Everything Ventured, What Gained?

Two new "insider" chronicles of the new economy -- messy tales of startup mania -- explode some of the more romantic myths about entrepreneurs and venture capitalists. But they don't tarnish the dream.

Book: "The Leap: A Memoir of Love and Madness in the Internet Gold Rush"

Author: Tom Ashbrook

Publisher: Houghton Mifflin

Price: $26

Book: "eBoys: The First Inside Account of Venture Capitalists at Work"

Author: Randall E. Stross

Publisher: Crown Business

Price: $25.95

We Americans love to create myths about our entrepreneurs and the people who support them. We want to believe that startups are launched by brave men and women who have a passionate belief in maverick ideas. We want to see those pioneers as heroes who don't falter whenever problems arise. We even want to set aside a bit of glory for the financiers who bankroll startups. Venture capitalists are supposed to be modern-day Medicis, distinguished by their generous patronage and by their bold visions.

Those are the popular images. Reality, of course, gets a bit more complicated.

In "The Leap," entrepreneur Tom Ashbrook describes a poignant three-year struggle to launch a business that ultimately became known as HomePortfolio.com. For much of the narrative, he is torn between a desire to build that company and the fear that he is throwing away a good career as a writer and editor at the "Boston Globe" -- and perhaps jeopardizing his marriage as well. Even the mission of his new company is in flux: HomePortfolio starts out with a plan to sell CD-ROMs that will help affluent people design neo-Victorian homes. By the end of the book, HomePortfolio is doing all of its business over the Internet, where it mostly displays information about sinks, stoves, and other household fixtures.

In large degree, "eBoys" is an even blunter assault on the entrepreneur-as-hero myth. The book provides an inside look at Benchmark Capital, one of Silicon Valley's most successful venture firms, made famous by its well-timed backing of Ariba Inc., eBay, Scient Corp., and Webvan Group Inc. Randall E. Stross, who teaches business at San Jose State University, packs his book with juicy accounts of bickering and preening among the firm's partners. As Stross confides in his acknowledgments, "The Benchmark partners did not really know what they had signed up for; if they had, they wouldn't have."

Yet, for all of the legend-defying details that these books provide, both somehow end up portraying entrepreneurs and financiers as remarkably appealing. It's true that the day-to-day drama of Ashbrook's quest is, at times, harrowing. But, by the end of the book, Ashbrook has a company that he can view with great pride. (And his marriage survives too.) As for Benchmark, there's no question that its partners can be pushy, arrogant, and just plain befuddled. Still, they get right almost all of the big decisions that they face -- and they learn some useful lessons from their occasional missteps.

Startup Solitaire

Tom Ashbrook's big idea comes to him almost by chance. We meet him in the summer of 1994, when he is a restless writer for the Boston Globe. The world is changing, and he's worried that if he doesn't think of something new, he will be caught flat-footed. Into his life walks Rolly Rouse, a college friend who wants to build a company that would use technology to help people design their dream homes. "Yeah, it sounded a little crazy," Ashbrook writes. "But weren't new things ... supposed to sound a little crazy?"

For more than a year, the two men putter at this idea, treating it as a sideline to the rest of their lives. But by early 1996, the idea has become an obsession. Ashbrook and Rouse barely notice their families as they pour time into what is now a major project. They woo the few rich people whom they know in an effort to raise at least $500,000. And both men secretly begin to stockpile credit cards as a way to generate cash.

"There is a game that I call start-up solitaire," Ashbrook writes. "You're alone in your bedroom at midnight with a tall stack of credit cards.... You're slowly spreading it out on the bed,... looking for the ones that still have a few dollars left to borrow. It's a game to be played alone. Not many people can stand to watch it."

Yet, after several brushes with financial collapse, HomePortfolio finally starts to thrive. Companies that make Viking ranges and Corian countertops decide that they are willing to pay to be showcased on HomePortfolio's Web site. A venture affiliate of the media company E.W. Scripps decides to invest $3 million. And HomePortfolio starts attracting the kind of positive, high-profile media attention that often paves the way for more good news.

Self-deprecating in an almost old-fashioned way, Ashbrook seldom pulls back from his narrative to explain why his startup ultimately beats steep odds and survives. But the most important clues to the company's survival seep out anyway. Both founders (Rouse especially) always believed that the world needed their product, even if they weren't always sure how to get it to market. To ensure that production quality and user interfaces were better than most people might have expected, for example, they attracted top technical talent from MIT even during their most embryonic stage. And, for all of their private doubts, Ashbrook and Rouse showed brave faces to the outside world.

On a (Bank) Roll

There's not a lot of self-effacement in the Menlo Park offices of Benchmark Capital. The firm's most ebullient partner, David Beirne, is a former executive recruiter for whom bravado isn't merely a personality trait -- it's the essence of his strategy. In a community where others use a four-door BMW or Audi as an understated sign of wealth, he drives a Porsche 911.

Like a flashy basketball player who wins over a crowd with his skills, Beirne eventually gains his partners' approval with his prowess. He is Benchmark's biggest champion of investing in Webvan Group, an online grocery company that (at least in the early days after its November 1999 public offering) looks as if it will become a giant success.

Even when Beirne misfires, his audacity is instructive. At one point, he tries to coax his partners into making two big investments at the same time -- one in priceline.com, the other in TriStrata, a secretive company that claims to be on the verge of a breakthrough in computer encryption. Stross provides us with ringside seats during those deliberations, showing us the partners' mix of ardent faith and outright scorn. Beirne portrays both businesses as having the potential to achieve multibillion-dollar valuations. One partner, Kevin Harvey, calls priceline's losses "terrifying." Before long, terms like "chickenshit" and "prick" are flying around the room.

In that instance, Benchmark makes a mistake. The firm doesn't invest in priceline, which becomes a stock-market darling, but it does bankroll TriStrata, which stumbles. Yet the partners regroup. Robert Kagle, the firm's most experienced partner, reassures Beirne that his colleagues want him to pursue bold, risky deals. And Harvey, who was a strident opponent of the priceline deal, gradually recalibrates his worldview, making room for the idea that even seemingly dangerous investments may be worthwhile.

At least 10 times a year, Benchmark's partners sink major amounts of money into companies that are at such an early stage that risks are most immediate and success seems far away. The partners also pour a lot of energy into recruiting strong management teams and helping draft strategies for those companies. Sometimes knowing what not to do is the key to a good investment. At one point in 1998, well before the company is ready to go public, eBay gets an acquisition overture from OnSale, a more established online merchant. Two Benchmark partners -- Bruce Dunlevie and Andrew Rachleff -- argue vehemently against OnSale's initiative, maintaining that eBay has too bright of a future to allow itself to be swallowed up by a competitor -- an argument that the stock market later vindicates in a gigantic way.

By the end of "eBoys," it becomes clear why venture capitalists aren't seen as mythic figures in the way that entrepreneurs are: VCs play a role akin to studio bosses in Hollywood, putting talented people together, helping natural hits become even bigger hits, and worrying a lot about the numbers. Still, Kagle, in the book's final scene, argues persuasively that there is something special about what he does. Nine times out of 10, he says, an entrepreneur is taking on a big, established system. If his firm's money helps a little guy win, then that's "exhilarating," he says. "It's confirmation that one person with courage can make a difference."

FC Recommends

John Seely Brown is one of the most brilliant technologists and business thinkers we know. He's also a longtime member of the Fast Company community. Chief scientist at Xerox and director of that company's fabled Palo Alto Research Center, "JSB" coauthored an article for the premiere issue of FC that challenged conventional wisdom about how people work and learn.

Now he and historian Paul Duguid have released a book that challenges conventional wisdom about the impact of digital technology. "The Social Life of Information" (Harvard Business School Press, $25.95) offers a series of provocative essays that are meant to correct the "tunnel vision" of Web wizards and other digerati. It's time to look beyond our obsession with technology and information, the authors argue, and to appreciate how "social networks" -- relationships between people -- shape how ideas move, how people work, and how we live. It's also time for you to reckon with the sensible arguments put forth in this book.

Cheatsheet

Are you too busy polishing your "elevator pitch" to wade through these books? Then hone your business plan with these take-aways.

Finding the right idea: During a mystical moment, Tom Ashbrook brainstorms with a friend about changing the way people live. "We were pulling threads out of the air, weaving Xanadu into ideas that could be shared." Nothing quite so spiritual is going on at Benchmark Capital - where, Randall E. Stross writes, the firm's partners want to finance "a total can-do guy ... a big honkin' stud."

Startup bravado: Both authors agree: Paint a picture of future success that will attract people with talent and with money - and maybe your dream will come true.

When things get ugly: Ashbrook worries that his marriage is in trouble and that he might go broke. The Benchmark partners don't brood: They stridently insult one another's judgment.

What's the reward for all this hard work?: Ashbrook says that he tried to form a startup at age 40 because he wanted "to be on fire again with dreams." The Benchmark partners believe that they are standing at "the best place in the cosmos to get the first peek at the future."

No, really, what's the reward?: Ashbrook's stock in HomePortfolio.com is probably worth at least a few million dollars. In the course of "eBoys," Benchmark's partners boost their personal wealth at least 20-fold, to $350 million or more each.

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