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In Down Market, New Entrepreneurs Take Lessons from 'Oldest Profession'

MOUNTAIN VIEW, CAL. ( — They are young, quite often attractive, and down on their luck. Desperate for money, they are forced to sell themselves for whatever they can get. They are the latest Internet startups, the prostidots.

"I came out here for fortune and fame, but it hasn't worked out like I thought," said Patrick Kendall, 28, who the night before sold a 5 percent stake in his network software company, LinkStrategems, to a venture firm for just $500. He said he would do it again tonight. "I know it's wrong, but I've got employees to feed."

Cargo box that held startup execs'

Less than a year ago, venture capital firms fell all over themselves to offer seed and first-round financing to high-tech startups. All that changed last April, when the NASDAQ plunged and the IPO market dried up. Suddenly, newer dot-coms found themselves fighting for a dwindling supply of money. As a result, many of them decided prostidotion was better than destitution.

The scene outside the offices of Kleiner, Perkins, Caufield & Byers, home to the legendary VC John Doerr, illustrates the sad story. Day and night, groups of eager dot-com executives, male and female, loiter near the entrance. They are waiting for a prospective backer, what they've come to call a "John Doerr." Whenever one of the venture partners walks by, the soliciting begins:

"Hey, money boy, you want No. 1 clicky-clicky?"

"Say baby, you've got the seed I need!"

The partners usually ignore these crass come-ons, and for most hopefuls, the day ends at around 11 p.m. Then they are picked up in a van driven by their "management consultant," usually the head of a Net incubator that has several companies it's trying to get funded.

"I've got a choice stable, top quality, and last year, VCs were begging to get a piece of them, offering up $4 million for a 10 percent stake," lamented Charlotte "Huggy Bear" Holcombe of incubator DreamtheWeb. "But now, my bi... my startups... they're lucky to get $400."

And some have gone for less.

Index of Dot-Com Shakeout stories

Roberta Boseman, CEO of groupware startup ConnectedNation, works the corner of Broadway and Bleecker Street, near the new East Coast office of startup factory idealab! Last week, she sold them 12 percent of her firm for $75 and a used foosball machine. "They didn't even cut me a check," she said. "They just left the money on the dresser and told me to get out."

But Boseman is hopeful her luck will change. "This is only temporary, right?" she insisted. "Someday I'm gonna get out of this business cycle and go respectable."

Like other prostidots, Boseman said she doesn't think about the act itself when she's offering up her company for next to nothing: "I don't look at the John Doerr's face. I usually close my eyes and think about marketing strategies or profit margins. ... Oh God, is my mother going to read this?"

Yes, she is.

In the past month, the competition between prostidots has gotten so fierce that many have been forced to seek financing far from home. Last week, French authorities at the port of Marseille found 24 Internet entrepreneurs crammed inside a shipping container. Interviews with the detained executives were sketchy, but French police say a Boston-based incubator packed the group off in the cargo box, promising them that French venture firms would be more receptive to their funding needs.

"The conditions were deplorable," said a French Interior Ministry spokesman. "Their wireless PDAs wouldn't work through the metal walls of the container."


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