The Investor David S. Wetherell

He materialized from out of nowhere, the owner by leveraged buyout of College Marketing Group (CMG), a mail-order company in Winchester, Mass., that sold lists of professors and their courses to textbook publishers.

Suddenly, David S. Wetherell’s name was on everybody’s lips. Over a three-year period, the easygoing guy amassed a multimillion-dollar conglomerate under an umbrella corporation named CMG Information Services, then CMGI. Early investments in Lycos, GeoCities, and more than 20 other Internet companies – as well as incubation or outright purchase of startups such as ZineZone – delivered to Wetherell a collection of Net eyeballs that ranked right up with Microsoft’s and AOL’s.

CMGI went public in 1994 with a $23.2 million market cap, and now boasts an $8.6 billion market cap. So who is this guy?

Wetherell didn’t set out to build an empire. He was born on a Connecticut chicken farm and at age 5 moved to Clearwater, Fla., where his father was a general contractor. He studied mathematics and education at Ohio Wesleyan University, expecting to become a high school math teacher. In his senior year, he began a love affair with computer programming and his career took a sharp detour. He worked as a code writer, then a headhunter, and in 1982 founded Softrend, which developed integrated desktop software, pre-Microsoft. Wetherell sold it in 1984 for $4 million and launched a string of startups that led him to form @Ventures to buy stakes in early-stage Net firms.

What investments excite Wetherell? “We look for a hard problem being solved … We look for a first-mover advantage, applications which leverage Metcalfe’s Law [that a network squares computing power], good management, and companies that are complementary to other investments,” he says.

Among more than three dozen investments, only one has tanked: free email upstart Freemark Communications. Wetherell says he honed his ability to pick winners while developing software and running CMG. “I learned a lot about direct marketing. The Internet is the perfect channel for direct marketing,” he says. “And I was watching for an emerging standard for electronic publishing since 1984 … I never found anything until the Web came along.”

“I think of him as an industry seer,” says Ullas Naik, an analyst with FAC Equities/First Albany, who expects six or seven CMGI-backed companies to go public within the next year or so. “He has demonstrated an uncanny ability to spot emerging trends in the Internet and e-commerce sector.” Naik says Wetherell invests in four basic areas: content (Lycos), community (GeoCities), commerce (Chemdex), and infrastructure (NaviSite). As Jeffrey Cunningham, CEO of PlanetDirect, puts it, “He can see clearly through the mist.”

Wetherell’s profile rose in February when USA Networks’ Barry Diller announced plans to merge with Lycos. CMGI controls 18.5 percent of Lycos stock, a $688 million stake that makes it the company’s largest shareholder. Following the announcement, Lycos shares dropped nearly 35 percent. Wetherell quit the Lycos board. Lycos shareholders have yet to vote on the proposed bid.

Wetherell is convinced the Internet will prove more important than the Industrial Revolution. “The pace of change is far greater, and it’s far more wealth for far more people,” he says. Has he thought about how to do good with his own wealth? “I have a definite plan,” says Wetherell, who has been married for 21 years and has three children, “but I’m not prepared to discuss it.” He adds that within a year he will begin his next major investment – in humanity.

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