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December 1, 2000

IPO Dotcom Survivors

By Colleen O'Connor

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The uncertain future for the dotcom industry has not stopped venture capitalists financing the most promising companies - especially if they are so-called content providers.

Consider Comedy World, a Los Angeles-based entertainment distributor. The distributor said it is no longer "focused on" an IPO, according to chief executive Jody Sherman.

Instead, Comedy World is raising venture capital and recently closed a second round of financing. In all, $20.5 million was raised from Moore Capital Management and Attractor. That more than doubled the company's first funding round of $10 million, which was completed before digital Darwinism penetrated the market.

"The whole content space has fallen out of favor," Sherman said. "Investors now have the luxury of taking their own sweet time. Attracting funding has become a bit more cumbersome."

Competitive Market

Internet companies have found it difficult to distinguish themselves in a competitive market. But a shift is taking place in the dotcom industry. "Our business model is different from a pure-play Web site," Sherman said.

"We're an entertainment company that creates content and distributes it on the Internet," he added. "Our main focus is on distribution to radio stations, as well as to satellite radio."

The company's online-arm accounts for only 30 percent of Comedy World's business, says Sherman. It is the Internet's secondary role, he believes, that will make the company profitable, and in turn attractive to investors. "The whole idea is not to think like an Internet company."

Despite that pure Internet-skeptical approach - an approach that convinced

Moore partner Jim Caccavo to invest in Comedy World - Sherman is optimistic about the future of the dotcom industry.

"The reality is that somebody is going to have to fill up the pipes being built," he said. "The difficult part is picking a winning content company. A lot depends upon the fickle nature of the consumer."

Comedy World is just one example of a company that piggy-

backs on the Internet and manages to raise capital. It does not exclusively concentrate its business on the Internet., which operates a Web site that allows advice-seekers to connect with advice givers over the phone, recently landed $42 million, bringing its total funding to $109 million.

Net-sourcing solutions provider Intira, received $140 million in October. eLance, a global service marketplace for companies that want to outsource related projects, has raised $65 million in recent months. As entrepreneurs and investors begin to understand not just the Internet's potential, but its limitations, finance will become more available.

Likening the Internet to building a railroad, Caccavo said that if everyone concentrates on laying the tracks and building the cars, there's still an opportunity for someone to fill the cars with cargo.

"As a distribution platform, is the Internet viable? The answer to that is yes, but...,'" he said, trailing off.

Said Sherman, "I don't think consumers rely on any one medium, they rely on all mediums. So this is a money-making opportunity. We're not just in the Internet realm, we aggregate to the largest audience possible."

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