There is a famous story about Joseph Kennedy who, in the 20’s was known to get a shoe shine each day as he entered the financial district on his way to the New York Stock Exchange. The Big Apple buzzed with money talk as the stock market was at an all-time high. The shoe shiner spent 20 minutes giving the father of our future President stock tip after stock tip. After flipping him a quarter, Kennedy promptly went to the Exchange and sold off his entire portfolio. A mere nine days later the market crashed. When asked about his fortuitous timing, Kennedy observed in a letter, "When the shoe shine guy gives you stock tips, it is time to get out!"

Why is it that so many literary geniuses of our time have plundered their fortunes: Honore’ de Balzac, Dostoyesky, Tolstoy, F. Scott Fitzgerald, Shelly, and even Tom Clancy who recently blew $2 million to a swindler he met at a Baltimore Oriole game to name a few. Of all the writers that have had their limited financial acumen profiled, perhaps no one has received more attention than the revered and beloved American writer Mark Twain. In a recent book by Andrew Leckey, "The Lack of Money Is the Root of All Evil: Mark Twain’s Timeless Wisdom on Money, Wealth and Investing," it was said that his knowledge of business matters was only enough to know when "…to come in from the rain." He passed on investing in the telephone and instead poured hundreds of thousands of dollars into a typesetting machine, a publishing company, a dietary supplement all which failed and lost huge profits in mining stocks due to margin calls. Thus, it appears whether you are a beloved and world recognized writer or just a mere shoe shiner, one thing remains constant; there are no short cuts to value investing.

It is easy to lament the ever-growing number of the dot-com dead. Yet collectively they have left a rich legacy as they pushed Corporate America into the net and spearheaded enormous strides in information technology. Venture capitalists, suffering through enormous loses and egregious failures, have become "vulture capitalists" spewing forth terms like "down rounds", "cram-downs" and "emergency cash infusions" all over Silicon Valley, the bell-weather of the industry. Entrepreneurs are forced to give up larger stakes for initial and secondary funding and accept investment and/or lending terms previously described as "unreasonable" or "unthinkable." Sky high valuations for unproven fledglings which have decimated aggressive VC funds are a thing of the past. Many startups that are receiving financing are now non dot-coms (e.g. wireless, biopharmaceuticals and medical devices to name a few). In these more risk-averse times, understandable and predictable tried and true business models are back in vogue. Most of the new economy business models suffered the same fallacy: Although services were provided more easily and efficiently over the NET, the market penetration did not occur fast enough to cover the enormous start-up costs and the supplier’s overhead. The Internet is, for all due purposes, still an immature and developing industry. As it continues its viral expansion across industries, markets, countries and even continents, it will become clearer what are the sources of failure and ultimately success. Although the Internet is a young phenomenon , it is a paradigm that will continue to develop.

An area that has been receiving particular recent attention is that of Branding. New economy companies spent hundreds of millions of dollars to brand their products or new name. To exemplify the marketing efforts of companies to brand their products there is an old anecdote of a young nine-month old baby who refused to eat anything and was being kept alive intravenously. One day the child’s uncle put a single Cheerio on the baby’s high chair and walked away. Several minutes later it was gone. H repeated the process until the child ate a full serving of Cheerios. This of course became part of General Mills folk lore and helped solidify the cereal’s brand. Steve Sanger, CEO of the Company writes: "I’m not sure how true the story is, but the people who read it believe it absolutely." Another Company that has done a tremendous job branding its business has been NOKIA. Located in Finland, a small country wedged in between Sweden and Russia, it is home to this global telecommunication behemoth. By constantly embracing technological innovations and aggressively branding its products worldwide, it has maintained a competitive advantage. Nokia employs 55,000 Finlandians, has 52 R&D centers across 4 continents and produces a new product model every 35 days. Together with their extraordinary management and top executives, its dominates the mobile Internet industry.

There is a growing concern that the VC industry has strayed from its roots by growing so large, so quickly. VC’s with billion dollar funds simply do not have the time to assist in the incubation and development of early stage companies. New smaller VC boutiques which hark back to pre 1995 when "sweat equity" meant something, are once again in vogue. Smaller boutiques can avoid the cumbersome bureaucracies and ensure decisions are being made by hands-on personnel. Although small generally includes their financial coffers as well which is not always beneficial for cash-intensive start-ups, this forces boutiques to seek out outside, strategically suitable investors/partners which is often extremely synergistic.

We at WPs were not immune to the recent downturn in our industry. This past quarter has been the first such period in our firm’s three year life that we did not nor participate in a private placement or purchase any form of securities for investment purposes (e.g. stock, warrants, options, convertible debentures or bonds…). Rather, we have been concentrating on three major areas of our business: Consulting, Bridge Loans and Triage. Since inception, we have always performed general consulting services for our corporate clientele and certain members of our portfolio companies. We are pleased to welcome to the aforementioned group the following companies this past quarter: Osmio, Channell Communication, Infidelity Support Services, Mi8, Transchat Plus, ZA Consulting, Tuesday Interactive, SupportScape, ProLaser, IB. Net, Hudson Sloane, Tradesoft, Cel Sci ("CVA") and most recently Answers Systems. In addition, we expect to be retained by 2-3 additional companies before the end of July. We perform a variety of services for each of these corporate clients and it ranges from writing the business plan, revising and improving the business model, evaluating their indigenous industry’s landscape, mergers/acquisitions and/or introductions to either capital sources or public companies or shells with cash. We are in varying degrees and stages of transactions and strategic partnerships with many of them already.

As per our prior newsletters, our subsidiary Spider Financial/Epiphany Holdings, Inc., has been actively reviewing and closing short-term bridge loans primarily for small yet emerging private growth companies. We were pleased to have closed loans for Campus Concepts and Support Scape and are in the final stages of negotiations on a third, Health/Chem ("HCLC") in conjunction with its company’s Board of Directors.

We, as have all our competitors, unfortunately also have had to perform triage for several of our portfolio companies. They represent investments we and our clients have made over the past two years (Wellfleet Holdings I – X, corporate and/or individual clients through our previous broker-dealer affiliations). We are working closely with several companies in particular to maximize shareholder value. They include: Aluminium.com, Kinkos.com (previously LivePrint.com), MyDocuments.com (previously Arvee Systems), Cloudsource and Big Chalk.com (previously HomeworkCentral.com). As always we will keep you apprised of all new developments. Finally, we are extremely pleased to announce the signing of two Letters of Intent/Term Sheets to raise capital for a new company Autowraps, Inc. in San Francisco, CA and an old friend Synergy Brands, Inc. ("SYBR") both through our new broker-dealer affiliation, KSH Investment Group, Inc. ("KSH"). We are working closely with KSH on both WP’s corporate clientele and portfolio companies and all new investment opportunities as well as KSH’s transactions such as its recently closed private placement for Paradigm Medical Industries ("PMED"). We thoroughly enjoy our new found partnership with KSH and its management and look forward to great things ahead.

NOTE: This report was produced by Wellfleet Partners, Inc. ("WPI") from various public research sources, for the sole purpose of general information. WPI makes no warranties to its factual content and is not a brokerage firm, registered Investment Advisor nor securities dealer; therefore, nothing contained in this report shall constitute an offer to sell, solicit or buy any securities or investment advice. Investment in these securities mentioned here involves risk and should not be considered without first reading the target Company’s most recent financial statements, 10Q and 10K, its Private Placement, Offering Memorandum or Business Plan, if applicable, and discussing the investment with your registered representative or professional financial advisor. Venture capital is inherently extremely risky. Mr. Lev is currently a registered representative of Starr Securities, Inc. a NYSE and NASD member broker-dealer.