What's life like for would-be entrepreneurs these days? (page 1 of 3)

Davis started at Lycos in 1995 and while there, completed the fastest IPO in Nasdaq history. Last year he sold the company to Terra Networks, a subsidiary of Telefonica, for $6 billion. The original venture funding was $2 million.

Now a partner in Highland Capital, an early-stage venture capital firm with over $1 billion under management, and the author of a new book entitled Speed Is Life, Davis was the keynote speaker at the Wharton Entrepreneurship Conference on November 9th. Also speaking was Alan Patricof of Apax Partners, one of the largest VC firms in the world. Both men offered words of advice for the audience of fledgling entrepreneurs and VCs.

Davis told the audience, for example, that there never was a "new economy" - just an "irrationally exuberant bubble that existed for a year or two," although he also noted that "the true potential of the Internet remains grossly under-hyped." Calling the Internet one of the most significant business process improvements in history, Davis identified several basic business capabilities and talked about how companies can best exploit these using the web. Two of the ones he focused on were innovation and customer service.

Innovation (speed plus imagination): Citing such breakthroughs as instant messaging, digital publishing technology and timesaving business-to-business software, Davis said that "speed saves money, makes customers happy and drives revenue." When an audience member argued that speed was what brought down the dot.coms, Davis responded that the Internet bust had more to do with "companies that had no concept of revenues being rewarded in the financial markets." Any company in any industry that could bring its product to market faster, serve customers faster and hire the best employees faster would always have the advantage, he said, adding that "even the mighty Jack Welch, looking back on a flawless record at GE, said, 'My biggest mistake was taking too long to make decisions.'"

Speaking about imagination, Davis said the key to success in a knowledge economy is to invest aggressively in your imaginative capital and ensure the best talent. The pharmaceutical and entertainment industries are examples of this, regularly spending millions in such areas as drug research and film production.

Customer service: Davis advised companies to "seize their customer service moments of truth." He recalled how 25 years ago he saw a grocery store manager win over an irate customer with a gift of a candy bar and a simple, sincere apology. With the Internet, he said, "stores can institutionalize and automate that Snickers bar you drop in the bag to keep customers coming back." He cited the Land's End virtual model and Amazon's recommendation tool as examples of good customer service.

In general, though, according to Davis, an overwhelming majority of companies handle online customer service so badly that they "un-sell their own company ... Fifty percent of customers expect an accurate response to their email within six hours, yet only 20% of companies do that. And 30% never reply at all: They have slapped up a website, added some e-flash and dazzle, and then assigned one or two hapless souls to maintain it. The Internet is possibly the best thing that ever happened to customer service, yet few companies leverage the opportunity properly."

Davis also noted that while the tremendous information-sharing power of the Internet is well recognized, the security risk is not.