Closing Books on Dot-Coms
Fallen upstart geniuses of the “new economy” are writing memoirs, trying to distance themselves from huge equity losses.
Los Angeles Times, February 1, 2002
Christine Frey, Times Staff Writer
Like a modern-day Dickens, Stephan Paternot witnessed the best and worst of times.
A year after graduating from Cornell in 1996, the co-founder of Web site Theglobe.com was worth nearly $100 million. His company’s stock set a Wall Street record when it jumped 606% in its first day of public trading. At 24, he became emblematic of the cocky boy geniuses using the World Wide Web to change the rules of business, media and life itself.
In 2000, though, Paternot stepped aside as chief executive of Theglobe.com, and the site shut down a year later after losing millions of dollars. Gone were Paternot’s paper fortune, his fashion-model girlfriend and the fawning reports on CNBC.
“It suddenly dawned on me that I might get nothing out of this, not a penny. For all intents and purposes, I was broke. . . . But of course, everyone still perceived me as a billionaire,” Paternot wrote in his memoir.
His book, “A Very Public Offering: A Rebel’s Story of Business Excess, Success, and Reckoning,” is one of many being written by former dot-commers searching for meaning in the giddy years from 1995 to 2000.
No one could confuse these tales with Nicholas Nickleby’s “demd horrid grind” amid the filthy, dangerous 19th-century factories of the Industrial Revolution. These modern journals–including “Dot.Bomb: My Days and Nights at an Internet Goliath” and “Boo Hoo: A Dot.Com Story from Concept to Catastrophe”–aspire to be the first drafts of an equally momentous era that inspired both great technology and terrible investments.
The books themselves are inherently ironic. The authors once seemed poised to make old media obsolete. But they had to turn to ink and paper to memorialize businesses that evaporated in the ether of the Internet.
“Even in a digital age, paper matters,” said J. David Kuo, author of “Dot.Bomb” and former Value America executive. “Tactile paper can relay history better than anything else can.”
Some fret that these books–equal parts history, confession and damage control–present a skewed picture. Rather than provide serious analysis from inside the dot-com meltdown, most of the authors try to distance themselves from the billions of dollars in equity that simply disappeared.
“It’s just a celebration of the cluelessness of the people who created this whole mess in the first place,” said Bill Lessard, founder of Netslaves.com, a Web site catering to the information industry’s technical workers. “Instead of trying to glam their stupid companies on people, they’re trying to glam themselves as products on people.”
History, though, is in the hands of those who hold the pen. Despite their portrayal in magazine articles and television spots as titans of the “new economy,” Paternot, Kuo and others describe themselves as innocents who got caught up in the euphoria of big dreams and easy money.
“Despite the hype, headlines and hysteria, this was just a gold rush we were in, not a gold mine we had found,” Kuo wrote. “We might look like hip, chic, cutting-edge, new-economy Internet workers, but in fact, a lot of us were kin to those poor, freezing fools in Alaska who had staked everything on turning up a glittering chunk of gold.”
Online retailer Value America, which touted itself as “the Internet superstore,” sold everything from laptop computers to barbecue grills, but never actually held inventory. Merchandise was shipped to customers directly from the suppliers.
But the site’s selection was limited, orders could take weeks to arrive, and the company spent lavishly on advertising–including a NASCAR sponsorship. When Value America posted a wider-than-expected quarterly loss in August 1999, Kuo recalled being shocked by the reaction of the analysts and the business media, which expected better.
“The world had changed,” he wrote in his book. “It wasn’t just about revenue anymore. It was about gross margin and controlled losses and growing revenue. It was like having to grow a real business. No one ever told us we had to do that.”
Paternot’s Theglobe.com, one of the first Internet “communities,” offered online chat and games and personal Web pages for free. Advertising, subscriptions and a venture into e-commerce wasn’t enough to support the enterprise, which sparked the frenzy of dot-com public offerings in 1998 and 1999.
In the last pages of his memoir, Paternot comes to this conclusion about taking his company public, which ultimately cost investors millions: “In the final analysis, it was a necessity. It had to be done. From a personal stance, I sometimes wish I could take it back. But . . . whatever.”
According to Paternot, running a multimillion-dollar dot-com wasn’t as glamorous as the media made it out to be. In his book, Paternot recalls angry phone calls from investors after the company’s stock began to fall. “Every morning, we’d walk in, ready to face the day, and the first thing we’d hear was, ‘I hate you! I hate you! I hate you! I will kill you!’ ”
For Annie Van Bebber, who sold her Attitude Network Ltd. to Paternot’s company in 2000 in a stock deal, such insight offers little consolation. The stock certificates now paper her bathroom wall. “We believed in him, in them, in their entire team,” Van Bebber said of Paternot. “And we all got screwed.”
In the book–and even now–Paternot dismisses the concerns of those like Van Bebber who came up losers investing in Theglobe.com. “I feel bad for anybody right now sitting in a tough position financially, but I don’t blame myself,” Paternot said. “They went in and gambled. I don’t have a single sleepless night over it.”
That lack of reflection has led some to question the motive behind the writings.
“It’s a job for people who would otherwise be jobless,” said Philip Kaplan, founder of a Web site that tracks dot-com failures.
Kuo said he hoped for a better understanding of himself by writing about his experience. After starting the book in the summer of 2000, “it struck me that Value America was the leading indicator of the dot-bomb bust to come,” he said.
Value America, for which Kuo served as senior vice president of communications, filed for bankruptcy protection in August 2000 after its stock fell 93% in one year. But by the time his book was published in October 2001, the bust Kuo anticipated had already come. Dozens of other Internet executives shared his story.
Ted Weinstein, a San Francisco literary agent, said he has been approached with several book proposals about dot-coms. Although “most are personal projects that would not attract a larger audience,” Weinstein said, he would be interested in finding “the right dot-com memoir.”
“People are always fascinated by other people’s lives,” he said.
Well, not always. Reviews of the books have been mixed. Paternot’s book recently ranked 31,957th in sales on Amazon.com. Kuo’s showed up at 3,903rd. More than a century after their publication, Charles Dickens’ “Oliver Twist” was at 20,914 and “Great Expectations” was at 6,089.
“The jury’s still out as to whether there still is a market for them,” said Carol Franco, director of Harvard Business School Publishing. Franco has not signed any deals for dot-com memoirs, but is publishing a book by Kaleil Isaza Tuzman, founder of GovWorks.com and the subject of the documentary “Startup.com.”
GovWorks.com, which enabled users to pay parking tickets and government bills online, failed in 2000. Although Tuzman will include his personal experiences in “Lessons of Early Entrepreneurship,” the book will look much more broadly at how entrepreneurs should start a business.
In the end, it may be academics and journalists compiling the early history of the Web who benefit most from the memoirs. Much of the information about Internet companies was digitized. But e-mails get erased, and outdated home pages aren’t always archived.
Because of the lack of physical data, it’s easier to compile a history of cinema’s first decade in the early 1900s than that of the Web at the end of the century, said Henry Jenkins, director of the comparative media studies program at the Massachusetts Institute of Technology.
“The digital space is already gone,” he said.
Stories written by journalists or academics who are “going to take a step back and draw a second draft of history” would have much broader appeal, Weinstein said. Books that analyze the Internet boom in the context of other times of economic prosperity–the 19th-century gold rush and the aerospace boom of the 1960s, for example–are “going to grab us that much more.”
Several weeks after the books were published, dot-com tracker Kaplan had two of the dot-com memoirs sitting on his desk but hadn’t gotten around to reading them.
“If they make all these books into movie format, I’ll definitely see them,” he said.
He may get the chance.
“Boo-Hoo” author Ernst Malmsten said he already has sold movie rights to his book about the failure of online retailer Boo.com.
And Paternot, who is now represented by a talent agency, is packaging a movie deal based on his book. In the meantime, he is pursing an acting career. This month, he will begin shooting an independent feature film in New York, in which he plays a con artist.
© Copyright 2002 Los Angeles Times