The Many Lives of a Wall Street Angel

He will invest only in companies with chief executives who think like artists. The executives don't need to know what their company will look like when it reaches maturity. They need to know how to start with an idea and how to nurture it from day to day, changing plans as they go, basing decisions on the success of previous decisions, discovering how the company can get bigger.

The new company must have strong brand equity -- or a plan for tapping into it. Branding must be an essential discipline for the management team. In fact, it must be an obsession: A company with an unassailable brand, with no fixed assets, and with no staff would be ideal. "I want everything outsourced," Lessin insists. "All of the money we invest in the startup should go to establishing the brand." He always looks for ways to reduce assets and atoms, and to increase the supply of ideas, gigabytes, and dollars.

Yet Lessin believes that a new company needs to associate itself with a physical entity somewhere. People still trust the physical world. They still believe in assets. And above all, they believe in the companies with recognizable brands. Which is why Lessin wants to create synergy with such brands. He believes deeply in the old economy, because that's where brand equity and name recognition are unassailable. A corporation with a huge marketing budget can simply print a URL at the bottom of its existing billboards -- and wipe out an Internet-startup competitor -- as easily as it can write a check.

The way he sees it, every company that does business with physical assets, with a physical plant or with storefronts, will eventually have an electronic doppelgänger: a Web site, a virtual identity, a way of doing business over the Internet. Lessin believes that he has the connections and the clout to create that doppelgänger in record time. "I will never compete against an established brand," he says. "I will partner with it. Otherwise, it will go online, and kill you in one swoop. I can take a brand and convert it to brand-dot-com in six months."

Lessin will not invest in a startup that hasn't formulated an exit strategy in advance. "This is not a hobby. I'm not doing this to build a nice $10-million-a-year business," he says. "Unless you can talk about billion-dollar revenue potential, don't take a company public. And if you don't take it public, you will own it forever, or you will sell it. You don't want to be relying on one buyer. You need multiple exits, which means that you have to define a market that's very large and that has potential."

Finally, Lessin has created a new indicator of a company's potential to grow -- the price-to-weight ratio of a product. Lessin's Law of the Net: The less a product weighs relative to its cost, the more it will thrive as a commercial venture. In this regard, the computer chip reigns supreme: It weighs almost nothing and costs plenty to buy, but little to ship. Silk neckties come in second. To be profitable, a product doesn't have to be high-tech -- but the company that sells and delivers it must be.

In 1995, Andrew D. Klein, 38, issued and sold the first IPO over the Internet -- for his own microbrewery, Spring Street Brewing Co. He raised $1.6 million from 3,500 investors and then devised a system that enabled the investors to trade shares with one another online. To further the online offering and trading of securities, Klein founded Wit Capital in April 1996. A year later, after mixed results, he surrendered the helm of the company to Lessin.

Lessin didn't buy Wit Capital; he isn't even its largest shareholder. But he does have a major chunk of its equity, and as CEO, he plays a big part in its day-to-day operation. He chose Wit -- despite its lack of any real track record and despite its inability to get significant shares of IPOs for its membership -- because it was the most powerful, best established vehicle for doing what Lessin wanted to do. "It would have taken us two years to build what Andy has managed to build with Wit," Lessin says. "He has the vision. He has regulatory approval in 50 states. And he has the trading technology in place."

Lessin has used Wit as an instrument to help him achieve one of his primary goals: to level the Wall Street playing field by giving the little guy, individual investors, a chance to invest in a company when it first offers shares to the public and before the stock actually begins trading in the markets. It's at this moment that stocks have the highest potential for both immediate and long-term appreciation in value. In the opening days of trading, IPOs often provide returns of 30% to 50%. But the IPO market has traditionally been a club that only Wall Street insiders could belong to. The few individuals who do get a slice of the premarket pie are usually wealthy investors, or friends and family of people who work at the company that is going public.