Lessin's Lessons

What Bob Lessin looks for in a deal.

When Bob Lessin left Salomon Smith Barney, he was considered a whiz kid of investment banking and financial entrepreneurship. Now he has set his sights on companies built around the Internet. For anyone starting an Internet-leveraged business, or for anyone considering an investment in one, here are a few of his rules of thumb.

Watch the "burn rate."

Consider the rate at which a company goes through money. A good benchmark: A company should spend no more than $200,000 a month. Invest only in companies that can put together a year's worth of capital.

Look for creative CEOs.

You need chief executives who can react to the changing faces of business. The true entrepreneur can change course at a moment's notice — and succeed. The litmus test: Does the CEO think like an artist?

Have an exit strategy.

Invest only in companies that know the end game. You don't want to run a business. You want to create it. Know when you plan to go public or to sell the business to a larger corporation.

Few assets, few atoms.

You want to be as liquid as possible, to own as few assets as possible, and to outsource as much of the operation as possible. The premium should be on ideas and dollars. Do as much as you can over the Web: finance, distribution, sales, design, supply.

Worship brand equity.

Look for a strong brand, one that has a stranglehold on its market. Either create a brand, or align your startup with an existing brand that rules its market. Everything rests on the strength of the brand.

The new supreme indicator: the price-to-weight ratio.

The less your product weighs relative to its cost, the more secure your investment in the company will be. A computer chip reigns supreme in this regard: It weighs almost nothing but costs a great deal. A silk necktie comes in second. The product doesn't have to be high-tech — but the company that sells and delivers it must be.

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