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It is funny how people are now
pining for the �good old times� that took place before
the Dot Com stock market melted down in mid-April 2000.
Lots of people had started companies who never started
them before and hired a lot of people with even less
experience. Experienced old-timers left their cushy
Fortune 500 jobs to jump into the dot com fray � this
seemingly being their last chance at stardom.
But did that many people really
strike gold?
Even at the height of the stock
market frenzy, the only people who really made money
were the principals of the firms, and of course their
investors. The average workers never really made more
than $15-30,000 off of their options; hardly enough for
a down payment on a decent condo in Manhattan. If they
looked at the slave hours that they put in for that
measly bonus, they would have done better off working as
a contractor than getting equity. The VCs made and lost
a ton of money, and individual investors did the same.
It seemed that only a precious few made money and
actually kept it.
The firms were no better. I
worked briefly at Avalanche, a new media pioneer, but
even at the height of the rush, Razorfish bought them at
a fire sale as a result of mismanagement by incompetent
management. Razorfish blew it too - their principals
resigning in shame due to their refusal to learn the
lessons of the past. They waited too long to lay off
staff and ran up a huge loss, and their stock price
evaporated. Around the same time, IBM Global Services
announced layoffs. The press asked them about that, and
they simply replied, �What�s the issue? We�re a
consulting firm. That�s what we do!� IBM�s stock went
up.
According to the US Chamber of
Commerce, 90% of startups fail in the first year. Why
shouldn�t this apply to dot coms? The simple truth is
this: It is really HARD to start a company � any company
- and grow it successfully. Most firms fail. That�s a
fact of life. Most dot coms were doomed from the start �
they either didn�t have enough capital, had bad
management or no viable product. I don�t feel sorry for
all of those failures. They deserved to die, and they
were ultimately sentenced to the form of capital
punishment that occurs when investors withhold capital:
bankruptcy and liquidation.
Recently, I was at a CEO
Breakfast sponsored by New York eComm on the topic of
fiscal health. Everyone there discussed managing costs
and watching revenue and profitability, if any. At the
end, I mentioned that the firms that can survive in
today�s business climate and become profitable and grow
off of their revenues will look like heroes and will
also be the first ones to receive funding when the
funding spigot opens again. Organic growth, long
pooh-poohed as being a business model too slow for a
rapidly growing and changing industry, suddenly sounds
good. It is ironic how the tortoises always seem to beat
the hares. |
