Tom Taulli is the publisher of the Taulli Report, an online investment site.  You can reach him at tom@taulli.com

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Once again, the IPO market is heating up. And there are more concept companies going public. Should you invest in these?

During the early part of 1996, there was a raft of concept Net companies going public. Many have fallen greatly. However, some have done quite well.

There are lessons to be learned from these. Let's take a look:

• A Business Model That Makes Sense: @Home (ATHM) is, for the most part, a concept company. For the past six months, the company posted losses of $22.8 million, compared to losses of $8.3 million in the same period a year ago. Revenues for the last six months were a scant $1.8 million.

  But @Home has a great business concept. The company is focusing on a problem that desperately needs a solution: the lack of bandwidth. @Home plans on using the existing cable infrastructure to solve the problem. According to the company, its technology will boost speeds 300 times more than the typical dial-up access account.

  @Home has arranged contracts with major cable giants, such as Tele-Communications, Comcast, and Cox, as well as others-with a combined base of 44 million homes.

  Of course, there is no guarantee that this will be a solution. After all, when was the last time a cable company did anything more innovative than install cable lines and collect checks (remember digital TV)? Also, the @Home service has a high price tag and requires major infrastructure investments.

  Despite all this, the company still has a model that seems to make sense-and potentially can make a bonanza.

  On the offering date, @Home closed at $17, up $6.50 on volume of about 12.6 million shares (the stock was as high as $25.50 on this day). Currently, @Home is selling for $19 ¾.

• High-Powered Management: True, there are many twenty-somethings starting cutting-edge companies. However, there is a big difference between starting a company and running one. Being a CEO of a fast-growing high-tech company requires a tremendous amount of skills: managing human resources, developing alliances, controlling cash flow, dealing with Wall Street, establishing a brand.

  One company that successfully transitioned successfully from a young start-up of entrepreneurs to seasoned management is Yahoo! Out of their dorm, in 1994, Jerry Yang and David Filo created a cool search engine-something that was greatly needed on the confusing Web.

  Then entered Michael Moritz, a Silicon Valley venture capitalist with the firm Sequoia Capital. He already had experience in transititioning a business started from a garage to the Fortune 500. He invested $2.5 million in a husband-and-wife team, who had a company called Cisco (Moritz's partner, Don Valentine, was the venture capitalist that financed Steve Jobs's Apple Computer).

  Moritz invested $900,000 in the Yahoo! startup. He then set out to assemble a top-notch management team. He hired Tim Koogle as the CEO. He was the former President of Intermec, which makes automated data collection and data communications products. He was also a top executive at Motorola. Jeffrey Mallett, senior VP of Business Operations, was the VP of Novell's Consumer Division. Farzad Nazem, senior VP of Product Development & Operations, was the VP of Media and Web Server Division at Oracle.

  Moritz also retained high-quality board members. An example is Mr. Hippeau, who has been Chairman and CEO of Ziff-Davis Publishing since 1993.

  As for Yang and Filo? Well, they are on the board and are also called the Chief Yahoo!'s.

  On April 12, 1996, when Yahoo! went public, the company was definitely still at the concept stage. Losses were $643,000 and sales stood at $1.4 million.

  Yahoo! issued 2.6 million shares at $13 each and raised $32.5 million. On the offering date, the stock shot to about $43 and then closed at $33.

  The stock is now at $48 ¼.

  But didn't Lycos and Excite also have good managements? Why didn't they do as well?

  That leads us to our next factor:

  Brand: Although the concept of brand recognition is difficult to measure, it was apparent that Yahoo! was the leader. Besides, the site was generating a tremendous amount of traffic. And once Yahoo! received money from the IPO, the company wisely invested it into brand-building vehicles: Yahooligans! (site for kids), local Web Guides (such as in LA, Chicago, NY, San Francisco, etc.), Yellow pages and classifieds, localized versions (that is, sites for other countries), collaboration with Motley Fool, the creation of a site for women (called Beatrice), agreement with Amazon.com to sell books, premium status on the Netscape web page and a joint venture with MTV to develop unfURLed (the Ultimate Guide to Music on the Web).

• Technology Migration: Many traditional businesses are having major problems in transitioning into the online world. A prime example is the traditional print business. Ziff-Davis has generated tremendous amounts of profits selling magazines to technology users. But with the Internet, these magazines are resembling dinasoars. Not wanting to face the prospect of extinction, Ziff-Davis is aggressively developing online media properties.

  Unfortunately, it is difficult to charge subscriptions to online magazines. Also, the online advertising revenues have not been large. This is extremely scary for a company like Ziff-Davis. That is, the company is transitioning its media into a form that has much lower revenues-at least, for the meantime.

  One company that had trouble with this migration is Wired Ventures. The company has spent millions on Internet Ventures, of which none seemed to produce anything but huge losses. Last year, the company had to pull its IPO offering (although, Wired did obtain about $21.5 million in a private round of venture capital financing).

  But there are online companies that do not have to worry about this transition. One is C/Net (CNWK). This company does not have to concern itself with cannibalizing existing businesses, because it was born in the online world.

  C/Net's sites push the envelope of the Net-using innovative streaming of sound and video. The news.com site provides 24-hour coverage of the latest on Web happenings. At the gamecenter.com site you can play cool games. You can listen to radio broadcasts from the Net (called Webcasts, using Real Audio) of news and features stories on computers and the Internet. With shareware.com, you can download over 200,000 shareware titles. Using buydirect.com, you can download the latest in Internet software titles.

  On July 1996, C/Net offered 2 million shares at $16 per share. The current stock price is now $26 7/8.

• Better & Cheaper on the Web: One company that perfectly fits this category is E*Trade, which allows consumers to buy and sell stocks without the need for talking to a pushy stockbroker-or paying the high fees. Also, you can do tons of research using the tools from the E*Trade site.

  In August 1996, E*Trade went public-issuing 5.6 million shares at $10.50 per share. The stock is now selling at $281/8.

  Another cool business on the Web is Onsale (ONSL). Let's face it. Not everyone needs the latest Pentium MMX supercomputer. Perhaps, you want a down-scale Pentium. Onsale has auctions on close-out and clearance computer equipment. Like Sotheby's, you submit a bid and hopefully get the equipment at this price. In fact, placing bids on this site can be quite addicting.

  The company not only makes revenues-but even profits.

  On April 1997, the company offered 2.5 million shares for $6 per share. Currently, the stock is selling for $9 ¼.

But, by following these factors, you will increase your odds. And it only takes a few home runs to make up for some bad picks.

Tom Taulli For comments/questions, contact Tom Taulli at tom@taulli.com.