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Mary Meeker '81 Shares Winning Strategies for New Businesses

Mary Meeker '81 Shares Winning Strategies for New Businesses

October 6, 2001

October 6, 2001, Greencastle, Ind. -- Mary Meeker, one of America's best known stock analysts and a 1981 graduate of DePauw University, says in the past five to ten years. investors have witnessed a "big bang," that began with the growth and development of the Internet. Audio Link[DOWNLOAD AUDIO: "Big Bang" 238KB] “We've just lived through a period of unprecedented innovation (and) technology progress, significant wealth creation and significant wealth destruction, although the wealth creation is far greater than the wealth destruction on a net basis," Meeker told the first-ever Symposium for DePauw Entrepreneurs today at DePauw's Memorial Student Union Building.

Meeker, managing director and Internet analyst for Morgan Stanley and Company in New York City, has seen more than her fair share of start up business plans. Over the past decade, Meeker estimates that she and her colleagues analyzed about 1,000 high tech start up companies. Morgan Stanley wound up taking a very small percentage of those firms, about 45, public; Meeker was lead analyst on approximately 14 of them.

She says the "big bang" hit in 1994 when Netscape's web browser hit the market and made surfing the 'net easy to do. Since many homes already had personal computers, it didn't take long for the flames of the new revolution to spread.

Meeker says her firm's research shows that 5% of technology companies create about 90% of the industry's wealth, so very few firms “win big". She says in the past few years, "digital Darwinism" has thinned out the field of players, and today "only the fittest survive." Audio Link[DOWNLOAD AUDIO: "Digital Darwinism" 222KB] "Post September 11th, the thing we look at first is the balance sheet, and then we look at everything else," Meeker told her DePauw audience.

What does it take for Morgan Stanley to become excited about a company? Meeker says the attributes she analyzes include a large market opportunity, Audio Link[DOWNLOAD AUDIO: "CSCO, MSFT, AOL" 303KB] citing Cisco Systems, Microsoft and America Online ("it's much better for a company to have 10% in rising market share of a billion dollar market than 100% market share of a $100 million market"); good technology and service that offers a significant value and service proposition to its customers ("if we find a big market opportunity, and then a good technology and service, and a bad management team, we're not interested. If we find a large market opportunity, an okay technology and a great management team, we do get interested because a great management can make an okay technology and service great"); a simple and direct mission and strong culture; missionary, not founders ("that are passionate and focused"); a very strong technology magnet, meaning the company is able to attract engineers and developers; a great management team, board of directors and committed partners; an ability to lead change and embrace chaos; brand leadership; insane customer focus and a rapidly growing customer base Audio Link[DOWNLOAD AUDIO: "eBay" 406KB]("one of the interesting things about eBay is that their customers tell them what to do"); clear and broad distribution plans; and big gross margins are among the things on Morgan Stanley's checklist.

Meeker says those starting new businesses must be willing to make, and admit to, mistakes. She cites eBay's Meg Whitman as an example. Video Link [DOWNLOAD VIDEO: "MEG WHITMAN" 708KB] "One of the great things about Meg is that she'll constantly ask, 'What I am I doing wrong? How should I think about this? How can I be better?," Meeker told the audience of present and future entrepreneurs, stressing the only way to have an honest dialogue with your staff is to ask for it. A CEO should also put together a board that will ask tough questions, reflect the diversity of the United States and be a sounding board and a source of ideas and innovation, not a rubber stamp.

The Internet stock analyst was also asked about the state of Wall Street. The major indexes have suffered steep losses in recent months, with investors wary over the possibility of recession concerns that have been heightened by the recent terrorist attacks. Video Link [DOWNLOAD VIDEO: "The Markets" 391KB] Audio Link[DOWNLOAD AUDIO: "The Markets" 313KB]"This is the time to be a buyer, not a seller," Meeker said. She is confident that technology, especially the Internet, will be a major factor in the eventual resurgence of the markets.

Broadband technology will allow companies to send DVD quality movies and music into homes via the web, and Meeker believes the events of September 11 have increased people's need to be connected to friends and loved ones via technology. In New York, she's observed Audio Link[DOWNLOAD AUDIO: "Being Connected" 372KB] “post September 11th, everybody is upgrading their home PC system, making sure they have DSL and cable access... buying new cell phones." In a few years, she predicts, "you will indeed be downloading the Madonna or John Mellencamp concert, and going backstage... broadband is going to change the way we're entertained, communicate and do business."