The Digital Debutants' Ball

Inside PC Forum, a posh coming-out party where fresh young startups flirt with the industry's rich and famous. Who will grab the golden ring — and who will go home broken-hearted?

Scott Moody is about to give the demo of his life.

Back home in Seattle, the staff of his threadbare software startup has gone without pay or with only minimal pay for almost a year. The lack of income hasn't stopped Moody, president of Throw Inc., from maxing out his charge cards to produce $12,000 in registration fees and travel expenses to get him and two senior partners into a small, overly air- conditioned conference room at a plush resort in Tucson, Arizona.

Moody is sure that a year of cranking out code, avoiding the landlord's phone calls, and staring into empty refrigerators is about to pay off. At the end of his demo, any 1 of the 50 or so people in this room could step forward and offer him the door prize he desperately desires: a strategic partnership, a distribution deal — or maybe just a big, fat check. Or they could walk out of the room, steal his product idea, trash his business model. Worst-case scenario: they find his software unworthy — boring — and condemn him to death-by-irrelevance.

This is PC Forum, one of the most exclusive technology conferences in the world. Each year, this conclave in the Arizona desert attracts the world's highest density per square foot of high-tech CEOs, venture capitalists, and industry analysts. The $3,300 admission fee tends to keep the riffraff out. This is no sweaty convention center with plastic tote bags and lines at the back of the hall for hot dogs and soft pretzels. This is the sprawling Westin La Paloma resort, where meals are served poolside and chefs carve filet en croute.

And the business opportunities are a la carte. Need an online distribution channel for your hot new content? The man breakfasting on the patio is America Online's Steve Case. Looking for a cash infusion? Sidle over to the buffet line and cut in behind Steven Rattner from Lazard Freres. Desperate for a boost from the press? The woman breast-feeding by the pool is Wired President Jane Metcalfe, with her new baby, Orson.

PC Forum is a three-day gathering of high-tech high rollers: part power-breakfast, part secular revival, part slumber party. Everyone is here to get a little sun, give a little attitude, and catch a speech or two. And presiding over it all is the industry's foremost sibyl, Esther Dyson, whose EDventure Holdings Inc. sponsors the event.

Everyone here is an FOE, a friend of Esther. But at this party the real guest of honor is none of these lofty people. The real guest of honor — rarely revealed but constantly in evidence — is what everyone has come here to celebrate, or locate, or furnish: money.

"It's the only conference I've ever been to where people are only physically present," says Skip Walter, former head of engineering at Aldus Corp., now president of his own startup, Personal Health Connection Inc. "One year, I was having lunch with nine people at one of those big circular tables," says Walter. "Six of them were on cell-phones checking their stock prices."

And then there is the beauty pageant that gives the event its own peculiar frisson. Each year, a dozen or so lucky software start- ups are invited to present their fledgling products. For Scott Moody and the 12 other nervous CEOs, the "Forum" in "PC Forum" summons up images of Christians in the lions' den.

It is 2 PM on the first afternoon of the forum, and a standing-room-only crowd has gathered in a small breakout room to see Scott Moody's demo.

Moody launches his software. And his life immediately begins to pass in front of his eyes. His software can't find the server. The connection must be down. He frantically rechecks every potentially errant software configuration. A runner is dispatched to find somebody from the network management company to help.

In the front row, a senior executive from Microsoft drums her pen on a notebook and recrosses her legs for the 10th time. Toward the back of the room, a managing director from Morgan Stanley loudly leafs through this morning's Wall Street Journal.

Moody glances at the clock on the wall. He has until 3 PM to do his demo. But he may not have that long to make the sale. Moody may be undergoing the last stage in the life cycle of a startup in today's economy — a cycle that, like life itself, can be experienced only once. For what differentiates startups from traditional businesses is not just that the cycle is so short. It's the stomach-tightening sense that the whole life-changing, soul-testing experience is riding on one throw of the dice.

"It's like a launch to Mars," says Peter Friedland, president and CEO of Intraspect Software Inc., another of this year's digital debutants. "If you miss your window, you have to wait until the planet comes around again."

In fact, Friedland is overly optimistic. In today's high-tech economy, opportunity does not follow anything nearly as predictable as an orbit. A startup may have only one chance to "ship and flip" — to get a product out the door and cash streaming in before this fickle industry loses interest and starts chasing somebody younger and cuter. "This industry is like a big, hungry dog eatin' cookies," says Stewart Padveen, chairman and CEO of HotOffice Technologies Inc., another deb. "It's only interested in the next cookie."

Moody wipes his sweaty palms on his blue jeans. The natives are getting restless. After a year of struggle — a year of empty bank accounts and all-night work sessions — the opportunity of a lifetime is about to go down the toilet.

He has already learned the first lesson of being a debutant: nubility has a very short shelf life.

Jerry Michalski may be the most desired man in the world of technology.

Michalski looks boyish and suburban, despite a generous nose and a diminishing hairline. But it's not his features that have supplicants bombarding him with phone calls and filling his office with an endless, free supply of the latest electronic gadgets and toys. Michalski is managing editor of Release 1.0, the pricey and influential newsletter published by EDventure Holdings. A mention by him in Release 1.0 can do for a software or hardware company what a line in Walter Winchell's gossip column did for a starlet's career in the 1940s.

Published since 1982, the newsletter has a cachet that owes much to Dyson, whose name tops the masthead. Although she is a frequent contributor, Michalski now does most of the writing. He sees hundreds of companies each year. "If there's something you have that's really great, I want to meet you," says Michalski. An audience with him is brief. "If they can't explain it in 5 to 10 minutes," he says, "then they haven't got anything that the user is going to understand, let alone buy."

Throughout the year, as he sits through hours of pitches and glitches, Michalski silently compiles a shortlist of lucky startups that will be invited to demo at PC Forum. A few are already shipping products, but Michalski reserves the best slots for the true "debutants" — companies that have neither announced themselves to the world nor presented their products.

He demands that debutants be virgins. "We were scheduled to show our stuff at Internet World," says Keith Zentner of Netbot Inc., a deb that makes Internet shopping software. "But when we got the call from Jerry, we canceled."

There is palpable competition between PC Forum and the other two jewels in the Triple Crown of technology conferences: Demo and Agenda, both hosted by International Data Group. Agenda, founded by former Infoworld Editor in Chief Stewart Alsop, caps its attendance at 400 — which makes PC Forum's ceiling of 600 and Demo's cap of 800 look plebian by comparison. These limits are meant to guarantee an intimate ambiance for learning and camaraderie. But the exclusivity also serves as a reminder that all revolutions — even information revolutions — ultimately create their own aristocracy.

One month before PC Forum.

Scott Moody has just returned from lunch, where he has been asking a friend, a successful entrepreneur, for advice. Moody needs to know how to survive what he shyly admits is a first-time experience for him: starting a company. Moody's lunch companion has been chillingly forthright. "He said I have to be willing to drown a puppy," says Moody, with a nervous laugh.

In fact, Moody bears a faint resemblance to a baby cocker spaniel. Eyes worthy of a painting on black velvet are framed by a shoulder-length mop of frizzy hair that he can barely constrain with an elastic band. He delivers all of his utterances, from phone greetings to business strategies, with wide-eyed enthusiasm.

Throw's product is a tool for creating what Moody describes as "purpose-centric communities." The low end of the Internet publishing spectrum concentrates on letting users build personal Web pages; the high end takes the form of giant online systems such as America Online. Moody's insight: there is an untapped opportunity in the middle of the market for helping groups of users with a common interest (a family, a Cub Scout pack, a fan club), and no programming skills, to create their own gated online system.

A parade of potential investors has previewed the software at Throw's loft. Each visitor applauds the product's uniqueness. There's just one difficulty: no one can describe in 25 words or less what it actually does.

This has been a matter of some discussion among the staff of eight, all of whom own equity in the company. Glenn Northrop is Throw's new president and its token grown-up. He worked at Young & Rubicam. He owns neckties. Today, at a meeting to discuss the upcoming PC Forum demo, he distributes a mission statement that he claims, only half-jokingly, is the 30th version that he's written in the last two weeks.

"The Throw Mission," the handout reads dryly, "is to set the standard for online community software that integrates communication and information, allowing groups to build thriving communities on the Web."

Moody fidgets in his chair, his eyes growing wide. "Maybe I should just do something like what that guy did in The Hudsucker Proxy," he suggests. The staff stares at him blankly. "Remember how Tim Robbins kept carrying his product idea around on a little piece of paper he kept in his shoe? And every once in a while, he'd pull it out and show it to people, and it was just this circle, and he'd say, 'You know, for kids.' I'll just stand up at PC Forum and pull this little piece of paper out of my shoe, and there'll be a circle on it, and I'll say, 'You know, for communities.'"

This crew is missing more than a final mission statement. Like paychecks. Funding has been, to put it modestly, elusive. "Today's my first payday," says Northrop, who started as president two weeks ago. "Only I'm not getting a paycheck," he says with cavalier good cheer.

Throw's debut offers a chance to establish "brand presence" in a race where winners are determined not just by who has the most brilliant product but also by who can get through the most, and the best, doors. "We're a company composed of people nobody has ever heard of," Moody admits. "PC Forum is a chance to get in front of people who normally wouldn't give us the time of day."

What he expects those people to do remains indefinite. He is simultaneously open to acquisition and opposed to it. Like a real deb, he constantly weighs and reweighs the benefits of independence against those of commitment. "I don't want to get swallowed up and have somebody else driving this," says Moody. On the other hand, acquisition would eliminate the muss and fuss of selling and distributing his product. He could let somebody else worry about all that. As a business model, actually selling Internet software to customers seems unpredictable at best and tedious at worst. Often the quickest route to founder contentment is not through sales and profits but through acquisition and IPO.

"I know that as soon as we get back, the phone is going to start ringing," he says. "We're not ready for all the attention we're going to get." The software has only recently become stable. The product has yet to be given a name. Moody is exhausted from wearing the multiple hats of chief visionary, lead technologist, and sole fund-raiser.

PC Forum is a major ballpark, and the invitation to play in it has catapulted Moody and his team into the major leagues.

There is only one problem: Throw is almost too tired to pitch.

Sunday afternoon.

The Westin's khaki-colored bungalows quietly bake in the heat. A coyote has just been shooed off the tennis court. An elderly couple in matching striped shorts wobbles down the walkway toward the 2 PM "Stroke of the Day Clinic," which turns out to be a golf lesson. Deep in the sunless bowels of the conference center, the presenters are unpacking equipment, untangling wires, and rehearsing the pitches that could make or break their companies.

Mark Saul and Andrew Busey of Austin, Texas-based ichat Inc., are running through their PowerPoint slide show for an audience of . . . one. Maureen Blanc of their public relations firm, Blanc & Otus, sits in the back row of the darkened auditorium and calls out criticisms like a stage mother.

"Why are you guys talking so much about AOL? I thought you said it was going out of business?"

"Do we really want to take credit for making chat popular on the Internet?"

"I don't get that graphic. I don't see 'applications' and 'server.' I see two olives sticking out of an apple."

Saul, ichat's president, practices introducing founder Andrew Busey. "Ladies and gentlemen, the author of the best-selling Secrets of the MUD Wizards, Andrew Busey!"

Busey credits his company's existence to one serendipitous meeting. While wandering around Internet World, he met a local venture capitalist who introduced himself as "the king of the home runs." Busey pitched him on the spot about starting a chat software company. The VC's response was simple: "Who do I make the check out to?"

Busey also says the best decision he ever made was hiring Saul, ichat's president. "Most founders try to do it all and fail. Mark has specific objectives: attract some corporate partners, gain credibility, build OEM relationships."

Busey's fantasy: seeing his picture on the cover of a national business magazine. He vowed to a girlfriend who dumped him that he would achieve this feat by the time he was 30. At 25, he doesn't have long to gain his revenge. The pressure to succeed, he says, "is way harder than anyone says it is. I wake up screaming sometimes. It makes my cat unhappy."

Next door, Diffusion is setting up a mass of equipment worthy of a rock band: two video screens, seven laptops, ten pagers, one fax machine, two video mixers, and two network hubs. Has anyone worked up a budget for this demo? "We have chosen not to be constrained by reality," says President and CEO Jim Gagnard.

Diffusion's need to win first place may have something to do with the fact that one of the company's investors is Esther Dyson: Mom will be in the audience.

At the Tucson airport Doug Hickey, president of Global Center Inc., is strolling off a late flight from San Jose. He has a garment bag slung over his shoulder and a laptop tucked under his arm. He sees no need for rehearsal and will have a car waiting to take him to the airport right after his demo.

"I've got a real company," Hickey says. "I have 10,000 business users, and last year I had $13 million-plus in revenue." He is not blown away by the event's cachet. "Once you get outside of it, nobody cares." Nor is he impressed by the luxury of the conference's locale: "This could just as easily be at the airport Marriott."

As night envelops the Westin LaPaloma, a welcome dinner has begun by the pool. A local combo plays hits from an era when the software developed by most of the millionaires at this party was still in beta. As the debutants gather to mingle with digital high society, they are alert for omens.

Nature has conveniently provided two. In the eastern sky, an eclipse of the moon darkens the Sonoran Desert like a screensaver. To the west, the comet Hale-Bopp smears its luminescent pigment across the horizon. A venture capitalist informs her table that her husband, an astronomer, says the comet's tail is not necessarily "behind" the comet at all. That streak we see is made up of gases being sucked into the sun — which is now actually in front of the comet.

This great omen, used for centuries as an augury of good fortune or cataclysm, is facing forwards. No, backwards. Whatever.

The sun does not rise in Tucson; it's suddenly there, as if someone had reached up and yanked a lamp chain. Day One of PC Forum is under way, and in the Canyon Ballroom, the 600 attendees wait attentively for the future to be revealed to them.

The stage resembles a Southwestern living room — branches of mesquite leaning against the proscenium, a cow's skull lolling on the floor. Dyson curls up at one end of the sofa, bare feet tucked under, college-girl style. Panelists are invited up, two and three at a time, to have a nice, long chat with her.

At the back of the darkened auditorium, the debutantes stand waiting to make their entrance. The speakers' voices boom through the PA system; their faces fill a screen that extends over an entire wall. And then it is simply time. The clock strikes noon, and Michalski invites the debutantes to do their best, in five minutes, to entice audience members to attend their demos.

Scott Moody spends his first minutes behind the podium explaining why he can't stand to be behind a podium. "I like to jump around a lot when I present," he protests.

Stewart Padveen from HotOffice attempts to cram every screen shot of his product into his five minutes — which soon grow to six minutes, then seven. ("OK, you're saying to yourself, 'Another email client, big deal!'") He introduces HotOffice's primary venture capitalist, Jim Kollegger, who uses an ill-advised metaphor to explain how, unlike most Internet software companies, HotOffice is really, really going to make money. "Women want to talk about relationships," he says, leaning into the mike. "Men want to have them." Several members of the audience hiss.

But the demo gods take their true vengeance on Richard Bruce, copresident of PlaceWare Inc., who stumbles through his slides as if it's the first time he's seen them. He keeps walking away from the mike. A live cross-country audio feed adds a sophisticated touch to his presentation — but the feed won't stop when he tries to hurry on to the next slide. He keeps clicking the disconnect button, but to no avail. Bruce finally looks up at the control booth and begs the techies inside to pull the plug.

Then it's all over. The audience rushes out to the pay phones, the restrooms, the poolside Tex-Mex lunch. The debutants, blanched and slightly wilted from the heat of the lights, look relieved to have vaulted the first hurdle of their ordeal. Now they have to survive their afternoon demos.

It's time for the main event:

a series of hour-long demos in the hotel's small breakout rooms — or what Alex Knight, former Microsoft executive and now a consultant for Throw and other high-tech startups, affectionately calls "the petting zoo."

Peter Friedland, of Intraspect Software, is welcoming a small audience to his product's first public demo: "Good afternoon. It has taken $3.5 million in venture capital to get us to this meeting. I want you all to know that I'm wearing new pants."

Next door, the PlaceWare team has recovered from its rocky noontime performance to give the most ambitious and potentially dangerous demo of the conference. Their product, Auditorium, lets large audiences view and hear a speaker's presentation, ask questions, chat, and even vote — all over the Internet. The demo is taking place in Roseville, California. A product service manager at PlaceWare's beta-customer, Hewlett-Packard, is conducting a live conference with multiple customer service agents — displaying interactive product diagrams and answering questions using real-time audio. This time, the presentation goes flawlessly.

Down the hall, Throw's presentation is 15 minutes late in getting started. Moody finally realizes why he can't connect to the Internet. "It was unplugged," he explains. A single cable had become disconnected. Contact is reestablished with Seattle, and Moody begins the demo. Finally.

This is the moment his team has spent almost a year waiting for. Freed from the constraints of a podium, Moody bounces back and forth in front of the screen like a pinball, stopping once to pirouette in a complete circle when seized by the perfect thought. His software is a kit for building online communities, so he links to one designed to look like his own office. Then he shoots the breeze electronically with an engineer who has signed on from Seattle. "And there's our company cat," he points out. His words tumble out faster than he can form complete thoughts. A few sentences are abandoned halfway through, ending with "blah, blah, blah."

It is a bravura performance, filled with the messy passion of a creator who wants his audience to experience the joy that drives his vision. As Moody finishes the demo and blushes at the audience's applause, he remembers to do what he has virtually forgotten to do throughout his presentation. Breathe.

Throw's pitching arm has regained its strength.

Bill Shott, copresident of PlaceWare, stumbles into the room on the last morning of the conference.

"I was up until way past midnight," he says. Along with his exhaustion, Shott displays a telltale morning-after satisfied look. The nature of his nocturnal triumph? He's inked a deal for his company's first outside funding. After his demo, he met privately with John Zeisler of InterWest Partners. "We'd been talking for the last month," says Zeisler, "but I wanted to come to PC Forum to see the audience reaction." Stewart Padveen from HotOffice is basking by the pool, having a morning mimosa, and grinning like the Cheshire cat. A distributor has seen his demo and said, "We love it. We have to have it." The lawyers will not permit names to be named, but according to Padveen, the deal gives HotOffice access to half the U.S. market, courtesy of a $50 billion telecom company. He had his one shot. He took it. And he made it.

The free copies of the New York Times being distributed outside the auditorium announce that PGP (Pretty Good Privacy) Inc. had just acquired Zoomit Corp., one of this year's presenters. Dan Lynch, founder of CyberCash Inc. and a PGP board member, is this morning's alpha male. "We ate a debutant!" he crows.

Scott Moody is alone in the hotel lobby, guarding the team's bags as his partners fetch their rental car. To treat his staff, all of whom have worked without vacations for a year now, Moody is taking them on a car trip through the Southwest, and for some camping if the weather is nice. First stop, Sedona, Arizona. "They've got this psychic vortex there," says Moody, who shares with most software engineers a connoisseur's appreciation for the truly silly and weird.

Moody's prayers have not been answered at PC Forum. Despite some interesting hallway conversations and one behind-closed-doors meeting with a potential investor, Throw's $12,000 has purchased little beyond exposure. "A couple of people came up to me and said our software is ahead of its time," he says, his customary brightness masking disappointment.

Moody remains convinced that he will have his moment. Time will continue to test him. Three months from now, he will have to take on consulting work to keep his company afloat. Glenn Northrop, the company's president, will depart to pursue "other opportunities." In the summer, with Throw a week away from financial ruin, a venture capital firm will come through with a small bridge loan. Through it all, Moody and his staff retain a messianic fervor for their product, which will be in beta by the end of the year. And they remain confident that an eligible suitor will find them while their company is in the full bloom of its youth.

After three days of irrepressible sunshine, a storm cloud has settled over the Westin La Paloma. Moody's spirits sag as he thinks about how much his crew from Seattle has been looking forward to their desert vacation. "These guys haven't had sun in so long," he says.

Moody's team drives up and begins loading the luggage into the trunk. All of them are wearing shorts, hard-soled shoes, and socks. Their legs are as white as refrigerated poultry.

By the time the car has reached the end of the driveway, the storm cloud has evaporated, and the desert sun has returned. The moment needs no rehearsal, no business plan, no venture capital. As the car enters the highway, a pale arm emerges from an open rear window, catching the rays with its palm.

Stevan Alburty alburty@earthlink.net is a New York City-based writer and technologist. His article, "The Ad Agency to End All Ad Agencies", appeared in the December:January 1997 issue of Fast Company.

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