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The Next Internet story

We managed to hook up with Next Internet co-founder Scott Rewick yesterday after we blogged about his intriguing new start-up incubator. Turns out that Rewick and his partner Ken Chan are longtime entrepreneurs who'd become disillusioned with the venture capital funding process (not surpisingly since they'd been edged out of their last company) and wanted a way to launch companies on their own terms.

"We think the current venture model is broken,'' Rewick says. "The deal terms they put out there just make them rich, not the guys doing the work.''

Rewick's frustration stems from his experience at Netblue, a "customer acquisition'' company that he and Chan founded. After building Netblue into a profitable company, the founders were forced out when VC's brought in a new management team. It's a common story in the valley.

"It's a nightmare. It's trainwreck,'' he said. "We were asked to leave, basically. You have an outside investor who owns 20 percent (of the company) that basically forces you to leave, and we own the company. We own three board seats. How does that happen?''

So the duo decided to strike out on their own. Next Internet is a place where the pair can incubate their ideas and bring them to fruition. They've already pushed one company out the door, email advertising firm Web Juice. Another company, Winzy, which will provide a way for Internet companies to distribute their toolbars to consumers, is getting close to launch.

"We've really stayed close to consumer Internet marketing, which is what we know well.''

Next Internet is not looking for outside ideas or investors, and Rewick said he and his partners would be happy to fly well below the radar. The plan is to turn their own ideas into companies. To that end, they incorprated four "inter-related" companies, built teams around people they know and gave them "huge percentages'' of the companies. Some comapnies they may look to sell; with others they may be content just making money .

"I just don't feel like giving Sand Hill any more of my money, given that we're doing all the work. These are ideas we know how to make money on, and we work with guys we know, who are cool and are hungry....We're very much of the belief that you can start these things on a shoe-string budget, keep it very, very simple and know who your customers are, create value-add and make money,'' he added.

"It's not, hey, we have an idea, or an Idealab,'' Rewick said. "We think ideas are kind of a joke. We're really targeted on the companies we think we can build well. And they're centered around customer acquisition type models, where advertisers are paying them on a performance basis.''

The company ran into a buzzsaw of criticism this week after it was discovered that they'd stolen the HTML code and look and feel of Flock's web site. Rewick acknowledged the mistake.

"It was never meant to be for public consumption, but that's how it goes sometimes.''

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Chan was also forced out of his previous company, Everyone.net, which went bankrupt. Be wary of people who "have no idea" why they were forced out.

FC on March 10, 2006 3:08 PM
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Everyone.net is live and kicking. We are using their email services.

TW on March 10, 2006 3:37 PM
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After reading this and looking into businesses, I'm intrigued with their approach to starting internet companies. We'll see where it goes.

TJ on March 11, 2006 7:30 PM
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VCs suck.. I hope it works out for them

Eric on March 11, 2006 8:59 PM
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Their story is much more common than people might think. Most investors and founders start off like one but eventually become like oil and water at some point. In many cases, the disagreement centers around diverging interests- entrepreneurs care more about the company's product and innovation while the investors are solely focused on their return. The board exerts its control and the founders leave (ie. Steve Jobs and Apple). It's a vicious cycle and I hope that NextInternet succeeds in setting up a more positive long-term relationship between investors and entrepreneurs.

DK on March 13, 2006 1:44 PM
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Hmmm, this sounds alot like what we do up here in Seattle at curiousoffice.com

Maybe some of you saw this month's Business2.0?

We've already done one company and are working on another now called ImageKind. Will be releasing soon.

The difference between this model and ours is that we actually fund other companies too. But, its personal money that I would characterize as "micro" funding...far less than a VC wants to invest.

Kelly Smith on March 13, 2006 6:12 PM
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