Paul Allen - Slowdown Led To Cutbacks, 2000-2001

SLOWDOWN LED TO CUTBACKS (2000-2001)

Following the slowdown of the Internet economy and the dot-com shakeout of 2000, Vulcan Ventures cut back on some of its investments. Among the companies affected were pop.com, the Internet entertainment site set up by Dreamworks SKG, which folded in spite of $50 million in financing from Vulcan.Priceline.com 's grocery affiliate, WebHouse Club, also folded in October 2000 after announcing it was unable to raise enough capital for the coming year to complete its business plan. Still, Allen provided Priceline.com with $64 million in funding in August 2000, just before its stock collapsed. Following due diligence, Allen also decided not to participate in a $300 million private placement for online brokerage Datek Online. Vulcan also withdrew from a $25 million investment in Island, an alternative trading network in which Datek owned a majority interest. On the other hand, Vulcan invested $7.5 million in financial news site TheStreet.com, taking a five-percent interest in the company.

Other failing dot-coms in which Vulcan has invested include software distributor Beyond.com, Stamps.com, Drugstore.com, and ValueAmerica. Early in 2000, Allen closed Interval Research, a think tank and research laboratory in Palo Alto, California, that he had established in 1992. Like other venture capitalists, Vulcan Ventures has tightened its investment criteria in response to the dot-com shakeout and faltering Internet economy of 2000. Notably, Vulcan is looking to invest in established, operating companies rather than pure start-ups. According to Allen's Web site, the strategy of Vulcan Ventures is to, "in-vest in established, operating businesses that are involved in the Wired World technologies. We are not interested in pure start-ups at this time. We do, however, consider new ventures being planned by established companies."