Casey Kait and Stephen Weiss' Digital Hustlers, the Please Kill Me of Silicon Alley
It'll be okay with Casey Kait and Stephen Weiss if their book Digital Hustlers (ReganBooks/HarperCollins, 344 pages, $26) becomes known as the Please Kill Me of Silicon Alley. They readily admit that the oral history of punk rock was a model for their oral history of New York's dotcom rise and fall.
There will surely be a lot of books published in the next couple of years on the rise and fall of Silicon Alley, and I bet many will use Digital Hustlers as a primary resource. Tiled together from hundreds of interviews with players large and small, it's a chronological composite portrait of New York dotcom culture?at least, as remembered by those insiders, with both nostalgia and chagrined hindsight, as they stood among the ashes and ruins of that culture in the fall of 2000. The interviewees are spread across that blasted landscape, from early pioneers like Red Burns and Stacy Horn to last-wave VCs, from worker bees to geek-chic celebrities like Pseudo's Josh Harris, Razorfish's Craig Kanarick and Silicon Alley Reporter's Jason Calacanis.
Weiss is currently freelancing for Vogue, Kait's been concentrated on writing the book. It started as an idea to cowrite a rise-and-fall-of-Silicon-Alley movie; their agent, Jim Fitzgerald, talked them into the book. They began working on it in August. Doing it as an oral history made eminent good sense: they already knew a lot of the players, people who'd become very used to talking about themselves and the industry, and it was the fastest way to turn a book around.
"What made it difficult was we were interviewing these people under the most hostile circumstances," Weiss says. "Everyone was doing their best to put on a good face. Because for so many years they had just told their stories and enjoyed this freedom to give their story. But now people were?you could just see the fear in their faces."
Still, they made for natural interviewees, Kait says. Silicon Alley "was really an environment of storytelling. The businesses were about telling the story of the business. That's what you learn when you're writing your business plan for the first time. You're telling the story of the business, how it started, how it will grow, how it will succeed. So in some ways people were comfortable talking, because they had done a lot of talking."
The co-authors agree with several of their correspondents that there were two generations in Silicon Alley: the original Internet visionaries and pioneers, and the money people they attracted. SiteSpecific's Seth Goldstein recalls in Digital Hustlers, "Some time in '97 it changed. But from mid-1995 to the end of '96, it was magical. In '97, as the IPOs started to hit the market, it became more of a real business, and the investment bankers started to leave their jobs to go to dotcom startups and venture capital started to flow in: '97 to '99 was really about the money. Now it's about the morgue and the funeral."
"I would say it changed around 1996, and the Gold Rush probably started in '97 going into '98," UrbanDesires founder Kyle Shannon says. "That transition makes me a little sad. Because prior to that, the only reason people were quitting their day jobs and starting businesses was because they passionately believed in something. And after that, no one really gave a shit if the business was good or not?no one was passionate. It's like, 'Oh he's doing a travel thing? I could do a travel thing?fuck it. Give it a different name, get a new URL, IPO baby, yeah, whoo.'"
By '97, dotcoms were attracting not just mad money, but stupid money. Startups that would have benefited from small, intelligently applied investments literally had too much cash thrown at them, pumping them up to steroidal growth levels they couldn't manage. With the flood of money came the inevitable explosion of useless, redundant sites and businesses.
"There was a moment in 1997 when we said, Wait a second?in a world of supply and demand, if supply is infinite, price falls to zero," SiteSpecific's Clay Shirky says. "That's why you can't charge for content. It was a total mystery. Other people had figured that out; I'm not saying I was the first. But no one had ever published it that I read, and everyone was still banging on about 'content is king,' and suddenly I woke up one day and went, Oh, that's why we can't charge for content. It's just macroeconomics. Once people had figured that out, you didn't need to ask me or anybody else why that was true?it was just absorbed by the culture."
DoubleClick CEO Kevin Ryan concurs. "This is exactly what we thought was going to happen. To me it's no different from if you opened 12 pizza parlors on this street. It's not the pizza that's the problem, you just have too many parlors. What would happen over the course of two years is that 10 of them would go out of business. You'd end up with two, maybe one upscale, one downscale, and they'd be very successful. Meanwhile, all the guys going out of business would say, 'You know, these people don't like pizza.'
"That's exactly what's happening on the Internet. There are just sooo many sites...which is healthy and good. But remember the normal math of startup companies. For a while people forgot that eight out of every 10 businesses don't make it. That's just a reality. And it's going to continue here. What you'll see, if you do the math for any sector, is that if you reduce it down to three or four players it works fine. Because the volume doesn't go away, but the costs do. So you're going to see a lot of consolidation."
"We fucked up," Shannon admits. "We got seduced into thinking that a slick pitch for a screenplay is a good movie. There were a lot of people pitching slick screenplay ideas, and a lot of people funding movies, for people who never made a movie before, didn't have a screenplay to back up the pitch, didn't know what they were doing, and didn't know anyone who knew what they were doing.
"Ultimately investors will believe in the potential of what's out there, but we shot ourselves in the foot with all the companies that weren't really businesses, just a bunch of yutzes that got together with 10 million dollars to blow. They blew through their 10 million dollars, and I guess it's probably because we live in a world of such perfect information that when one goes, they topple like dominoes..."
David Liu, cofounder of TheKnot.com, says, "I think the pendulum has swung far across the threshold of what equilibrium is. I've used the phrase 'the class of '99': any company that got its initial financing in 1999?and I'll go out on a limb here?was categorically overvalued. They raised too much money on too high a valuation. I don't care what category you are?fiber-optic networking, B2C, B2B?if you raised money in the year 1999, you were overvalued."
As symbols of the rise and fall of Silicon Alley, most everyone cites the spectacular flame-outs of TheGlobe.com and Pseudo.com. And Pseudo's Josh Harris remains the one guy who embodies the epoch's exuberant dreams and ludicrous excesses. As much funky fun as the idea of Pseudo was, the stark fact is that it was cable access tv for the Internet, with an audience you could count on one hand. The amounts of money thrown at it?and quickly thrown away by the high-rolling Harris?were like a sick joke.
"I think the right-minded people in Silicon Alley always thought there was something incredibly ridiculous and impossible to understand about what was going on at Pseudo," dotcommer-turned-VC Jason Chervokas opines. "The thing always seemed loony, because (a) it wasn't a business, obviously?it was never run as a business, it was never built to be a business; (b) the notion of creating tv for an alternative distribution platform was ridiculous. We already had perfectly good tv. Why did we need something else? Down to its most fundamental assumptions, the whole thing made no sense. I think people in New York were so caught up in the sense of creativity and revolution, and the fun of the party scene, that there were a lot of people who didn't step back. Though, actually, people did: Pseudo didn't raise real money for years.
"And looking back I think we should have taken it as the sign that the end was coming when Pseudo raised as much money as it did from what looked like sober investors. I remember thinking at the time, Gee, they got this money from Tribune and Prospect Street? These guys ought to know better. What do they see in this? And I spoke to some of those guys and asked them what they saw in it, and they were very much enamored of the fact that broadband was beginning to become a reality to a very small collegiate test market, and they thought, We'll learn some lessons here. But I think it was really a sign that a sort of investment mania had finally driven all logic out of the way we invested. I wish I had realized it at the time."
For those who might still wonder why the bubble burst, Harris continues to be an instructive emblem. Comparing himself to Warhol, he theorizes, "Marilyn Monroe?maybe that's his signature piece, or Chairman Mao. I'm doing Gilligan. 'Cause Gilligan is really the body of work that changed the culture. Marilyn Monroe was the surface of that change, but it was really Gilligan, and the mores that he brought to a generation of culture, that really shaped their behavior and shaped who they are. Gilligan, to me, was a primal force in terms of other mediation than physical. That was my formative Wonder Bread, my formative years. Gilligan shaped me."