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CLASS OF 91
When most people think about
the nations hot sites for information technologyIT, also known as The
Futurethe Greater Philadelphia area does not come to mind. Yet there
is a surprising amount of IT
activity in the region, and Paul Morin W91 WG98 wants people to know
about it.Which is why, last year, he wrote The Greater Philadelphia
IT Report: Creating Wealth and Opportunity in the Region.
objective was to understand how and to what extent IT companies in this
region were creating wealth, said Morin, a principal of the Philadelphia-based
Vector Strategic Management Group, which provides strategic advisory
services for corporations. In addition, he noted in an e-mail interview,
the Wharton Entrepreneurial Programs were eager to reach out into the
IT entrepreneurial community and let key players know that Wharton is
interested in the region. Working closely with Morin on the project was
Mark Fraga, Wharton Entrepreneurial Programs managing director.
report, sponsored by Bank of America and Whartons Sol C. Snider Entrepreneurial
Research Center, employed a database of 165 key regional IT companies
a sample that focused on companies with quantifiable track records, and
one that did not purport to represent the entire IT population. (The regions
Eastern Technology Council has more than 800 tech-company members.)
It also made use of extensive interviews with 70 regional IT CEOs, senior
managers, venture capitalists and service providers.
of the reasons the regions IT sector is relatively unknown, Morin pointed
out, is that it contains very few B2C [Business-to-Consumer] IT companies,
such as Amazon .com or Yahoo! (A notable exception is Comcast Corporation.)
What it does have is a wealth of B2B [Business-to-Business] IT/e-commerce
companies that most people have never heard of. Fortunately, since the
report was published (though we cant take credit for it), B2B has become
very fashionable (and fruitful). A case in point is VerticalNet, based
in Horsham, Pa., whose recent $100 million investment from Microsoft confirmed
its status as one of the nations premier B2B companies. (Its industrial
trading communities include such unfashionable sites as Solid Waste Online
and Bakery Online.)
is the most extraordinary example in this samplea company that, with
just $3.1 million in 1998 revenues, has managed to reach a market capitalization
of $1.3 billion, says Morin. Clearly, the market is expecting great
things from this company.
incidentally, is one of the companies financed by the wildly successful
Internet Capital Group Inc. (ICG), a suburban-Philadelphia-based Internet-holding
company and venture-capital fund whose roster reads like a page out of
the Gazette. The list includes Dr. Thomas P. Gerrity, former dean
of the Wharton School and current head of the Wharton Forum on Electronic
Commerce [Gazetteer, March/April] (director); Douglas A. Alexander W83
EE88 (managing director); Julian A. Brodsky W56 (director, also a founder
of Comcast); Robert A. Fox C52 (father of ICG co-founder and director
Kenneth A. Fox); Mark J. Lotke W90 (managing director of acquisitions);
John A. McKinley Jr. W79 (advisory-board member); Henry A. Nassau G76
W76 (managing director, general counsel and secretary); and Robert A.
Pollan W82 EE82 (managing director of operations). After its initial
public offering last August brought in $179 million, ICG went public again
in December to the tune of $1.26 billion. Its market-capitalization was
valued at $37 billion in March. It recently joined forces with the Hong
Kong-based Hutchison Whampoa Ltd. to launch two B2B businesses in Asia.
Capital Group and the extraordinary growth in its market capitalization
is just the shot in the arm that the region needed, says Morin. It highlights
the strength of the region in the B2B sector and, by example, proves that
companies in this region can be major players in B2Bwhich by most estimates
is a much larger opportunity than B2C.
the Philadelphia region is replete with wealthy individuals and angel
investors, says Morin, most of these individuals did not make their
money in IT and typically dont understand it very wellwhich makes them
less likely to cut checks for IT deals. But, he adds, that is changing
rapidly, as many more individuals are making significant fortunes in
IT in this region, and are then turning around and investing a portion
of their wealth in seeding the great IT companies of tomorrow.
describes the feedback on his report as very positive, adding that about
100 business leaders showed up to the release of the study, which helped
to begin a healthy dialogue about the strengths and weaknesses of the
region as they relate to IT. In addition, he said, many IT companies
are using the study to help them recruit IT talent from outside the region.
Many talented employees want to understand the size and level of activity
in the IT sector in the region before moving from their current (typically
very lucrative) positions.
implication is that Wharton students should not automatically head for
the hills when they go looking for the next best entrepreneurial IT opportunity,
he concludes. There are a great many tremendous opportunities right here
in Greater Philadelphia. This region has so many advantages over many
other IT hot spots, not the least of which is cost of living. Many of
the now-successful IT entrepreneurs who are on to their second or third
IT company in this region are in great need of managerial (and other)
talent, much of which can be provided by graduating Wharton/Penn students.
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