How do you get a dot-com CEO off your porch?
A: Pay him for the pizza.
It’s a joke making the rounds of Silicon Valley and other digital dustbowls, but within it lies a slice of truth. In the topsy-turvy Net economy, where success was measured by the money a company spent, not by what it earned, few firms could last for long. And even if the company survived, the chief executive often didn’t.
Aside from notable exceptions like Amazon’s Jeff Bezos and eBay’s Meg Whitman, many high-flying Net execs have been shot down, only to pursue other managerial avenues. George Shaheen, for example, ex-CEO of bankrupt online grocer Webvan, recently resurfaced on the board of Closedloop Solutions, a maker of financial software for CFOs. Jay Walker, the flamboyant force behind Priceline.com, now tends a new batch of startups at Walker Digital Media. Even Netscape co-founder Mark Andreessen’s Loudcloud startup, which manages Web infrastructure for companies like Ford and Nike, staggered through 2001 with losses and layoffs.
The biggest bloodletting occurred in fall 2000, when nearly 500 CEOs left or lost their posts-mostly due to the dot-com collapse, says John Challenger of executive outplacement firm Challenger, Gray and Christmas. “A lot of them were CEO-founder dot-commers,” Gray says.
Scott Gordon, director of the technology practice for executive recruiter Spencer Stuart, notes that many Web startups suffered from “founderitis”-a condition where the firms’ founders lacked the know-how or desire to take the company to the next level. “Passionate entrepreneurs often lack critical financial, strategic or people skills to continue forward progress,” Gordon says.
But not all ex-Web CEOs are looking for jobs at Domino’s. Some, like BabyCenter’s Matt Glickman and Mark Selcow or Onebox.com’s Bill Nguyen, saw their startups acquired before the NASDAQ bubble burst. Others, like iVillage’s Candice Carpenter or Napster’s Eileen Richardson, stepped down under pressure but went on to open new chapters in their lives. And there are some like RealNames’ Keith Teare, who, because his company never went public and doesn’t have to answer to a board, has held on and is sticking it out for the long haul.
For a few heady years in the late ’90s, these top executives took a ride on the Internet roller coaster. They experienced giddy highs and dizzying drops, but all emerged wiser and no worse for wear. Here are the stories of what they did, what they would have done differently and what they learned along the way.
Names | Matt Glickman and Mark Selcow
Ages I 36
Old job | Co-founders of BabyCenter
Status of startup | Merged with eToys in May 1999; now owned by Johnson & Johnson
Current titles | Partners in Merced Systems, an enterprise software startup
When Matt Glickman and Mark Selcow were Stanford graduate students, they knew one day they’d run a business together. But they never dreamed they’d give birth to the premier parenting site on the Web.
When the MBAs got together in the summer of 1996 to brainstorm ideas, it was BabyCenter that had the most potential, says Glickman. The concept was disarmingly simple: Attract mothers-to-be with unique services, such as weekly email updates on fetal development, then sell them everything from bottles to booties. Still, it wasn’t easy getting started.
“At first it felt like we were running into the wind,” says Selcow. “It was hard to recruit people, hard to raise money. But 18 months later, the world looked entirely different.”
By early 1999, BabyCenter had grown from a two-person operation to 175 employees with a fully stocked online store. But the business had hit a critical juncture. Feeling threatened by competitors with deeper pockets, the founders had to raise more capital, risk an IPO or seek a suitor. They chose the latter and were acquired by eToys in May 1999 for $750 million.
The partners stayed on to run BabyCenter for another year, but it wasn’t the same as running their own show. They left within a few weeks of each other-Selcow to travel the world, Glickman to raise his growing family.
EToys didn’t survive. After a volatile run up and down the NASDAQ, it filed for bankruptcy last March, selling its BabyCenter operation to Johnson & Johnson for $10 million.
But the Selcow/Glickman partnership did survive, and last summer they formed Merced Systems, which plans to develop call center software for large enterprises. Their first product will be available later this year. “Once you’ve had the opportunity to grow your own business,” Selcow notes, “it becomes addictive.”
20/20 hindsight: Glickman: “I’d hire the right people earlier, while still being prudent about the bottom line.” Selcow: “I’d start working with customers earlier, to build the product and get it right.”
Facing the Music
Name | Eileen Richardson
Age | 39
Old job | Interim CEO of Napster
Status of startup | In hibernation; expected to relaunch in spring 2002
Current title | CEO of Infravio, a Web services startup
Ten years in the VC business, including a stint as founding partner of JK&B Capital, didn’t prepare Eileen Richardson for what she encountered when she took the reins at Napster in September 1999. The fledgling music-swapping service had an 18-year-old wunderkind inventor, Shawn Fanning, and a rabid underground following, but no clue as to how to turn these assets into a revenue stream. Still, “Napster captured my heart,” Richardson says. “I was fascinated by the underlying technology.”
Under Richardson, Napster grew from 40,000 users to nearly 20 million in just nine months. But she was unable to convince major record labels to let Napster distribute their music online. Within three months the company had been sued by the Recording Industry Association of America for alleged copyright violations. More suits followed a few months later. Short on cash, Napster turned to VC firm Hummer Winblad, which provided $15 million. But Richardson says her vision for Napster-that it be a launching pad for unknown artists-didn’t jibe with the VCs, so she stepped down.
Today Richardson heads Infravio, a software firm that helps enterprises build applications running over the Web. In her first eight months, Infravio has grown from seven employees to 45. “At Napster I had a lot of responsibility, but not the authority to get things done,” she says. At Infravio, Richardson says she gives her employees both.
Napster, on its third CEO in two years, plans to relaunch as a subscription-based service this spring. Its larger legacy may lie in a new generation of peer-to-peer applications that may change how people share data across the Internet.
But Richardson doesn’t miss her days with the freewheeling startup. “People joke about getting gray hairs from doing this kind of stuff. I’m not joking-I’ve got the gray hairs to prove it.”
20/20 hindsight: “I’d have spent more time doing due diligence on the VCs themselves€¦to make sure their vision was the same as the company’s.”
Names | Bill Nguyen
Age | 31
Old job | Founder and CEO of Onebox.com
Status of startup | Sold to OpenWave in February 2000
Current titles | CEO of Seven, a data services provider for telecom companies
Talk about excellent timing. Bill Nguyen (pronounced “win”) sold his dot-com startup Onebox.com to Phone.com (now OpenWave) in February 2000, just two months before the dot-com bubble burst.
The price: A cool $850 million. Not bad for a site that gave away voice mail, email and fax services to four million people. Nguyen won’t say how much he made on the deal, except that he did “well enough to take care of several hundred generations of Nguyens,” the 31-year-old quips.
So what does a guy with a reputed nine-figure bank account do next? Start a new company, of course. “Selling Onebox was great because of the financial rewards, and it made the investors happy. But we never did all we wanted to do. That’s why I started Seven.”
Seven builds software that lets companies like British Telecommunications and Cingular deliver mobile data to enterprise customers. Started in May 2000, it employs nearly 90 people and recently posted its first cash-positive quarter.
In some ways, Nguyen says, operating a startup is easier now. Back then, most dot-coms spent a third of their money on ads, another third on overpriced real estate and the rest in a bidding war for talent. These days, with no marketing overhead and a depressed real estate market, Nguyen can spend 70 to 80 percent on building an engineering team.
Despite his own success, Nguyen never went into business with the goal of cashing out-and won’t hire anyone who does. “Some people came to work for startups with the idea that it would be the last job of their lives. I’ve tried to terminate every single one of them I could find.”
20/20 hindsight: “My philosophy is that everyone you hire should be better at something than you are. If they aren’t, why hire them?”
Name | Candice Carpenter
Age | 49
Old job | CEO and co-founder of iVillage
Status of startup | Merged with Women.com in July 2001
Current title | Self-described writer, wife and mother
Whether running a virtual village or shopping at Versace, Candice Carpenter doesn’t do anything halfway. So in the summer of 1995, Carpenter and partners Nancy Evans and Robert Levitan used seed money from AOL to launch a series of sites that would eventually become iVillage, the Web’s most popular destination for women. After a hugely successful IPO in March 1999, the stock soared to a high of more than $130 per share, making Carpenter a member of the $100 million club.
But by December 1999, iVillage was trading in the mid $20s and Carpenter was “completely out of gas-and beginning to notice it,” she says. April 2000’s market correction, a failed attempt at ecommerce and a spate of high-level departures didn’t help. By July 2000, Carpenter was out.
In her new book, Chapters: Create a Life of Exhilaration and Accomplishment in the Face of Change (McGraw-Hill, 2001), Carpenter says she recovered from her five years in the Net maelstrom by tending to her two children, shopping and eating candy bars. Now, as a managing director of The Transitions Institute, she’s helping executives make changes like the one she just made. “I’m interested in how we can prepare people for a world where you continually have to find new ways to reinvent yourself,” she says.
Though iVillage’s stock is still less than $2 a share, the company announced its first positive cash flow last fall. The site is one of the Web’s 25 most popular destinations, according to Jupiter Media Metrix.
20/20 hindsight: “The best way to build a great company would be to keep it under the radar screen for as long as you can€¦[and] not to go public as a young company.”
Names | Keith Teare
Age | 46
Old job | Co-founder and CEO of RealNames.com
Status of startup | Still operating
RealNames.com was on the verge of finalizing its IPO in April 2000, but ditched that plan when the market crumbled.
In retrospect, it may be one of the best things that could have happened to the company, which was founded in April 1997 by CEO Keith Teare. “Right now it’s way more attractive to be private than public,” says Teare. “It gives you a lot more freedom” to weather your company’s ups and downs without public scrutiny, he adds.
Simply put, RealNames offers surfers an easier way to navigate the Web. Instead of typing a complicated Web address, you can type a keyword-such as Sony Walkman or Ford Explorer; computers operated by RealNames detect the keyword and direct you to the appropriate site. RealNames earns revenues by selling keywords to companies like Sony and Ford.
Freedom from public scrutiny has helped the company weather some hard times. In the past two years Teare has cut his workforce by more than 60 percent-from 320 employees to 120 today. And it took three years to convince Microsoft to embed the RealNames technology into its browser, a key driver of the comp-any’s growth.
RealNames now handles more than 140 million keyword searches a month, up from 40 million earlier this year. Teare says the company is on track to see its first positive cash flow in mid-2002. He also claims that the company is currently valued at $520 million-$200 million more than when it filed for its aborted public offering. And, he adds, he has no plans to retest the IPO waters any time soon.
“I doubt we’d be valued at $500 million today if we’d gone public,” he says.
20/20 hindsight: “You’ve got to be very nimble. Things change quickly in unanticipated ways. If you don’t have a solid core [of management], you’ll probably be torn apart.”