(FORTUNE Magazine) – You hear a lot these days about the great business-to-business gold rush that's beginning to transform the economy. If that's truly the case, then the ultimate picks-and-shovels play just might be a company called SmartPipes.

A startup with the backing of Silicon Valley's A-team, SmartPipes intends to do nothing less than transform the way businesses communicate. The company is developing a layer of software that, it hopes, will take all the semicompatible pieces of a company's networks--hardware, software, voice, data (whether cutting-edge or in their dotage)--and make them run like the parts of a tuned engine. In other words, SmartPipes expects to accomplish seamlessly--over the Internet, of course--what so many companies spend a fortune to accomplish manually today.

It's a technologist's dream come true. And there's more: SmartPipes is bootstrapping a potentially huge enterprise out of nothing, at Internet speed. Though the company didn't even exist six months ago, SmartPipes has made believers of Mr. New New Thing himself, entrepreneur Jim Clark, and venture capital king John Doerr. Within weeks of seeing the company's blueprint, they rushed to fund the startup, allowing SmartPipes to race ahead. "SmartPipes could be really huge," says Doerr, as he is wont to say about an idea that floats his boat. "It really looks to be an awesome technology."

But wait a minute: Is this really such a big deal? Companies already patch their networks together, right? Well, yes, but only with great trepidation and expenditure. A universal system with an easy-to-use graphic interface for running corporate networks simply does not exist. As it stands, every midsized to large company has a hodgepodge of networks, some serving customers, others connecting brick-and-mortar branches or serving a sales force. Inside the network you have all kinds of Oracle and PeopleSoft databases, perhaps SAP, and maybe a dedicated voice network. And, of course, this stuff runs on disparate software (Windows, Unix, etc.) and is piped through all sorts of hardware (Cisco routers and Lucent or Nortel switches).

To optimize this bramble, you would need to continually beef up your IT budget and thereby put yourself at the mercy of an increasingly large group of very highly paid "dudes" who would much rather play foosball than work overtime to complete your project. Says Theran Lee, head of networks at Charles Schwab: "I have 400 branches, and if I want to reconfigure the routers at each site, I have to get an engineer to work on each one for half an hour. It's a real waste of time, but the only way around it right now will be if SmartPipes works."

"This [corporate networking] is a market that's growing 40% a year," says Jim Clark's buddy Tom Jermoluk, chairman of Excite@Home and another SmartPipes investor, "and it's based on a 20-year-old technology that is completely obsolete. Imagine what happens when new technology is applied here."

What SmartPipes hopes is that for a monthly fee of 15% to 20% above what you are paying your phone company or Internet service provider for DSL or a T1 line, you will get total IT relief by turning over all your networks to the SmartPipes cybercenter in Columbus, Ohio. How does it work? Theoretically you will log all your network's specs on to a graphic interface on your customized SmartPipes Web page, and then the SmartPipes software will allow all the pieces of your network to make nice with each other. Want to hook up your senior Pac Rim sales staff to your European technical staff? Reconfigure which branches receive data fastest? SmartPipes says it should be a point-and-click operation.

How does SmartPipes intend to make this happen? The company's secret sauce is a package of extremely complex software containing zillions of instructions that facilitate communication between all manner of software and hardware. Or as one SmartPiper puts it: "Geek Nirvana."

Of course, there are questions about all this. Run SmartPipes' model by a technical person and his first reaction invariably is: Sounds too good to be true. "I'm not sure it all adds up," says Dave Shirk, senior vice president of product management at Novell. "If they are talking about just outsourcing some Internet applications, there are already companies doing that. And if they are really talking about Windows-based databases interfacing with other platforms, I'm not sure how they are going to do that." Because the software isn't completed yet--the company hopes to have the service up and running early this summer--and because it is so cutting-edge, no one know really knows whether Shirk's concerns are valid. But Clark and Doerr are convinced it will work. And so are several dozen crackerjack engineers--some wearing shirts that read manhattan project, the over-the-top nickname they've given the enterprise--who have signed on to the company.

Oddly, the guy behind SmartPipes doesn't even have an engineering degree--though his technical expertise surpasses that of most engineers. Ray Bell, a fifth-generation Bay Area native and the son of a school superintendent in Mill Valley, Calif., graduated from the University of California at Berkeley in 1979 with a degree in political science. He went to work for a law firm after college and soon found himself working more on legal databases than on briefs. Bell went on to found a company that managed online data. Then he jumped ship to Oracle. "I guess you could say I'm completely self-taught," says Bell, a boyish-looking 44-year-old. "All this engineering stuff, if you really want to, you can learn on your own."

At Oracle, Bell learned all about relational databases, the heart of Oracle's product line. And he was assigned to work on some of that company's more cutting-edge technology, such as groupware and e-mail. But in late 1996, rather than work on CEO Larry Ellison's network computer project, Bell left Oracle and took a job down the Valley at Cisco. It was an exciting move, but from a product standpoint, Bell was starting at ground zero. Cisco isn't about databases; Cisco is about networking. "I literally would come home and stay up studying networking textbooks and manuals every night," says Bell. "My wife said it was like being back in college."

Bell began working on a project at Cisco that would be the foundation of SmartPipes. It was an effort to integrate the desktop computer with networks through what is known as directory technology. Directories are complex databases that map out networks and their users. Unlike a relational or traditional database, a directory allows you to model thousands, even millions of objects and define the relationships between them.

In a sense Bell's directory project was adding his Oracle expertise to Cisco's strengths, and his work gained momentum, especially after he phoned James Allchin at Microsoft and proposed a partnership with the giant of Redmond, Wash. Allchin greenlighted Microsoft's participation even though Bell didn't have business up and running yet at Cisco. But by last summer it had become clear that Bell's project would be difficult to pull off within the confines of Cisco. "Maybe it was the fact that Cisco is a hardware company and this is a software business," says Bell. "It also needed to be a lot bigger, so it just wasn't a perfect fit."

Last September, Bell had lunch with Dave Roux, an old buddy from Oracle, now of the tech buyout fund Silver Lake Partners. Bell explained his dilemma, and Roux said, "I think it's time you ran your own company." In other words, Roux was urging Bell to take his business idea and jump ship. But how? And who would fund the project? "I will," said Roux, who because of his behind-the-scenes networking on the company's behalf is now referred to by the SmartPipes team as "the consigliere."

That still left the other questions unanswered: How and with whom would Bell actually build this company? Bell's solution was to say, "Hello, Columbus." One of the most important potential customers Bell had been wooing while at Cisco was UUNet, the Columbus, Ohio, unit of MCI WorldCom. UUNet just happens to be the biggest Internet service provider in the world, making it critically important to SmartPipes. That's because Bell figured that selling SmartPipes' services as an add-on to an ISP's offerings could well be his best sales channel. And so Bell called up his chief contact at UUNet, an engineer named Bill Emerick. As it turns out, both Emerick and marketing executive Dennis Brouwer weren't particularly thrilled to be working at UUNet and jumped at the chance to go with Bell. In fact, the name SmartPipes is a bit of a dig at another UUNet exec, who told his troops, "Guys, what we make are dumb pipes." Bell and his team would make the pipes smart. (Bell acknowledges that in the future he will have to be a little nicer to UUNet, as it could well be an important strategic partner.)

In September the Columbus contingent flew out and met with Roux, who encouraged them and then laid down a challenge: "The Valley is filled with guys who talk about doing a startup on Sunday, but then just head into work on Monday." How could the team resist that one? Within a matter of days, Roux and Bell were drawing up what's known in the business as a cap table, which maps out where the money would come from to fund SmartPipes and who would own what percentage of the company. It was decided that Bell would first approach certain wealthy investors, since they would be less demanding than a hard-edged VC. The VC round would come after that. Then a corporate round and finally an IPO.

At Roux's suggestion, Bell and his team focused on two of Silicon Valley's best-known and deepest-pocketed personalities, both of whom were investing in startups: Jim Barksdale, former CEO of Netscape, and Jim Clark. They decided to try Clark first, by going through Jermoluk, who they thought might have a better grasp of this particular technology. Jermoluk--or TJ, as he is known--a protege of Clark's, became a star (and COO) at Silicon Graphics and then went on to run Excite@Home. Recently Jermoluk stepped aside to become chairman of that company and spend more time investing with Clark. The two men have an informal investing partnership called Helix (named after the patterns of smoke trails that come off the wingtips of their stunt planes). At that point, Helix had invested in only a handful of companies, including Shutterfly, a Web-based photo-finishing business, and Kibu, a Web portal for teenage girls. That Helix had invested in so few companies was not for a lack of potential deals. "I'm literally getting five to ten pitches a day now," says Jermoluk. "Most of them are just copycats or get-rich-quick deals."

As Bell began his pitch, he wondered whether the project would appeal to Jermoluk. After all, Jermoluk has a reputation as one of the smartest engineers in the Valley. If he didn't bite, that might call into question the whole model. "It took TJ about five minutes," said Bell. "He understood the kinds of problems we are trying to solve from wiring together cable networks at Excite@Home." By meeting's end Jermoluk had agreed to invest. And he would bring the idea to Clark. "To me SmartPipes is the real thing," says Jermoluk. "A unique idea based on creating a superior engineering team. The risk here is execution, and I'll take that risk every time if the rest looks good."

In mid-October, Bell, his team, and Jermoluk met with Clark in the Mountain View, Calif., headquarters of another Clark venture, MyCFO. Clark listened to the pitch, but kept trying to peek ahead to the cap table. "It sounds good," said Clark, "but I'm really relying on TJ for this one. And he's excited about it, so I am too. There's just one thing," Clark continued. "We could buy a smallish piece like you're suggesting and be more or less passive investors, or we could buy a much bigger piece and be very active investors." Wow, thought Bell. But what does that mean? It meant that Clark and Jermoluk wanted to chip in a seven-figure number for some 20% of the company. Jermoluk would join the board, and the two men would do everything they could to build SmartPipes. Bell and Mark Dickey, a seven-foot former basketball player at Berkeley who had recently joined the company to head up sales, could barely contain their excitement. As they walked out, Dickey asked Bell, "Do you think it's cool if we high-five each other outside Clark's window in the parking lot?" "Nah," said Bell, "we'd better wait until we're around the corner of the building." So they did.

Clark and Jermoluk did ask that Bell clear one more hurdle. Even though both men are pretty serious engineers, they wanted to vet SmartPipes with their one-man brain trust, Milo Medin, the CTO of Excite@Home. "Milo listened to my story, fired a couple of questions at me, and then offered some suggestions," said Bell. "I guess we were okay." On Nov. 12, Helix and SmartPipes inked their deal. Bell never did get around to pitching Barksdale.

It's not so much the money that Clark and Jermoluk are providing as the pedigree. Drumming up a couple of million bucks these days in Silicon Valley for a serious project like this, run by a guy like Bell, with Roux's backing, wouldn't be much of a problem. In fact Roux, Bell, and the other team members, along with Mitchell Kertzman, CEO of Liberate, the cable TV software firm, and some executives from Excite@Home and Global Crossing, had already contributed nice chunks of change. But with Clark involved, Bell could say, "This is a Jim Clark company." It wasn't lost on Bell that Clark, who co-founded Netscape, was investing in a company that some were saying might be "the Netscape of the business-to-business Internet."

Meanwhile, it was decided that although SmartPipes' headquarters would be in Silicon Valley--borrowed space at Excite@Home's headquarters to start with--the engineering functions would operate out of Columbus. Of course, the UUNet expatriate engineering team was there already. And besides, Buckeye town has a bit of an engineering and networking history to it. Besides UUNet, Columbus had been the headquarters of Qube, Warner and American Express' ill-fated interactive cable effort. Not to mention CompuServe, LCI (now part of Qwest), and Sterling Commerce. Hiring engineers away from those companies would be worlds easier than trying to build a sizable talent pool in Silicon Valley. "The pitch has been pretty simple," says Bell. "We'd ask engineers, 'How would you like to work on a cutting-edge technology project backed by Jim Clark? We'll pay you Silicon Valley wages, and you won't have to move.'" SmartPipes has hired 42 engineers and counting (with a target of 100 by the end of next year).

Back in Silicon Valley, Roux and Bell were gearing up the company for its next round of financing: the venture capital round. This would be far tougher than the friendly going-over by Jermoluk and Clark. But Bell decided to aim high. That meant Kleiner Perkins. Jermoluk and Roux arranged for a meeting with John Doerr of Kleiner on Dec. 14. The night before the sit-down, Bell took a look at his company's presentation and decided it had to be completely reworked. "There was too much sales in it," recalls Bell. "We were camped out at the office, and we threw the plan on the floor, ordered pizza, and stayed up until 2 A.M."

The next morning Bell, Dickey, and Jermoluk walked in to meet with Kleiner partners Doerr and Will Hearst and junior staffer Matt Murphy. The meeting was scheduled for two hours but ran for more than three. "We had TJ and Jim," says Bell, "but we really wanted John. And he only has time to get involved with one or two companies a year." Doerr can be as intense a listener as he is a talker, and in this meeting he scrunched up his face and fired off rounds of penetrating questions. Well into the meeting there was a very positive development for the SmartPipes team. "It was a pronoun shift," says Bell. "Instead of saying, 'When you do this,' Doerr was saying, 'when we do this.'"

The two sides didn't meet again until after the holidays. Jermoluk flew back from New Zealand where he had been vacationing on Clark's boat at the America's Cup qualifying races. TJ was headed to the national championship college football Sugar Bowl because the game pitted Virginia Tech, TJ's alma mater, against Florida State, TJ's brother's alma mater, and the Jermoluk boys were taking their mom to the game.

This time the Kleiner partnership assembled for Bell's pitch, with Doerr acting as facilitator. "There was some spirited technical debate," recalls Bell. "TJ gave his pitch and went off to his football game, and then they said thanks and asked me and Mark [Dickey] to wait in a meeting room." How long did he wait, and what was that like? "I guess we were there about 45 minutes," said Bell, "and it was like waiting to have a baby." Finally Doerr and Hearst came out with big smiles on their faces. SmartPipes was in. "We were very excited," says Doerr, recalling the moment. "It's a huge opportunity. The realization was that the business they are in could be as big as the TV or even the car."

But there was still more to work out with Kleiner. Doerr wanted Bell to run his pitch by the firm's networking expert, Vinod Khosla, which Bell did. Doerr also wanted Kleiner to get in on the same terms as Clark and Jermoluk. Bell resisted initially--after all, Kleiner was coming in later--but ultimately he backed down. "You know what they say: You're only on the other side of the table with these guys one time," he says.

Then another, thornier issue arose. "John said that the word on me was I was one of the smartest guys around," says Bell. "But I had never run a billion-dollar startup. He said that Kleiner wanted to make me chairman and bring in an experienced CEO." Bell's reaction? "I said, 'No way. We'll fund it ourselves.' " But after listening to Roux, Jermoluk, and Clark (who has plenty of experience starting up companies but not running them), Bell came around on this one too. "It really is about subjugating your ego for the good of the company," says Clark. "Ray saw that." And that's why Kleiner has a headhunter out there looking to fill the CEO position of a high-growth, cutting-edge networking company.

So like Clark and Jermoluk, Kleiner ended up getting 20% of SmartPipes. Bell, the other founders, and early investors have about another 20%. The balance will go to employees, corporate partners (don't be surprised if that includes Cisco and UUNet), and the new CEO. As for the big liquidity event (i.e., the IPO), the thinking now is the second quarter of next year--if all goes according to plan.

And that, of course, is the only question that matters: Is this bet on execution winnable? Even though Bell and his engineers seem to have an answer for the most arcane queries, and even though the company carries both Clark's and Doerr's stamp of approval, there are no guarantees that SmartPipes will rewrite the networking business or, for that matter, that it will even work. Selling the company to Wall Street may present some problems too, given the technical ground the company hopes to break. Right now, Bell and SmartPipes have a long way to go and milestones to pass--like finished product, first customer, and first sale. "We will," says Bell. Well, there's nothing wrong with being ambitious. Not when there's a whole world to connect.

REPORTER ASSOCIATE Angela Key

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