Dr. Koop and The Bubble

Wow. I was too young when bubble started and all I remember is the talk that "Internet is going to change the world". But if companies like the one mentioned went public then I must imagine how bad situation might be at that time. Currently, companies that are going public have some solid revenue numbers and are in business for a while.

They also hired a direct mail firm (VentureDirect) as their agency of record, and they were expected to spend around 10 million with them. Yet another example of the crazy and flawed approaches to start ups and online marketing back in the day. We all thought we were so smart. If only we had known better.

You've got that right. Look at all that changed in 15 years in terms of what it took to garner $43,000 in revenue compared to doing the same now. An independent developer can, in less than the time it took Dr Koop to hit that number, hit the same number with 1/1000th (if not 1/10,000th) of the capital outlay (their $8 million in money), and nary a Microsoft product in sight. Between fifteen years of open source, competition for infrastructure and platform as a service, multiple revenue channels available to individuals and several orders of magnitude more eyeballs and attention spent on the internet, we can all party like it's 1997.

I remember CommerceOne being worth $20 billion, and having a gazillion dollar burn rate (they lost $3.7 billion over 10 years from 1994 to 2004). There was a famous story at the time that the CEO wouldn't take Bill Gates' call because CommerceOne was the future and Microsoft was the past.

Internet Capital Group was another similarly insane story, once worth $60 billion.

VA Linux IPO'd at a valuation of $7 billion if I recall, and had a roughly 700% pop on its IPO price.

Nortel and Lucent were worth $200 some odd billion, around the time Cisco punched up to $600 billion. And those are in 12 year old dollar terms; Cisco's valuation would be $900+ billion in today's dollar.

Infoseek was once worth $27 billion.

There was a great story in The Industry Standard or Wired about CritalPath, a messaging startup that planned to solve the holy grail of messaging. It intro'd with their team laughing about how a few pennies spent on a postcard had secured hundreds of thousands in new business, and that their biggest problem was dying of indigestion from growing too fast. Chuckles all around apparently. The company was worth $4 or $5 billion at the peak, and ended up bleeding out.

Masayoshi Son claimed that Softbank would end up owning something like 1/3 of the entire Internet eventually. He said he was building a thousand year empire. Softbank of course owned something like 25% of Yahoo when it was worth $100 billion, Softbank supposedly owned 15% or some odd chunk of all Web traffic, and Masayoshi was worth $70+ billion, just behind Gates.

Broadcast.com was purchased for $5.7 billion at a time when it had a mere $22 million in sales or so (and matching losses).

Yahoo paid $3.6 billion for Geocities. In that quarter, Geocities lost $8.4 million on sales of $7.5 million.

Viant, Scient, Razorfish, MarchFirst - billion dollar web development shops and consultants.

There are so many stories to choose from. Pud chronicled it well with Fucked Company.

One big thing people don't ever talk about is how much more expensive it was to get a site running back then. I was hitched to one of Utah's brightest dot-coms in 1998, and building a basic web portal was a LOT of work.

Consider our building blocks: Oracle or MySQL and Java with servlets.

Everything else was written in house, because the open source alternatives were all currently being written in-house elsewhere (or were too immature to use). It took phenomenal amounts of work to get the most basic sites working.

To make matters worse, horizontal scaling barely existed at the data tier, so the only answer was stupidly-expensive Sun boxes with even more-stupidly expensive Oracle licenses.

For hardware, you had little choice but to buy boxes and drop them in your ISP's kind-of-datacenter. Boxes purchased up-front, please.

We had about 15 engineers accomplishing about the same amount of work as the two engineers at my current company. The difference in productivity astounds me every time I think about it.

Now, all that said, companies were still stupid with their money. We had as many product managers as engineers at one point, because everybody knows it's as hard to think up new features as it is to build them (I'm a product manager now and understand the real work involved in good product management, and I still think it was stupid). We made multi-million dollar deals that failed to work out that a leaner company would never have touched.

When I look at the current environment versus back then, I see some very interesting differences: first, the productivity enhancement means value can be created for far less money. As a result, many, many more companies are getting a piece of the action. That is potentially good for investors because it broadens their portfolios. That is probably good for entrepreneurs.

The other problem is there are very few perceived mega-winners. This means that investors aren't getting many large returns and, when somebody smells "jackpot", there is a frenzy. That is good for successful entrepreneurs.

But I'm not sure I would call it a bubble.