Starting Your Startup

We're all operating in Web time. It doesn't take much more than a year and a half for a new business to become encumbered by the same constraints that affect traditional companies. You want to avoid establishing ways of doing business too quickly, and you want to avoid establishing mind-sets and procedures that are not conducive to marketplace opportunism. Bureaucracy is a state of mind, and it's remarkable how quickly that state of mind can be created.

Space.com (www.space.com) is a Web site featuring space-related information. it launched in July 1999 -- the 30th anniversary of Neil Armstrong's moon walk. Lou Dobbs helped launch several ventures while he was at Cable News Network -- including CNNfn, CNN's financial channel, and CNNfn.com. He was also anchor of CNN's daily financial news program, Moneyline News Hour with Lou Dobbs, until his departure last June.

Andrea Williams

Managing director, Equity Research
E*Offering Corp.
San Francisco, California

Today, there are more companies competing for capital and more companies competing for mind share. How do you stand out? Here are three rules for startups. First, have a differentiated product or service -- one that can capture mind share. Find a beachfront property in an area that's not already crowded.

Second, obtain capital of the highest quality, so that your money will open doors for you. Sign up with venture capitalists who have the best track records and the most-recognized brands. Investors today are savvy about recognizing the money behind a company. And get as much capital as you can early on, so that later you won't have to worry about having enough money. Go to the private as well as the public market, and do both an initial round and a follow-up round.

Third, show that your company is able to evolve. If you're a commerce company, you want to show the lifetime value of each of your customers -- and the expected growth rate of your business, based on the number of customers that you have. And once you're established, you have to go beyond business as usual. You need to keep creating new initiatives for people to latch onto.

I don't have a problem with a company not making money during its first few years in business. It doesn't do any good to be profitable in the first year if you're not going to be around later. You're running a marathon -- so remember to focus on whether your company can stay in the race.

E*Offering (www.eoffering.com) is the investment bank of E*Trade. Andrea Williams has been valuing e-companies since the emergence of commercial Web sites. While serving as managing director at Volpe Brown Whelan, she became one of Wall Street's first Internet analysts. She was also a management consultant at McKinsey & Co. She frequently appears on CNN and CNBC to discuss e-commerce and the Internet, and she writes a column for CNet. Williams joined E*Offering in June 1999.

Fernando Espuelas

Cofounder, chairman, and CEO
StarMedia Network Inc.
New York, New York

A startup is the ultimate test of yourself as a professional. Why do people climb Everest? Because it represents the ultimate test: You have to be willing to die in order to climb.

My mother and I came to the United States with $100. In 1996, I left a high-paying job at AT&T -- I was one of the company's youngest managing directors -- in order to start my own company. My mother thought I was out of my mind, and perhaps I was. My partner and I started with funding that was generated through second mortgages, 12 credit cards, and money that I borrowed from my dentist.

The first months were very difficult because we couldn't find substantial capital. Investors who focus on Latin America didn't understand the Internet. And traditional venture capitalists didn't understand Latin America.

But the most important factor was our single-minded pursuit of success. We wanted to develop the Internet industry in Latin America. From the very beginning, our theory was that every 30 days we would have a major competitor in the marketplace. So, if we didn't create more barriers to enter the market every 30 days, we would lose. That didn't happen. But it was healthy for us as a company to have that kind of focus, that kind of drive -- and that kind of paranoia.

StarMedia (www.starmedia.com),which went public in May 1999, is a leading global online network for Spanish and Portuguese speakers. It offers a portal, Internet connections, and wireless service. It was one of the first new-media companies to tackle Latin America's media monopolies, and it now has about 160 advertisers and sponsors. Fernando Espuelas, a native of Uruguay, cofounded StarMedia in 1996, along with his best friend from grade school, Jack C. Chen. Previously, Espuelas was AT&T's managing director of marketing communications for Latin America.