Softbank Corp, with ownership positions in over 300 Internet companies that includes Yahoo! (YHOO) and E*Trade (EGRP), is a name that both private and public market investors monitor closely. The firm is best known for its global Internet infrastructure and platform. As growth drivers in the U.S. continue to weaken, such as percentage growth of new users online, Softbank is playing an increasingly important role. Essentially, Softbank has become the gateway for leading U.S. Internet companies to enter the Asian, European, Australian and other foreign markets. The firm acts as an operational and holding company with several subsidiary groups.

Softbank Capital Partners (SBCP), led by partners, Masayoshi Son, Ronald Fisher, Charles Lax, and Bill Burnham, is one of the groups acting as the firm's late stage pre-IPO and post IPO investment arm. Portfolio investments of SBCP include Webvan (WBVN), Buy.com (BUYX), PeoplePC, and Law.com.

We had the opportunity to sit down for an exclusive interview with Bill Burnham, a true pioneer and success story in the Internet space. Burnham was the first analyst on Wall Street to have "electronic commerce analyst" on his business card--a lot of people doubted then that there would be enough companies brought public to support his niche. While at Credit Suisse First Boston, he was the lead analyst for the Commerce One (CMRC) IPO and he is still regarded as the authority on the online financial services sector. In August of 1999, Burnham left Wall Street to join Softbank Capital Partners.

Reporter@Large: What kind of value is Softbank providing its partner companies that is attracting the best entrepreneurs and models to the Softbank brand and team?

Burnham: Softbank sees its value added in three primary areas. First, we have a huge portfolio of partner companies. So we work diligently to make sure that lines of communication are maintained between the portfolio companies. We want the companies to have access to each other and to strike partnerships when it makes sense. Second, we're really the only global venture capital fund at this point. Softbank has venture capital and other operations in the U.S., Japan, China, South East Asia, India, Europe, Latin America, and an investment partnership with the World Bank. We pretty much have an investment presence now in every country of the world if you count the relationship with the World Bank. As a result, we are able to take companies global. We are helping a lot of U.S. companies go global as fast as possible--a lot faster than they could do on their own. The third piece is a whole group of value added services that help in every level from an early stage company to a late stage company. We've created an infrastructure of support. At the early stages we have incubators, entrepreneurs in residence, and in-house recruiters. In the late stage environment we have a business development team, an International development team, a research analyst team and other services that help companies develop and get big fast.

Reporter@Large: Softbank seems extremely excited about the financial services sector...

Burnham: First and foremost, if you think about a sector which has the potential to be completely moved to the Internet, it's the financial services sector. It's all about moving digitizedinformation around. We believe in the long-term potential. It's a lot easier to sell financial services over the Internet than it is some kind of extraordinarily bulky, touchy consumer good.

Reporter@Large: You're on the board of directors at partner company Law.com. What is the opportunity for Softbank here?

Burnham: Law.com is the dominant legal portal in the business-to-business (B2B) space. They offer everything a lawyer could need in terms of information, services, and resources. So there isn't only content in the form of news and analysis, but also e-commerce with legal texts, books, an online legal career center, and education offerings. We invested because 1) law is a huge and growing industry and 2) this is one of the few B2B exchanges I've seen that did real revenues last year and the revenues were very diversified; spread across advertising, sponsorship, e-commerce and transaction. We have the potential not only to dominate the B2B side in the U.S., Europe, and abroad, but also the potential to dominate the B2C side. It has a great URL and credibility because this is where professionals are going to get their legal needs met.

Reporter@Large: "B2B" is so broadly defined and applied these days. How exactly can Law.com's model fit under the B2B umbrella?

Burnham: Well, other lawyers and law professionals are selling to other lawyers. It's not an exchange model where they're trading plastics or something like that. It's a number of folks (professionals) selling legal products and services to the legal community. It can be remote learning for lawyers online or a number of other offerings and services.

Reporter@Large: CMGI is backing FindLaw, Law.com's only serious competitor at this point.

Burnham: Yeah, It's still unclear though whether they're going to focus on the B2B or B2C market. Frankly, from a revenue perspective, no one is even close to us. FindLaw can't even hold a candle to where Law.com is at today.

Reporter@Large: One of your public partner investments, Buy.com, has come under a lot of pressure from investors and skeptics of the model.

Burnham: I really think that Buy.com is misunderstood by a lot of people. Buy.com has almost zero capital employed. There is very little overhead at Buy.com. Not only can they offer really low prices and still make money, but it also means that they're not going to hemorrhage cash from an operating perspective like some of these other B2C companies are. Buy.com could be profitable tomorrow by raising their prices by only a couple of percentage points. It's not about selling below cost, as a lot of investors believe Buy.com does. It's about selling at a very low gross margin but if you're selling billions of dollars worth of goods, with no real overhead, you can make very good money doing that. Buy.com will be profitable before a lot of the other B2C companies. There are only 250 people that work at Buy.com and it did about $600 million in sales last year. Analysts are predicting close to $1 billion in sales this year.

Reporter@Large: Lets talk about this "invisible" infrastructure.

Burnham: Yeah. Buy.com partners with very large distributors. Those distributors actually hold the entire inventory and manage all of the warehouses and people associated with the operation. When you buy a computer at Buy.com, it's actually shipped to you from Ingram Micro, which is the world's largest computer distributor and does about $21 billion in sales each year. Buy.com is one of their best customers and gets their best rates. So Buy.com is able to benefit from the purchasing power of a $21 billion company without any of the overhead, inventory risks, and people associated with that.

Reporter@Large: What is Amazon.com's response to Buy.com's model?

Burnham:TheAmazon response is "you can do that but you can't provide the type of customer service we can because we control everything." I would say that in the short-term, Amazon could provide some elements of better customer service. For instance, if I order a book and a CD, Amazon can pack it all up in one box from a single warehouse. However, over the long-term Buy.com will be able to offer equal service to Amazon and the other B2C players that own their distribution infrastructure. The difference in service will soon be minimal and customers will focus on who is providing the best selection at the best prices. I don't think that Buy.com's success has to come at the expense of Amazon. Both companies are more than likely to feed off the vertical retailers. Vertical retailers are quickly realizing that if you just sell one item, you still have to pay just as much as Amazon or Buy.com to acquire a customer. So a company might only be able to sell me software, but Buy.com and Amazon can sell me everything under the sun. Customers are worth a lot more to Amazon and Buy.com.

Reporter@Large: Are there any recent Softbank investments that private and public market investors should be excited about?

Burnham: One company in our early stage portfolio is smoking hot, a company called TeraBeam Networks. They're marrying wireless technology with the hottest laser technology to deliver massive amounts of information over a "fiberless" infrastructure. It's one of the coolest things I've seen in a long time. That's one of those companies you look at and you say, holy shit, that's big!

Reporter@Large: Is there one example you can give our audience of Softbank's dominance and expertise in scaling successful U.S. Internet ventures abroad?

Burnham: I think the best one would be Yahoo! Yahoo Japan was set up by Softbank in three months, was profitable from its first day of operation, and now accounts for $25 billion in market value.

Reporter@Large: Thanks Bill.

Burnham: Thank you.