Robert H. Lessin, a high-powered investment banker, is giving the nascent on-line financial services industry a major dose of credibility.
Mr. Lessin, a former vice chairman of Salomon Smith Barney, has joined Wit Capital Corp., a New York firm that is spearheading the effort to deliver investment banking and brokerage services over the Internet.
As the firm's chairman, he plans to build Wit into a viable alternative to Wall Street's traditional investment banks by removing much of the costs and complexities associated with investing and capital raising.
"We are living in a different world," Mr. Lessin said. "There are some rather profound differences between a physical and a virtual world."
"Wit is certainly the pioneer, certainly at the cutting edge of what is going on," he said.
Wit Capital, a two-year-old investment bank and brokerage firm that exists only on the Internet, is essentially a capital-raising organization with an on-line brokerage attached. It was founded by Andrew D. Klein, the author of "WallStreet.com," who in 1995 used the Internet to raise $1.6 million from 3,500 investors for his other firm, Spring Street Brewing Co.
The Spring Street deal was the first offering ever to be handled via the Internet.
Mr. Lessin said he sees an opportunity to carve a niche for Wit by simplifying the way individual investors, small businesses, and middle- market companies tap into the markets to raise capital or to invest. The rapidly consolidating financial services industry can neglect the needs of smaller and middle-market businesses, Mr. Lessin said.
"In those companies, the availability of capital defines the difference between success and failure," he said.
Mr. Lessin should know. A graduate of Harvard College and Harvard Business School, Mr. Lessin has been on Wall Street since joining Morgan, Stanley & Co. in 1978. In 1987 he became the youngest-ever partner at the firm.
Several years later he was wooed, along with several other Morgan Stanley bankers, to Smith Barney by Travelers Group chairman Sanford I. Weill, who wanted to boost his firm's investment banking prowess. But the prominent executive changes were not as fruitful as Travelers officials had hoped and many of the Morgan Stanley bankers left.
Mr. Lessin, 43, resigned from Salomon Smith Barney just before Travelers announced its plan to merge with Citicorp.
He said he could have taken any job - or none at all - but joining Wit was a "pretty easy decision," given his penchant for growth companies and venture capital markets.
"There is no such thing as a free shot at anything, but I think we have pretty clear road for a while," he said.
Among his priorities at Wit Capital will be a series of "surgical hires" that would fortify the company's equity research department. The intent is to promote the use of the highly accessible Internet as the medium where savvy investors can receive the quality of service that formerly had been limited to a few.
"There are obviously some large companies that are very close customers of mine that I suspect will find this to be an intriguing distribution channel," he said.
To observers like Susan Skerritt, a former official at Morgan Stanley and now a partner at Treasury Strategies Inc., Chicago, the Internet is rapidly winding its way into normal daily activity.
She said she was not surprised to see that complex financial services increasingly were finding a home there as well. Accessibility would be the key to Wit Capital's success, she said, for the market may no longer be the purview of brokers and institutions.
Wit Capital's services would barrel through the barriers erected by intermediaries and "go straight to the public," she said.
"There is a recognition that people can handle their own investments responsibly," she said.
"It's a very interesting concept and something that never would have been possible without the Internet," Ms. Skerritt added.
Wit Capital's endeavors may hold a valuable lesson for all banks to follow - particularly commercial banks that are attempting to break into the highly competitive investment banking and trading arena.
Larger investment banks have made significant "human-capital investments," she said. "This kind of an approach may be a more effective way of accomplishing that goal."
James Marks, an equity analyst at Credit Suisse First Boston, said there is no clear model to compare to what Wit Capital is seeking to do. "But I think it is a clear and intriguing idea," he said.
But Wit Capital is not a direct threat to Wall Street's capital markets function, since the deals it handles are fairly small, he said.
"It's a whole new way of approaching things," Mr. Marks said. The firm represents a "hybrid between private and public capital."
"What they are trying to do is use the economies that are available over the Web to make these smaller deals rational or profitable to distribute."
Membership in Wit Capital is free. Officials there boast that all that is needed is $1,000 to open a cash account or $2,000 to open a margin account. Members can buy shares during an IPO at the offering price.
Wit Capital has underwritten about $10 million through 11 public offerings through March 31. Though the IPOs are lead by large investment banks, Wit Capital hopes to gradually build up its presence as a member of a syndicate through its low-cost distribution capability and as a value-added participant.
"It's our goal to work closely with both issuers and traditional investment banks," said Bill Feeley, director of capital markets at Wit Capital.
"As we build a broader customer base, it's our intention to move up the investment banking food chain and first become comanaging underwriter, and then perhaps a joint lead manager," Mr. Feeley said.
Wit Capital is also building a digital stock market that would let its members trade stocks directly with one another, thus allowing participants to dodge the spreads charged by brokers.
The company is also building a public venture capital service, which would allow investors to buy stakes in companies that are in their formative stages.
