Ah, the good ol’ days

From the March 2008 Issue of Vanity Fair…
http://www.vanityfair.com/magazine/2008/03/postscript200803

In January 2000, contributing editor Nina Munk reported on the late-90s Internet gold rush—a surreal time when speculators competed for stakes in Web start-ups, and entrepreneurs with little more than the talent for self-promotion became insta-tycoons by taking untried ventures public (“It’s the I.P.O., Stupid!”). Free Internet provider NetZero, which drained $15.3 million in its first, and only, year as a private company, was valued at $3 billion on the first day of public trading. Online-community site theglobe.com broke I.P.O. records when it rose 606 percent in its initial day of trading, briefly propelling its two giddy twentysomething founders to a combined worth of more than $150 million. Kozmo.com, having just raised $60 million from Amazon.com for its plan to deliver snacks and trinkets to people’s doorsteps, was racing toward a mega public offering, as were Pets.com and Petopia.com. It was I.P.O. mania. But as Munk’s article anticipated, everything would soon fall apart.

In March, the nasdaq, driven by Internet stocks, closed above 5,000 for the first time ever—up from 3,000 just four months earlier. Then, in mid-April, the bubble burst. Suddenly there were no more I.P.O.’s of tech companies. Dot-coms were dot-doomed.

Theglobe.com’s Stephan Paternot and Todd Krizelman, who were each worth at least $90 million on paper at one point, watched their million-dollar fortunes evaporate. Pets.com, which raised $82.5 million in its initial public offering in the last gasp of February 2000, was out of business nine months later. The others—among them Petopia.com (which had funding of at least $79 million, but was later folded into Petco Animal Supplies in order to pay off debts of $2 million) and Kozmo.com (which burned through $250 million before it went bust)—never made it to Wall Street.

The dot-commandos did recover, however. “What do you do after you’ve made and lost a fortune? You pick up where you left off, chasing the dreams that inspired you before you made your first dollar,” says Paternot, who wrote a tell-all book, A Very Public Offering, in 2001. Today, he invests in Internet 2.0 start-ups (including event-management site Ping.com and Craigslist–like Olx.com) and independent movies (Lunar Park and Down & Dirty Pictures). Krizelman started a publishing-data venture called MagazineRadar. Kozmo.com’s C.E.O., Joseph Park, who fell off the map after the delivery site went bust, resurfaced in December 2006, founding Askville.com, an information-sharing Web site under the Amazon umbrella. And former Pets.com C.E.O. Julie Wainwright is a self-employed strategic consultant.

As for NetZero’s C.E.O., Mark Golden, he and his Web 1.0 relic have survived, buying competitor Juno Online Services in 2001 to form United Online, a public company worth less than a third of what NetZero was worth in its heyday. Golden remains C.E.O. of the combined company.

The new Internet frontier is different from the virtual boomtown of the late 90s. “I think everything is more measured—both entrepreneurs and investors,” Krizelman says. Paternot agrees: “It’s founded on significantly stronger companies, many of whom show solid profits and more realistic long-term targets.” But that doesn’t mean Paternot is advocating Web-site I.P.O.’s. “Only go public as an absolute last resort,” he says. “If you absolutely must go public, then at least make sure first that your revenues are steadily rocketing and your profits entirely predictable.” That brings up this question: With so many of today’s Webpreneurs more focused on growing traffic than on building revenues, was anything really learned from the first tech bubble?

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Recently a great 6 page story ran in The New Yorker talking about the history of online communities, and how they’ve evolved into the social networking (ie “me media”) we now use today. Below is a brief excerpt related to theglobe.com, for the full story click on the link below.

http://www.newyorker.com/archive/2006/05/15/060515fa_fact_cassidy?currentPage=6

By John Cassidy

Online communities have existed since the dawn of the Internet era, and so has the desire to make them profitable. After Netscape went public, and surfing the Web became easy, a number of companies emerged to help people build Web pages, where they could post pictures and text. One of the first was theglobe.com, which two Cornell undergraduates, Stephen Paternot and Todd Krizelman, started in their dorm room in 1994. Within a year, theglobe.com had roughly two hundred and fifty thousand registered users, and it was generating about fourteen million page views a month. Using the slogan “A Whole New Life Awaits You,” the site advertised on MTV and on the sides of buses. In contrast to other home-page companies, such as GeoCities, theglobe.com encouraged its users to send messages to one another. “Our philosophy was more about people interacting with other people,” Paternot wrote in his 2001 memoir, “A Very Public Offering.” “Very quickly, everyone started using the term community. Everyone jumped on the bandwagon. Everyone became community.”

On November 13, 1998, theglobe-.com issued three million shares through the investment bank Bear Stearns, at a price of nine dollars each. By the end of the first day of trading, the stock price had jumped to $63.50. On paper, at least, Paternot and Krizelman were worth more than sixty million dollars each. Less than two years later, theglobe.com’s stock was trading at two dollars, and Paternot stepped down as co-chief executive.

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