Kerry DeMatteis had sat around for long enough watching the boom, marvelling as 22-year-old CEOs became instant millionaires and internet stocks shot upwards at escape velocity. And even when the market softened in late 2000, he figured, hey, there's still time to get in. So he decided to pack in his safe, stable job of six years as a web developer. Soon enough he found a promising startup: Zethus, an on-line commercial real-estate company in Fairfax, Va. They quickly offered him a job, and he quickly accepted.
"The company looked good. It looked ready to grow, to ramp up," he says. "I was finally joining this revolution."
On March 5, his first day, DeMatteis showed up early to make a good impression. People filed in and he set about organizing his new desk. But by noon, it was obvious that something was going on; the staff kept convening hurried, worried little meetings. At 4:45 p.m., everyone was called into the conference room. The company's president, Tom Bacon, and chief technical officer Gerhard Karba came on the speakerphone and explained that Zethus had been unable to find a backer. Goldman Sachs, which had invested $15 million (all currency in U.S. dollars) in Zethus, had cut the company off. They were immediately shutting down. Employees would be laid off. One of the founders began to break down. The head of human resources started handing out severance cheques. DeMatteis hadn't yet been put on the payroll, so he didn't get one. He followed the mass of employees out the door, got in his car and drove home.
"I laughed. Then I thought - what now?"
The end of the dot-com boom has meant a lot of things-no more hysterical stock values, no more venture capital to "revolutionize" the sale of pet food on-line, no more lunatic, $2-million-per-minute Super Bowl ads aimed at "brand building." But in terms of everyday life, it's the labour market that has suffered most. Since the beginning of 2000, dot-coms have laid off more than 93,000 people in the U.S. alone. "That's a lot of people in one small, focused area," says John Challenger, CEO of outplacement specialists Challenger, Gray and Christmas. "And it's been fast. Companies are cutting quickly and decisively."
All across New York and San Francisco and Toronto, offices have been reduced to fields of vacant $750 Aeron chairs-a reminder of the people who once occupied them. "It's just grim out here," says a friend of mine in San Francisco. "It's like a ghost town now. Literally overnight."
For the laid-off, there's a crisis of the type that only comes when an entire industry vanishes overnight. And so they gather on-line and off, commiserating drunkenly at Pink Slip parties and collecting at web sites like F--ckedCompany.com to heap invective on their former employers. The ones that still have jobs aren't bringing their dogs to work any more. Those that don't are wondering if their former Old Economy companies, from which they so sneeringly fled, will take them back. B2C now stands for Back to Consulting. "I'm seriously thinking about whether I'm gonna need a suit," said one morose hipster I met at a networking party. His last job? "Biz development and strategy." What does that mean? "Ahhhhh...nobody knows," he laughs crookedly. "Neither did I, really." In the world after the crash, the jokes come easier than the jobs.
And everyone has a story.
Daniel Brecher was a 21-year-old at the University of Michigan in 1998 when he founded Versity.com with four other students, sitting in their living room. Between classes and schoolwork, he helped run the company as its VP of sales and marketing. In April, 2000, Versity.com was valued at $125 million, Brecher had stock options worth about $2 million on paper, and had celebrated by buying a shiny, silver 1958 convertible Porsche, with the vanity plates VERSITY. "It was my one big indulgence," he says sheepishly.
The dorm-room entrepreneur: It was an archetype of the boom. And Versity.com fully harnessed that youthful, subversive vibe of the net-the site provided lecture notes to college students who missed class. "The college market was very hot back then, so there was a lot of money to be made," muses Brecher. In 1999, Versity attracted $12 million in venture capital. The following year, the San Diego-based company was acquired by an even bigger student-marketing company called CollegeClub.com. And, best of all, CollegeClub.com was set to go public in June, 2000, so Brecher figured he'd hit the ultimate dot-com score: an exit strategy with stock soaring ever higher, into the empyrean.
Then came the crash. CollegeClub.com called off its plans to go public-and immediately faced a brutal cash crunch. Over the next five months, most of the Versity.com staff was laid off, as CollegeClub.com slouched agonizingly towards bankruptcy. Two years of Brecher's work decomposed before his eyes. "It was just a spiral of doom and despair," he says. "There were people sending goodbye e-mails every day. People who'd just uprooted themselves, moved across the country to San Diego with their families. It was awful." His stock became worthless. He would later frame the stock-option certificate and put it on the wall, "but it was kind of hard to look at for a while there." As a last-ditch move to preserve a paycheque, Brecher moved into the sales department of CollegeClub.com. He spent the final weeks doing nothing more than dusting off his résumé, along with the rest of the panicked staff.
Now he's back where so many former founders are-working a day job, trying to figure out how to begin again. For now, he's given up on looking for jobs with get-rich stock options; his new job is working as senior project manager for Silicon Space Inc., a San Diego company that designs and configures intranet software for companies, and he looked for a solid salary ("I'm making pretty high five figures," he says) and company stability-those old-school traits. "They've been profitable since day one," he notes with satifisfaction. "No relying on VC money or advertising, which suits me just fine." Particularly since he's still making payments-on his second car, a Jag.
Despite the dizzying speed of his fall, Brecher plans to start another company-though he'll wait at least a year, by which time he expects the capital markets to thaw. "I'm optimistic. I'm not so burned that I won't take options again."
The attitude is typical of young dot-com entrepreneurs: The market giveth, and the market taketh away. Few of them blame themselves in any way for their failure. As they see it, even if they made mistakes along the way, even if they had delusional business plans--who could have survived such a vertiginous downturn?
The delirious world of late-'90s venture capital also seduced a new breed of entrepreneur-the 20-somethings who never really intended to get into business in the first place, but just had so much opportunity dangled in front of them that they couldn't say no. Doing a startup was like forming an indie band, except with nicer business cards. After the crash came the existential questions: Do I even want to be an entrepreneur? Why did I do this?
That's what Melanie Marshall wonders now. "I'm road kill on the information highway."
Last June, at age 25, Marshall won the "She-EO" contest being held by the NRG Group, the infamous incubator of net companies in Toronto. Handed out for the best dot-com business idea by a young woman, the "She-EO" award came with $250,000 (Canadian) investment from the NRG Group, and NRG support for developing the company. Marshall's idea was to build a web site called Hipikat.com, which would present international news in new and unusual contexts, allowing people to customize the information they received. A journalism school grad-the "She-EO" award reception was on the day of her graduation-she'd interned with the BBC in Africa, and saw how hard it was to interest an audience in international news. "I thought if you customize it, if you really turn it into a conversation, you have a better chance of grabbing people," she says. It's the sort of change-the-world vibe that drove so many dot-com ventures, but it also came with radical inexperience in business. Marshall had brainstormed the idea at school, but had never expected to build a company in a few weeks. "I wasn't sure if I was ready," she admits. "But then I thought, a quarter of a million dollars-when am I ever going to get another chance like this?"
In the logic of the dot-com boom, business inexperience was regarded as a bonus, as a type of clarity and purity that would help people think outside the box. NRG Group's co-founder Vicki Saunders infamously called it "the wisdom of inexperience."
"I had the McDonald's button on-I'm new and I'm learning," Marshall cracks.
But being green ultimately meant being unable to tell when a corporate situation was in trouble. Though the NRG Group talked incessantly of business "revolution," its founders had a meagre record of incubating companies. Marshall was soon locked in endless meetings, arguing with NRG's founders and staff on what, precisely, Hipikat.com ought to be. She wanted to use the $250,000 to develop a quick and dirty prototype to show to investors; NRG staff, she says, wanted to go big by developing a major piece of software that could retail to other people. "But I was a media person, not a software CEO," Marshall says. "Vicki once said that she 'existed in a cloud of possibilities,' and I felt like I'd descended into it. Even now, I still can't figure out why so little got done." She'd never signed a shareholders' agreement, so the issue of who precisely controlled Hipikat.com was unresolved, making it even harder to bargain for support. Meanwhile, hounded by a media hungry for profiles of dot-com kids, Marshall felt as if she was doing far less work on her own company than media PR for NRG and the "She-EO" concept.
The disagreements straggled on and, by January, 2001, Marshall still hadn't accessed her $250,000. That month, the NRG Group-which had gone public the year before, and promptly got pummelled in the downturn-axed two-thirds of its staff. Marshall's position at NRG was cut, and she was out on the street, with no severance, no savings and no Hipikat. The web site was still vapourware: nothing but animation on its splash page.
Like Brecher, Marshall doesn't entirely regret the experience; she did, for example, travel to the World Economic Forum at Davos, where she met environmentalist Vandana Shiva and record producer Quincy Jones. "My Rolodex is incredible now," she says. But for now, she's doing volunteer literacy work for Toronto's St. Christopher House, and being "tight with a buck" while she figures out her next move. While she still owns the Hipikat.com domain name, she's not ready to push ahead with building it. "I have a lot of things to think about now," she says. "But I've always thought, the way to build a business is very conservatively, very cheaply. The pinball tables come later!"
That's the view at the top of the dot-com food chain. But if you move further down, and talk to the worker bees, a much grimmer picture emerges. The market for their skills has vanished, almost overnight.
Take James Barnett. The 33-year-old from New York spent the boom years working as a web site designer for some of the biggest interactive companies, including iXL, Organic and BarnesandNoble.com. His specialty was information architecture-designing the overall shape and structure of a web site, how the pages, sections and tools connected together. The market for Barnett's skills was so hot that last January, when he decided to move to San Francisco, companies were bidding frantically to hire him. He had eight different interviews in three days. One firm even sent gifts. "They FedExed a really nice piece of luggage. It had a note inside from the company, saying, 'Pack your bags-we want you to move to San Francisco!' It was pretty classy. But it was like, holy shit, what the hell is going on?"
He took a job at CarStation.com, which procured parts for car repairs. But only a few months after he started, Barnett sensed trouble. The company seemed to be scrambling, rudderless. Barnett quit, figuring he'd have no problem finding other work. A month later, CarStation had its first round of layoffs. By this time, San Francisco was awash in laid-off dot-commers, all languishing in coffeehouses, all gunning for the same few positions. He got few interviews-mostly he got "we'll let you know" e-mails that were never followed up. Six months later, he was still unemployed, had spent all his savings, and was living for free in a friend's house, unable to afford the cost of moving back to his hometown of New York. "Unless I want to live in the suburbs with my mother, and at age 34 that just ain't gonna happen," he laughs.
James Barnett plans to find work in music production, his part-time hobby. No more $75,000-a-year paycheque, but, hey, look on the bright side. "If I'm gonna get paid 10 bucks an hour anyway," he says, "it might as well be for something I love doing."
His problem, he figures, is simple: Nobody needs information architects any more. The entire discipline was overly specialized, a hologram created by temporarily explosive demand for web site design, which vanished last year. After tracking dot-com layoffs for the last year, John Challenger agrees. Worse, he says, "New Economy companies actually worked in a very industrial style. They hired tons of people, all this labour. And now they're doing much of that stuff with software. Those jobs were a once-in-a-lifetime chance that this generation had."
"There were all these 20-something kids doing HTML and making, like, six-figure salaries. Nobody doing HTML deserves that," says Jodi Shapiro, a 28-year-old web site designer in New York. In the mid-'90s, Shapiro found work with prestigious companies ranging from e-marketing firm Grey Direct to Condé Nast and Disney. But as she watched the profligate spending of dot-com companies-the Friday massages, the blizzard of free Palms and cellphones-she paradoxically began wishing for the boom to end. "I'm all in favour of having a job you like, but somewhere a line got crossed. For me, it was when everyone started bringing their dogs into work. When it was dog day at [Disney company]Family.com, man, that would piss me off, because there'd be all these mutts sniffing me all day long. Everyone's saying, 'How come you're so uptight? Don't you like dogs?' And I'm like, 'Look, dude, this is a job, remember?'"
Still, the bust hit Shapiro hard. After she was hurled overboard last summer, she found herself competing with friends-the same people she used to help find work, back when stray job offers were freely e-mailed around like joke URLs. "Now, you find out about a job opening and you think, should I tell everyone else? It's a mess." At one point, when her unemployment benefits neared the end with no job in sight, she found herself looking at Help Wanted signs in a local Blockbuster. "I was serious. I was calculating how many dead-end McJobs I'd need to take on to afford living in New York." In early 2001, she finally found some freelance web design work, but still hasn't located a full-time job.
For average web employees, it doesn't much help that they were all laid off by 20-somethings whose style of firing was amateur and ham-fisted. At one company, several employees weren't even told they'd been canned-they only discovered it after their e-mail, cellphones and key cards stopped working. At the how-to firm Ehow.com, founder Courtney Rosen asked the freshly laid off to "spread the word" about the company. At Inside.com, some staffers found themselves fighting to get their expenses-interview meals racked up on credit cards-reimbursed.
Only programmers are immune from unemployment-because companies still need bodies to run the web. Grant Bremer, a 30-year-old programmer was laid off in the spring by Concrete, a New York web-design shop. Headhunters immediately called with job offers. Former employees had set up a Yahoo! discussion club-called "Ex-crete"-to help each other find leads. Within days, Bremer had accepted a new job. "If you have the right skill set, you're in okay shape," he says. Though maybe not. One programmer I spoke to in Toronto was laid off when his dot-com collapsed in January. "A year ago, I posted my résumé on-line and had 20 phone calls. Now I send out 20 résumés and get nothing."
And then there are the survivors - probably the most remarkable of all. There are those who, despite all the snarky told-you-so commentary, have been insane enough to launch companies in the crash.
Tim Stoute founded the Toronto company eyeReturn in January, 2000-"one of the worst times imaginable," he now admits. Even more brutally, his company was attaching itself to the much-maligned on-line advertising world.
Yet eyeReturn has managed to eke out a living. It produces "vokens," which can be short flash movies, sound bites or small mobile animations that companies can place on web sites, so they roam around the screen to attract attention. Stoute's first clients included CHUM Ltd., which owns CITY-TV and Bravo. The company hired Stoute to work on a promotional Sex and the City voken for CHUM's various web sites. "You could click on Sarah Jessica Parker and you'd get to this web site with trivia from the show," he says. Others followed, including Compaq and Nike, and now eyeReturn has grown to seven people. Since it's not yet profitable, Stoute is keeping expenses to a minimum, and not relying on "branding" to build his business -- just good old-fashioned working the phone and sales.
It's a harbinger of the net company to come: Conservative. Cautiously optimistic. Hungry, instead of arrogant. It's all very...Old Economy, actually. "If we can make it now," Stoute says, "we can make it any time."