How Do Fast Companies Work Now?

Pecaut is iFormation's networker in chief. He was senior VP of BCG's consumer global practice before cofounding the company's global e-commerce unit in 1997. He advised Ford, Goldman, and Whirlpool, among others, accumulating a fat trove of CEO-level contacts. He estimates that he has met with the CEOs of 41 Fortune 100 companies in the past year.

Pecaut's goal at iFormation was to build an organization of deal makers, company builders, and strategic innovators whose ideas and contacts would feed the company's collective imagination. Surely, the ideas do flow and multiply at iFormation: Its executives investigate dozens of opportunities each week. But those possibilities haven't yet coalesced into investments. To date, the firm has started only one rapidly expanding company, not counting Site59. Transactions that Pecaut guessed were four to six weeks from completion back in March remain, as of June, unconsummated. The promising deal pipeline remains just that.

At the all-hands meeting, executives run through a roster of potential plays in digital-rights management, mortgage automation, and e-learning. At the mention of one deal, an executive observes, "It's a tremendous opportunity but incredibly hard to pull off." In fact, these are all complex transactions that require months of negotiations even to reach the point of serious consideration. "Everything takes longer than I'd like it to," Pecaut admits, frustrated. And that underscores the central challenge that iFormation confronts.

In the spring of 2000, iFormation's basic proposition seemed undeniable. Then came the NASDAQ crash and the telecom bust. Pecaut argues that, if anything, the collapse of technology markets in the past year has shown potential partners just how hazardous it might be for them to create new ventures on their own. On the other hand, Pecaut admits, the sense of urgency that drove deals a year ago has dulled. "Getting everyone on board," he says, "takes a very long time."

Of Speedboats and Battleships

Ric Duques remembers precisely when he decided to rethink First Data Corp.'s Internet strategy. The $6 billion electronic-payments giant had made a dozen small investments in online ventures. "The thinking," says Duques, CEO and chairman, "was that we'd stay close to what was happening" in emerging payments technologies.

The reality, though, was that a bunch of minority holdings wasn't keeping First Data close to much of anything. The company's core businesses were focused on processing billions of credit-card payments each year for 1,400 financial institutions and 2.6 million merchant locations. "We couldn't see or focus on opportunities until they hit us in the face," Duques says.

In April 2000, Duques traveled up and down the East Coast, meeting with experts on digital payments, smart cards, wireless systems, and other emerging technologies. "I realized that things were just moving too fast in this space," he says. "We needed a better vehicle to keep up with it all."

First Data had at least two intriguing Net ventures that could be repackaged as independent businesses. One was CashTax, an $80 million operation that focused on electronic business-to-government tax payments. CashTax, now called govOne Solutions, was growing slowly but was extremely profitable. The second venture was SurePay, an uncommercialized technology company aimed at business-to-business payments.

These operations, largely unproven, weren't universally attractive. In themselves, "they're not great businesses," says one investment banker who looked at the opportunities and passed. But what First Data brought to the party was the enormous potential that resided in its core transaction-processing systems and its massive distribution network. The new businesses had to be managed independently and built for speed -- but they also had to leverage strategic connections to a payments infrastructure that no stand-alone dotcom could hope to reproduce.

Duques deputized Garen Staglin, a trusted First Data director, to seek out partners who could engineer such a deal. Staglin's first call was to Steve Denning, with whom he had served on the advisory board at Stanford Business School. Denning was managing partner of General Atlantic Partners. Within days, Staglin, Duques, and the then-skeletal crew at iFormation had started talking.

First Data met all of iFormation's basic criteria. First Data was eager to participate as partner, and it would bring key assets to leverage. Even more, its idea was obviously huge. "This thing was unique," says Bob Trudeau, the iFormation director who spearheaded the negotiations. "What we saw was small and nimble -- but by the way, it leveraged the assets off of this giant called First Data. There was no animal out there like it."