."

AT A GLANCE: OptiMight CommunicationsCEO Wu-Fu ChenLOCATION Mountain View, CAPHONE 650/254-5988URL www.optimight.comOWNERSHIP PrivateFOUNDED 1999EMPLOYEES 60PRODUCT Optical transport system that extends the distance of voice/data transportCOMPETITORSCorvis, Qatar TelecomFINANCING $37.5MINVESTORSBrentwood Venture Capital, Venrock Associates, Worldview Technology Partners, Meritech Capital Partners, Vertex Management, Lucent Venture Partners, Hook Partners, Thomas Weisel Partners

Eighty percent of AIT's employees are from the military, and for them, working for a dot com is as easy as doing 200 pull-ups. "Nothing is as stressful as being in a line unit in the military," says Clarence Briggs III, AIT's chairman and CEO and a veteran of the Gulf War and Operation Just Cause in Panama. "After that, switching to the business world is not so bad."

Mr. Briggs runs a tight regiment at AIT, synchronizing his watch before meetings, cutting off top executives who exceed their time limits, and barking marching orders with the steely precision of a drill sergeant. He emphasizes that army regiments are conducive to a well-run business, adding that "the military is steeped in high tech. And because all the battlefield weapons are digital, we are constantly exposed to the latest technologies."

Launched by Mr. Briggs in 1996 while he was still enlisted, AIT caters to small businesses looking to cash in on the e-commerce boom. The company does everything from registering domain names to setting up online retail outlets.

Recruitment is not a problem, as nearby Pope Air Force Base and Fort Bragg are being downsized, and new recruits "immediately get the structure of our company," Mr. Briggs says. That's because AIT is run like a battalion, with chief officers commanding various divisions.

In contrast to their laid-back high-tech California neighbors, new recruits (mostly men) undergo basic training, minus the physical rigors, on arriving at the virtually windowless AIT offices. Trainees are tested daily on "mission essential task lists" that assess mastery over a subject matter. Once a month, chief officers play "war games," frenetic role-playing exercises in which AIT salespeople go head-to-head against the competition. For an hour each day, everyone assumes "fighting position": cold-calling potential customers and checking in with old ones to alert them to new products.

Chief officers must spend one full day a month stationed in "the pit," AIT's 24-hour epicenter, where technicians field customer queries, complaints, and service calls. When promotion time comes, every three months, candidates enter the "interrogation room" for questioning by three review officers to assess leadership potential.

The hardball tactics have paid off. AIT currently hosts 90,000 global business domains, and that figure is growing by 8 percent a month, according to Mr. Briggs. The company predicts an estimated $15 million in revenue this year. AIT has just moved its 100 employees into 93,000 square feet in Fayetteville and plans to add 60 more people by the end of 2000. Civilians have a harder time adjusting to AIT's style, admits Mr. Briggs, but he thinks that dot-com workers in the far-from-regimented ranks of Silicon Valley should snap to attention and work on their discipline and structure skills. As he puts it: "Just like in the military, there's no room for failure in this business."

There are very few VC funds devoted to the funding of women-run businesses, especially on the East Coast, so Paula Groves and Sheryl Marshall are confident that they have the field to themselves. The pair founded Axxon Capital in Boston a year ago and just announced the close of their first fund, worth $12 million. Investors include Citizens Capital (OTC BB: CAAP) and John Hancock Financial Services. The VC firm hopes to have up to $50 million at its disposal by the end of the year, about two-thirds of it from the Small Business Investment Company (SBIC), which is part of the U.S. Small Business Administration.

Ms. Groves and Ms. Marshall have spent their careers in the financial world. Ms. Marshall was a stockbroker for 22 years; her last job was vice president at Donaldson, Lufkin & Jenrette. Ms. Groves was previously a partner with Triumph Capital Group. Both had seen the increasing rise of small businesses started by women and minorities and decided to capitalize on that with Axxon. What can they give that other firms can't? "I think they'll breathe a sigh of relief because we're like them," says Ms. Groves, who is African-American. "They have very few firms like ours to interact with, especially here in Boston."

One of Axxon's first investments is in oneNest, a New York-based digital marketplace for buyers and sellers of artisan goods such as Indian saris and Indonesian artwork, founded by Bangladesh transplant Dureen Shahnaz. Future investments will be in companies at all stages except for seed rounds. And the majority of those companies will also be on the East Coast, which, according to Ms. Marshall, is an area ripe with opportunity. "Boston is ranked No. 2 in VC money, but no one here is focused on women. The same goes for New York. So basically we have New England and New York to ourselves," she says.

Axxon's primary focus will be on "emerging and established companies operating in the New Economy" (what else is there these days?). The pair are hard to pin down on exactly what kinds of technology companies they will target. "We don't want to be pigeonholed on our investment strategy," Ms. Marshall says. That said, the company has indicated that it has a particular interest in online health care information, wireless communications, and consumer-focused companies. Axxon's initial investments will range from $250,000 to $2.5 million. Entrepreneurs can send pitches to info@axxoncapital.com.

Ms. Marshall is quick to point out that she's not running a women's charity. "Our number one concern is profitability," she says. And if becoming profitable means backing men, Axxon will do that. "Thirty percent of the fund will be invested in white guys," cracks Ms. Groves.

NO RIVER WIDE ENOUGH

There certainly is no dearth of technology incubators in New York City -- but then again, there are very few aiming solely at women. Enter Shannah Whithaus, an entrepreneur who started Ground Floor Ventures, which she describes as "an incubator that also nurtures women-owned businesses." Instead of setting up shop in Manhattan, Ms. Whithaus chose working-class Hoboken, a New Jersey town that sits across the Hudson River. She is currently preparing 200,000 square feet for a grand opening later this month so that Ground Floor can start ushering in five to seven companies for stays ranging from six to eighteen months.

In addition to running Ground Floor, Ms. Whithaus is CEO of Internet Images Worldwide, a Web hosting company she started five years ago. When she couldn't find a buyer for the company who would meet her price, she started to convert her office space into a full-service incubator. She says the market is wide open. "There's the Women's Technology Cluster, based on the West Coast," she says. "It's about time there's something like that over here." In exchange for space and services, Ground Floor will take an equity position of no more than 20 percent in each company.

Ground Floor has partnered with accounting and consulting firm Ersnt & Young and exec recruiter Korn/Ferry, among others, to provide services to hatchlings.

Currently, there are two companies in the incubator; Ms. Whithaus will only describe them briefly as "a business-to-business fashion e-tailer for petite women" and a "film industry play for the East Coast." Software and Internet development companies are those that are most welcomed (they need to be dreamed up, cofounded, or run by a woman, of course), but manufacturing companies are not automatically ruled out. "You never know what will be the next hot device, after all," says Ms. Whithaus.

Hoboken is most famous for being the birthplace of Frank Sinatra but, Ms. Whithaus says, there's plenty of tech thriving in the area. She cites Virtual Growth, an accounting firm for the high-tech biz that has been able to flourish over the past five years in part because of Hoboken-based clients. She doesn't see a mass exodus of companies coming across the Hudson from Manhattan, but the close proximity to the city doesn't mean that Hoboken firms will be left on the outside looking in. The added bonuses: "New Jersey is much more friendly in terms of taxes and real estate prices," she notes. Those are things every fledgling business needs to keep in mind.

SISTERS HELPING SISTERS

A constant headache for the technology industry is how to get more young women into the fields of engineering and computer science to help reduce the number -- currently 1 million -- of IT positions left unfilled. Last year, Smith College, one of the "Seven Sisters" of women's Ivy League colleges, took it upon itself to address the situation. Now the Northampton, Massachusetts, university is the only women's college and one of the few liberal arts colleges to offer an engineering program.

That decision caught the eye of the influential networking group Women in Technology International (WITI), and the two organizations have joined forces to create the WITI Technology/Incubator Center on Smith's campus. The center is scheduled to open in 2001. The primary goal, says WITI founder and chairwoman Carolyn Leighton, is to encourage female students and graduates to choose tech careers. The Center will do that by helping them with job searches and internships and helping aspiring women entrepreneurs launch tech-based companies.

Smith's Picker Engineering Program, which will be involved in the development of the Center, is not your typical engineering program. Headed by Domenico Grasso, an environmental engineer formerly with the University of Connecticut, Picker will have a heavy dose of liberal arts in its program (the first year promises to be writing-intensive so that future engineers will actually know how to communicate with something other than their computers). The program kicks off this fall with 23 to 30 students.

They'll be guaranteed open access to the Center, as well as interaction with professional women who will come in to give talks and act as mentors. Besides plans to lure interested students from the other Seven Sisters (Barnard, Mount Holyoke, Vassar, Bryn Mawr, Wellesley, and Radcliffe), Smith and WITI aim to spread the word to the surrounding community of women who want to launch startups. High-tech corporate partners are also being asked to come on board to offer assistance, since, ultimately, the WITI Center is a resource they'll be able to draw on for future employees.

"Awareness of the problem (of gender-linked financial inequity) is high," Ms. Leighton says. "But more light needs to be shed on the fact that in order for women to gain job and money equity, technology will have to be one of the resources they draw on."

Additional reporting by Steve Silverman.

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But the locals say the Yanks will find it hard to navigate cultural, legal, accounting, and other issues to make B2B take off throughout Europe. Can a Web site bring buyers and sellers from, say, Ireland and Italy, and guarantee that a transaction can easily be done? Will it really be worth it from a financial point of view? There is no common agreement, based on comments from venture capitalists, entrepreneurs, and CEOs here.

CHARGE!

But there's no denying one thing: the Yanks are coming to Europe, and they see big potential in B2B. Larry Lopez, a managing director in charge of international investing oportunities for Silicon Valley Bank, says he isn't even thinking of investing in European B2B players. "American players will make more headway because of their already-established sites, their capital, and their tech expertise," he says. U.S. B2B companies are already eyeing potential acquisitions, and "European B2B startups are organizing themselves just so they can be bought up," he notes.

Mark Suster, CEO of BuildOnline, a London-based application service provider (ASP) for the European construction market, says he doesn't plan to sell his company for a quick buck, but he is willing to partner with bigger players for strategic alliances. He doesn't see any handshakes coming soon, however, and he isn't worried about the threat of American dominance. "Look at eToys -- it tried to expand globally before it secured dominance in its own home market," he says in reference to the online toy retailer's reported plans to spin off its European business due to financial pressures. "B2Bs are duking it out for dominance in the U.S., and only have a few people in Europe, so they're really not going to get anything done that way."

Mr. Suster, a native Californian who's lived in Europe for the past five years, doesn't expect to see the American version of horizontal marketplaces flourishing on the Continent because of all the cross-country legislation barriers. This is where European players like BuildOnline have an advantage, he contends. "Yes, our operational costs will be larger at first because we'll have to deal with multiple languages and standards, but ultimately we'll be more defensible because U.S. companies are used to thinking that their market is homogenous," he says.

BuildOnline, which recently received $27 million (Ј18 million) in funding from Goldman Sachs, BancBoston Capital, and Vivendi, is building a local version of its product for each country it wants to do business in. That currently includes the UK, Germany, France, and Ireland (accounting for half of the $830 billion construction market). It plans to add Italy, Scandinavia, and the Netherlands by the end of the year. "So, compared to other European competitors, we have an advantage because of our local customized versions. And we will solve the problems of individual countries before the U.S. gets here," Mr. Suster claims.

TOO BIG FOR THEIR BRITCHES

American entrepreneurs' cockiness may also not go so well over here. "One conference speaker I listened to tried to explain the benefit of market dominance by asking, 'If you were McDonald's, wouldn't you rather have one McDonald's in town or 35 McDonald's in your region?'" Mr. Suster relates. "Well, I think I speak for all the attendees by saying that we'd prefer not to have any. Local cuisine is preferable."

But like so many local diners that went by the wayside after the rise of McDonald's, Europeans had better beware of the march of American entrepreneurialism. In particular, they'd better keep an eye on Ventro. Mr. Perry is studiously vague about plans for European expansion other than saying "we will leverage off of what we know." But he adds that acquisitions are an option.

Mr. Perry, who speaks with an Oklahoma twang, urged his European counterparts to ignore the "too fast, too soon" barrier that companies on their way to an IPO stumble over. Raising money comes first, gaining customers and a higher valuation come second, he said. "We went public early with only a few hundred thousand in revenues because we knew we had to get into other verticals. The fixed costs are enormous, so you need to leverage them immediately." Ventro is now horizontal, operating five separate marketplaces in health care, chemicals, food distribution, and individual office supplies. He expects to add another five before the end of the year.

Europe is similar to the United States in terms of what businesses should be considered for B2B sites. "Market size is key," says Mr. Perry. "Markets have to be at least $2 billion in size to have market potential." Gross profit margins are equally important. "Transaction fees in commodity-based markets like crude oil and energy have transaction fees that are razor-thin, less than ten basis points. But in a fragmented unique market like health care, you can get 10-plus percent margins."

First movers in a fragmented market can dominate the B2B space and may even have the ability to raise transaction fees, since each sector is supposed to have only one or two players operating there in the end. European movers and shakers can salivate because in a continent crossed by multiple borders, nearly every European market has a fragmented supply chain.

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Larry Lopez, a managing director of Silicon Valley Bank and head of its international funding arm, was not the least bit amused by what he saw. After presentations for a business-to-consumer (B2C) fashion site and one for organic food, he exclaimed: "Those [business] models should be taken to the barn and shot!"

But Mr. Lopez was by no means surprised by the poor presentations. In the United States, "kids have had to go to the front of the class since grade school for show and tell, book reports, oral essays," he says. "They never had to do that in Europe until university, so there's an obvious lack of emphasis on public speaking skills."

STONY STEEL SPIEL

The first day of the show started innocently enough when David Schelin, the Swedish CEO of Steelscreen, a business-to-business (B2B) marketplace for the metal industry, took the stage. In a monotone, he flipped through his presentation, staring at a point in the back of the room above everyone's head. OK, he can be forgiven. He's pitching metal, after all.

Curly Carrot's codirector Daniela Kelly had a much stronger stage presence, but she was largely brushed aside because no one seemed interested in funding a B2C site for the UK's organic food industry.

After Mr. Schelin and Ms. Kelly, the pitches only got worse. The co-CEO of Ready2, a site aiming to accumulating British women's fashion and beauty preferences for retailers and manufacturers, came on as a last-minute substitute for another dot-com. Her first line: "OK, I don't see many tits out there, so you'll just have to pretend that you're women while listening to my presentation." (We'll keep her name anonymous, out of courtesy.) She certainly captured the attention of the mostly male audience, but the rest of her spiel wasn't as memorable. The business model for her site seemed questionable and, like Curly Carrot's, focused on a market without the monster growth potential VCs want to see.

Presentations from startups from the south were particularly dreadful. A strange pattern emerged as the next four presenters emerged in groups of two -- sometimes both of them speaking in tandem. (In case you're wondering, that's a bad thing.) Other times, one spoke while the other stood on stage and simply clicked a mouse to show the next Powerpoint slide.

Direct Medica's male CEO and female CTO tripped charmingly over multisyllabic words in heavy French accents. They didn't do their company justice. The B2B electronic-commerce site for the pharmaceutical industry has already signed up five companies as customers.

CASTING ISSUES

One could only wonder why Earthnoise founder Elan Dekel brought a second person up with him. The man stood silently at the podium, clicking the mouse for the next Powerpoint slide. No matter: his company, which makes software for uploading camcorder film onto the Web, has received $7.6 million in funding from the likes of America Online, and it has hired former TV Guide CEO David Steward as its chief.

The presentations reached a nadir with Betcafe.com, an online gambling site based on the Greek island of Corfu. Its CEO, a former manager of a Greek hotel, and director of marketing pretended to be Pinky and the Brain (characters in a children's cartoon) as it went through its business model, which mimics so many other online gaming sites out there right now. "Is this legal, Brain?" asked the marketing director in heavily accented English. "Don't worry, Pinky. It is," replied the "Brain."

As members of the audience stifled laughs, they also stifled yawns toward the end of the first day's presentations. So did Clicvision's Henri Mojon, as he groggily trudged his way through a presentation with yet another sidekick silently clicking through a Powerpoint presentation. Mr. Mojon, CEO of the Paris-based site that features streaming media for teenagers, apparently had given his spiel a few too many times. He literally sighed his way through Clicvision's list of investors and barely raised his voice above the Realplayer-powered techno music thumping during his demo. VCs laughed at his groggy jokes, but they likely wrote off his presentation as well.

The best presentation came from the first presenter, CEO Mark Suster of BuildOnline, who is an American expatriot of six years. His vision of a B2B marketplace for the European construction industry won the audience over. It certainly didn't hurt that he gave his presentation in a clear, concise, appealing tone of voice.

The audience was also receptive to European entrepreneurs pitching wireless applications and mobile e-commerce, currently the hottest tech sector in Europe. Even if the pitches weren't the greatest, the pitchers gave enough info to satisfy the VCs in the crowd.

Tellingly, audience members fled in droves before the last two companies presented. They were developers of software pharmaceutical R & D and MRI/CAT scans. There evidently was next to no interest in those markets. It's doubtful that even a polished pitchman like Larry Ellison couldn't have kept attendees in their seats.

Note to media training coaches: if you haven't figured it out yet, there's a huge opportunity for you over here.

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But these days, paying off old debts isn't as difficult: Mr. Murphree has risen from the ashes of Murphree & Company to form Murphree Venture Partners, a successful seed-capital venture firm based in Houston.

NICE GUYS FINISH FIRST

Murphree's latest fund closed earlier this year with $50 million from investors such as the State of New Mexico and Silicon Valley Bank. Mr. Murphree and his partners plan to close a new seed fund of up to $200 million by the end of the month. The new fund will invest in broadband and wireless as well as medical devices and health care IT.

"People do call us 'the nice guys,'" Mr. Murphree says. "We're real polite; we take time to explain why we won't do their deals and take pains to refer them to other people. All of us have been entrepreneurs. I started 14 businesses, so I know what it's like to have doors shut in my face."

Don't take Mr. Murphree's word for it. Regional tech bible Digital South calls him and his partners "honorable, stand-up guys."

After Murphree & Company filed Chapter 11, Mr. Murphree devoted more time to venture investing, eventually making a full-time business of it in 1992. He is based in Houston, but his seven partners are scattered throughout Austin and Albuquerque, New Mexico, with new offices opening soon in Dallas and Atlanta.

The venture firm boasts an internal rate of return (IRR) of 23 percent over a decade and 59 percent over the past three years.

STAMP OF SUCCESS

The most notable company Murphree Venture has been involved with from the beginning is E-Stamp, which started in Houston. Murphree helped it mature from a mere idea to a solid business plan. (The company eventually moved to Silicon Valley. "That doesn't happen so much around here anymore," says Mr. Murphree.)

Other lucrative investments include MicroOptical Devices, which was bought by Emcore for $33 million, giving Murphree a 200 percent return on a $750,000 stake. In another big win, the VC bought a five percent stake in Java tools company Activerse (now part of Tribal Voice) for $500,000; 20 months later, CMGI bought the company for $35 million in cash.

Murphree Venture's recent track record has not gone unnoticed. Two years after launching an office in Austin, the office has racked up the second-largest number of deals in the state capital, behind powerhouse Austin Ventures. It can't hurt that Murphree partners are known for their Texan friendliness, even to entrepreneurs they turn down. "I know a VC who hurls business plans at the wall and says, 'Next plan,'" Mr. Murphree says. "I see no reason for that kind of behavior." Every rejected entrepreneur leaves the office with the names of at least five other firms, he adds.

Mr. Murphree extends his demeanor and hard-won knowledge outside the startup world. He teaches a class on entrepreneurship for MBAs at Rice University and will soon start a speaking tour for Arthur Andersen to educate the firm's clients about venture capital. His mission is to help everyone -- from MBAs to institutional investors -- to get their foot in the door. "I just like to spread it around," he says.

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