EDGAR Online's VC SECrets Newsletter Send comments to: mailto:editor@edgar-online.com ***INSIDE THIS ISSUE VC QUESTION OF THE WEEK: All Stock Options Taxed the Same? VC COMPANY PROFILE: Ethnic Foods.com VC SECTOR PROFILE: Broadband Companies COMPANIES MENTIONED IN THIS ISSUE PEOPLE MENTIONED IN THIS ISSUE /----------ADVERTISEMENT--------------------------------\ FREE IPO GUIDE FROM BOWNE. Everything you need to know before you go public -- from the initial decision to perfecting your roadshow. Click here. http://live.doubleclick.net/bowne/bowne_ipo1.html \-------------------------------------------------------/ ---------------------------------------- ***VC QUESTION OF THE WEEK*** ---------------------------------------- Answered by Bruce Brumberg, Esq. QUESTION: Are all stock options taxed the same? ANSWER: No. The taxation of your stock options will depend upon whether they are incentive stock options (ISOs) or nonqualified stock options (NQSOs). ISOs are free from regular tax at the date of grant and the date of exercise (when a non-qualified option would become taxable). NQSOs do not meet the IRS criteria for ISOs and therefore trigger a tax upon exercise. This type of option requires withholding of state and federal income tax, Medicare and FICA/FUTA on the excess of the fair market value over the exercise price on the exercise date. Bruce Brumberg is Editor-in-Chief of myStockOptions.com /----------ADVERTISEMENT------------------------------------\ DON'T MISS OUT ON YOUR CHANCE TO WIN AN IBM THINKPAD 600X Register now for any of ITworld.com's weekly IT email newsletters, and enter our sweepstakes for your chance to win a powerful new IBM ThinkPad 600x. CLICK HERE! http://www.itworld.com/sweeps/sweepsim.html?impsite=9235 \----------------------------------------------------------------/ ---------------------------------------- **VENTURE CAPITAL COMPANY PROFILE** ---------------------------------------- By Udayan Gupta, Venture Capital Contributor Tandoori and Noodles: EthnicGrocer.com Delivers Immigrants are hot. Asian and Hispanic populations are booming. Asian and Pacific Islanders populations have grown 43% percent. Hispanics have increased nearly 40%. EthnicGrocer (www.ethnicgrocer.com) has figured that the best way to these populations is through their stomachs. Food! "If you're Chinese and you live in Alabama, the chances of your finding a Chinese store are almost none," says EthnicGrocer.com CEO and president Parry Singh. Outside of the major urban centers, immigrants have a hard time finding cultural-specific foods. The ethnic food market in the U.S. is fragmented. Most retailers are small and carry a limited amount of merchandise. "Seven out of ten times you go to the distributor, he doesn't have what you want," says Singh. In response, Singh and his colleagues founded EthnicGrocer.com and its sister sites, Namaste.com for the Asian-Indian market, GongShee.com for the Chinese market, and QueRico.com for the Latin American market. Consumers can shop online and have their favorite foods - including perishables - delivered right to their door. A godsend for newly immigrated Chinese in Alabama. In August, EthnicGrocer.com announced the closing of its $41 million C round of financing. Investors in the company include Integral Capital Partners, Kleiner Perkins Caufield & Byers, Amerindo Investment Advisors, Merrill Lynch, Benchmark Capital and KB Partners, LLC. Singh says his company's strengths are its scalable supply chain platform and its expertise in ethnic marketing. As the company grows, it continues to add hard-to-find products, and to offer other product lines. "We start with food to build a bond with the consumer," says Singh. Based in Chicago with a distribution centers in Hebron, Kentucky and Northbrook, Illinois, the company currently employs 150. By the end of the year, EthnicGrocer plans to launch sites for the Korean, Filippino and Kosher markets. EthnicGrocer was far from the first in the online grocery shopping space, however. Companies like California-based Webvan Group, Inc. (WBVN), New Jersey-based NetGrocer.com, Inc., Massachusetts-based Streamline.com, Inc. (SLNE), Washington-based HomeGrocer.com, Inc. (HOMG) and Peapod, Inc. (PPOD) all deliver grocery products straight to consumers' doors. Moreover, what's there to prevent brands such as New Jersey-based Goya Foods, Inc., California-based Authentic Specialty Foods, Inc., and Minnesota-based Hormel Foods Corporation (HRL), or even Houston-based retail chain Fiesta Mart Inc., from launching their own Web sites? And it can only be a matter of time before established chains like Cincinnati-based The Kroger Co. (KR), Boise-based Albertson's, Inc. (ABS), and California-based Safeway Inc. (SWY) jump on the net. *** NOTE: On Tuesday, Peapod (PPOD) announced its acquisition of Streamline.com (SLNE) http://www.edgar-online.com/secrets.asp?d=A-1036992-0000950131-00-005301 *** NOTE: A number of Webvan Group(WBVN) insiders have registered to sell stock recently http://www.edgar-online.com/bin/esearch/default.asp?QT=1&query=WBVN&date=1994 EthnicGrocer.com, Inc. Venture Capital Investors Kleiner Perkins Caufield & Byers Benchmark Capital KB Partners, LLC Integral Capital Partners Amerindo Investment Advisors Merrill Lynch Executive Team Parry Singh, CEO and President Subhash Bedi, COO Venkat Raju, CTO and VP of Engineering Sami El Saden, VP of Marketing /----------ADVERTISEMENT--------------------------------\ Purchase Business/Credit Reports from Dun & Bradstreet on over 11 million U.S. businesses. Click on the "Resources" link when you look up SEC filings for any public company, or search by company name and state at http://www.edgar.telebase.com \-------------------------------------------------------/ ---------------------------------------- **VENTURE CAPITAL SECTOR PROFILE** ---------------------------------------- Broadband Companies: Unclogging the Pipe Ensemble Communications Inc. WildBlue Communications, Inc. @Link Networks, Inc. Jump. Net As the world - or increasing numbers in it - go online, the limits of the systems that deliver Internet services are being stretched. The protocol "WWW", for many, now signifies World Wide Wait. Critics say AOL stands for "America On Late." Telephone dial-ups are excruciatingly slow, severely limiting downloads and new product development. But the dangling carrot of land-based cable and DSL and wireless broadband keeps consumers going, holding out the promise of relief from slow modem madness. A report released by the Clinton Administration in the spring of 2000 says that while broadband is available to those in densely populated centers, the same cannot be said for those in rural areas. The study, published by the Department of Commerce, says that while broadband via cable is available in 65% of U.S. cities with a population over 250,000, and via telephone in 56% of cities over 100,000, fewer than 5% of towns with populations under 10,000 have any broadband access whatsoever. Even in the urban markets where broadband is available, delivery is spotty. Providers are backed up and many users have been waiting months, even years, for broadband installation. Wireless broadband could change all that, with satellites providing next-generation Internet access to those in far-flung regions, such as parts of Alaska, North Dakota and, yes, Guam. For many, however, cable and DSL are still preferable for its land-based infrastructure. The broadband space already has many contenders. For wireless broadband, Sunnyvale, CA-based Adaptive Broadband Corporation (ADAP), Tel Aviv-based BreezeCOM Ltd. (BRZE), Santa Clara, CA-based Wireless, Inc., and Plano, TX-based Nucentrix Broadband Networks, Inc. (NCNX) are already competing for customers in the U.S. and abroad. For cable and DSL service, individuals and businesses look to Redwood City, CA-based At Home Corporation (ATHM), Englewood, CO-based Rhythms NetConnections Inc. (RTHM), and New Haven, CT-based DSL.net, Inc. (DSLN). Given the ever-widening reach of the Internet, there is plenty of room in the space to grow. The following companies are worth adding to your radar: Ensemble Communications Inc. The San Diego-based company, with its Adaptix module and Fiberless delivery system, manufactures point-to-multipoint systems for use with wireless broadband. Ensemble (www.ensemblecom.com) recently announced the closing of a $60 million round of financing. Corporate investors in the company include Cisco Systems, Inc., ADC Telecommunications, and Samsung. Venture Capital Investors: Dell Ventures The Goldman Sachs Group, Inc. Crescendo Ventures Enterprise Partners Institutional Venture Partners Trinity Ventures Executive Team: David A. Twyer, CEO Jay Klein, CTO Sheldon Gilbert, EVP of Engineering and Operations Rami Hadar, EVP of Marketing and Business Development Gary Bohdan, VP of Finance and Administration WildBlue Communications, Inc. Based in Denver, WildBlue (www.wildblue.com) plans to offer broadband access via satellite in North America and Latin America by 2001. Originally founded as KaSTAR Satellite Communications, in July the company says it closed a $137 million second round of funding. Corporate investors include Liberty Media, TV Guide and TRW. Venture Capital Investors: Kleiner Perkins Caufield & Byers Executive Team: Thomas E. Moore, CEO and President David M. Drucker, Founder and Chairman Jeff Weaver, VP of Architecture Robert Luly, VP of Technology Brad Greenwald, VP of Marketing and Business Development @Link Networks, Inc. The Louisville, Colorado-based firm provides broadband services to small and medium-sized businesses. Formerly known as Dakota Services, the company says it secured $101.2 million in its second round of venture capital funding. @Link Networks (www.atlinknetworks.com), which offers primarily DSL, says it will use the money for its nationwide deployment. Venture Capital Investors: Madison Dearborn Partners Columbia Capital Telcom Ventures Morgan Stanley Dean Witter Executive Team: Alexander H. Good, Chairman and CEO Hank Carabelli, President and COO Jarrett B. Appleby, Chief Development and Strategic Officer Douglas Zolnick, CTO Raymond O'Brien, Chief Marketing Officer Jump.Net, Inc. Jump. Net (www.jump.net), based in Austin, Texas offers DSL, co-location and Web hosting in 90 cities across the U.S. Through its investment arm, Jump.Net Ventures, the firm gives start-ups low or no-cost Internet service and Web hosting in exchange for equity. Venture Capital Investors: Prime New Ventures Alta Communications Executive Team Kenneth Smith, CEO and President Frank Bieser, SVP Dewey Coffman, VP of Sales and Marketing ---------------------------------------- **COMPANIES MENTIONED IN THIS ISSUE*** ---------------------------------------- @Link Networks, Inc Adaptive Broadband Corporation Albertson's, Inc Alta Communications America Online Amerindo Investment Advisors At Home Corporation Authentic Specialty Foods, Inc Benchmark Capital BreezeCOM Ltd Cisco Systems, Inc Columbia Capital Crescendo Ventures Dell VenturesDSL.net, Inc Ensemble Communications Inc Enterprise Partners EthnicGrocer.com Fiesta Mart Inc Goldman Sachs Group, Inc GongShee.com Goya Foods, Inc HomeGrocer.com, Inc Hormel Foods Corporation Institutional Venture Partners Integral Capital Partners Jump.Net, Inc KB Partners, LLC Kleiner Perkins Caufield & Byers Liberty Media Madison Dearborn Partners Merrill Lynch Morgan Stanley Dean Witter Namaste.com NetGrocer.com, Inc Nucentrix Broadband Networks, Inc Peapod, Inc Prime New Ventures QueRico.com Rhythms NetConnections Inc Safeway Inc Samsung Streamline.com Telcom Ventures Telecommunications The Kroger Co Trinity Ventures TRW TV Guide Webvan Group, Inc WildBlue Communications, Inc Wireless, Inc Zolnick, Douglas ---------------------------------------- **PEOPLE MENTIONED IN THIS ISSUE*** ---------------------------------------- Appleby, Jarrett B Bedi, Subhash Bieser, Frank Bohdan, Gary Carabelli, Hank Coffman, Dewey Drucker, David M. El Saden, Sami Gilbert, Sheldon Good, Alexander H. Greenwald, Brad Hadar, Rami Klein, Jay Luly, Robert Moore, Thomas E. O'Brien, Raymond Raju, Venkat Singh, Parry Smith, Kenneth Twyer, David A. Weaver, Jeff ---------------------------------------- ABOUT THE CONTRIBUTORS ---------------------------------------- VC SECrets is published every Friday. Udayan Gupta has covered the venture capital industry for more than a decade as a senior writer for The Wall Street Journal and is the co-founder of Biztrail.com, an Internet portal for entrepreneurial businesses. He is the author of the forthcoming book "Done Deals" (Harvard Business School Press, 2000), an oral history of the venture capital industry. Bruce Brumberg is the Editor in Chief of MyStockOptions.com and an advisor to The National Association of Stock Plan Professionals. Bruce has developed numerous books and videos on SEC compliance, insider trading and stock plan administration. 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