There were plenty of stories of excess during the time. Did your company engage in any of the classics?
Our party was great
. Did I participate? Yes I did. Did I enjoy it? Yes I did. But deep down inside coming from an Oracle background where spending was managed to the nth degree, my instinct was telling me that this was a total waste of money.
Our building was the biggest excess and the biggest disaster. I dont even want to guess how much money we spent on our new building. Somehow at the time it all made sense. Everyone bought in.
I noticed an article in April 2000 that mentioned you had $22 million in the bank and yet the company shut down six months later. How did you spend all that money?
That was a common mistake that showed up in many articles. We had raised a total of $22 million, but by April 2000 we had burned through much of it and we had a substantial burn rate at the time. We had grown from 4 to over 100 employees in 15 months and had moved the company 3 times. By May 2000 I had over 50 people in my area and if you remember, technology, generally speaking people at that time were very expensive.
You finally shut down in October 2000, but in May things were still looking good. You had just signed a deal with Yahoo
We scored some great deals. We had Cox Media, AOL, Yahoo
we were signing up with the big players. Within four months it all came to and end. We were growing out of control. Our burn rate was out of control. The IPO window was shut. B-to-C (business to consumer) was a bad term. It was time to look at the situation realistically and say we are heading into a storm. Drastic steps need to be taken. That is where things started to crumble.
When did things start to get ugly?
The indicators were there that we no longer needed to grow, in fact we needed to contract fast, but we had this massive organization that was built for growth. Based on the fact that there was no more growth then at least half of the people shouldnt have been there. The projects that they were working on were not needed. It was time to take action. You know what, it is painful, but we had to make cutbacks. I fought for weeks to make cutbacks and came up against a huge amount of resistance. I finally was able to make some of the cutbacks in June. It was the most painful experience of my career, but I knew it had to be done. I was totally dragged over the coals by every member of my staff. They thought I was the devil. It was a very sad day because I saw that people did not understand what was going on and why these things needed to happen. No matter how you tried to explain it, they saw it as evil, inconsiderate and unfair.
A major problem was that the employees had no sense of risk. It was not part of their vocabulary. That is what struck me the most. People were relating to a startup situation as if it was a corporation that had been around for 10 or 15 years with healthy growth and profits. They wanted all the benefits AND the upside opportunity, without the risk.
Most of us knew that there were thousands of startups and that only a few would survive, but everyone thought that they would be the one of the survivors. In a sense, you have to believe that sometimes. If you dont believe in yourself and your ideas then it will all collapse anyway. It was hard to maintain a balanced perspective at the time.
Where were you when the end came on October 4, 2000?
Believe it or not, I was on vacation in France after getting engaged to my now wife in Ireland the previous week. After a few days on the trip in France my wife and I were robbed and we lost everything we had with us. After we got that taken care of, I went to a cyber café to check my email. I started seeing that my staff were bidding each other and me farewell. At this stage the company closed a few days before I had a chance to check my email. After reading those emails I got an email from Roger that told me to come and pick up my stuff after I got back. After working with him for 22 months, building this company together, he sent me an email. It was not a very pleasant email to get. I never got a voice-to-voice communication that the company was shutting down.
Truthfully, by that time I had become a bit of an irritant to Roger since I was pushing back on him regarding the financial health of the company and he didnt want to discuss it. It was none of my business! I had left the financial issues completely to Roger. He would tell me when cuts needed to be made. I wanted to know what was going on with the company financially, but I was included in the decision-making process. It ended up having to make cuts every week. I had my staff asking all these questions and I didnt have answers for them. Productivity fell off a cliff.
I realized that there was a huge resistance to reality, what was really going on, and the unwillingness to share it with others. The executive management team was left completely in the dark about the financial status of the company. Roger would never tell us how much money we had and when the money could run out. He refused to answer the question. That is what bothered me the most. That is the issue that I cant let go of and may never be able to let go of. I cant help but think that if the executive management team had the opportunity to sit down together and really take a look at the situation we could have found a solution.
I was prevented from telling people the truth. I believed then and I firmly believe now that when you tell people the truth they wont run away from you. They will rally around you and they help you find a way to get through the situation. If you are straight with people they will stick with you, even if you have to eventually let them go from the company. They will appreciate the respect you have shown them and understand why there was no alternative.