Dots Dashed

Unit of One

Dotcoms come and dotcoms go, but the lessons we learn from them last a lifetime. The new economy has turned a corner; that’s old news. It’s far more interesting and useful to spot the new economy’s new location. Where you think we are now depends a lot on what you think you learned from the last round. Here’s a report from the GPSs of 16 explorers — gurus, VCs, leaders, and bleeders — of the Internet’s opening act.


Bob Lessin

Chairman and CEO
Wit SoundView Group Inc.
New York, New York

My advice to B2C companies trying to make a go of it alone? Don’t do it. If you don’t already exist on the Web, don’t bother now. You’ll be wasting your time. That is, unless you have an idea that touches the consumer in a unique way. But I’ve got news for you: There aren’t many unique ideas out there.


Why is it so impossible to enter the Internet space as a stand-alone B2C? Primarily, because brands rule. And the cost of building a brand has grown from $10 million to several billion. The events of last year have made me understand, like never before, the power and legitimacy of brands. When the dust settles, we’ll have only a few brands left: Amazon, eBay, Yahoo!, and perhaps a few others.

Many B2Cs made the mistake of presuming there would always be an abundance of capital. They didn’t focus on building their brands. Today, unless those companies have found a physical partner or another way to extend their brand, they’re facing a tough road.

I don’t think most people anticipated that in one day, one hour, one minute, everything would change. But in the market, there’s rarely a gradual landing. When CEOs ask, “What’s the secret to venture capital?” I say, “Not running out of money.”


Don’t get cute with capital. Presume that you’ll never raise another dime, and run your business accordingly.

Bob Lessin began his career at Morgan Stanley, and in 1987 he became the youngest person to make partner at that firm. Before joining Wit Capital in 1998, he was vice chairman of Salomon Smith Barney. Wit Capital merged with SoundView Technology in early 2000. Wit SoundView Group now focuses exclusively on the Internet and technology sectors.


Candice Carpenter

Cofounder and chairman
iVillage Inc.
New York, New York

What’s one tough lesson that I’ve learned about doing business on the Internet? It’s important to have a diverse team. I’m not talking about just gender or race. I mean diversity of skills and temperament. It’s hard to get your team composition right.

At the beginning, you need more diversity than you can imagine. When we started iVillage, we didn’t have enough technical people or really anal analytical people. Instead, we had a surplus of people who could sell our story to customers and advertisers — which is great. But you still need people to build the subways. That lack of diversity slowed us down in the beginning.


But as critical as diversity is at the beginning, once you start to scale, you want the opposite: a team of minds that think alike. Otherwise, you get gridlock. As iVillage grew, creative gridlock threatened our team’s cohesiveness. I had to deal with intuitive people, analytical people, lyrical people, and worrywarts. It took a lot of work to get everyone to trust one another.

An added challenge, of course, was managing people during the overhyped, dysfunctional universe of the Internet boom. In the end, you’re crazy to let any kind of success go to your head. The moment when everything seems to be going your way is exactly when you should be looking over your shoulder and asking, What’s brewing?

Candice Carpenter ( stepped down as CEO of iVillage in August 2000. She took the company public in March 1999, when its stock price reached an overall high of $130. The company, which she cofounded in 1995 and of which she remains chairman, is a women’s network that draws more than 10 million viewers each month. Previously, Carpenter served as president of the shopping channel Q2, as well as president of Time-Life Video and Television.


Dick Sabot

Cofounder and chairman
North Adams, Massachusetts

Look around at the carcasses of first-generation companies littering the Internet landscape, and you’ll see several common characteristics — all of which came back to bite them. For instance, no one could understand why Time Warner’s Pathfinder didn’t fly. Here was a company, backed by some of the best media brands in the world, spending $3 to $4 million a month on a project. But to succeed on the Net, you have to do something that truly takes advantage of the medium. Pathfinder couldn’t attract an audience because it simply repurposed the content of magazines like Fortune, People, Sports Illustrated, and Time as digital texts. A company like eZiba, on the other hand, can exist only in cyberspace, because we’re dealing with such thin inventories. If we tried to sell through a paper catalog, we’d be sold out the minute the catalog hit the mail.


But the biggest downfall of many first-generation companies was under-capitalization. Too many thought that they knew when their ship would come in. If you wait until you’re desperate for money, no one will want to talk to you. One of our mantras has been “If we survive, we’ll succeed.” Back in January 2000, our first order of business was to get enough funding to ensure a low burn rate. We now have years of financing in our pocket — a big competitive advantage over anyone who tries to enter our space.

One of the results of the Darwinian shakeout is that with each consolidation and failure, the pie just keeps getting bigger. Anyone who emerges intact is going to have a larger slice of a much larger pie.

Dick Sabot (, professor emeritus of economics at Williams College, was a cofounder and chairman of Tripod Inc. before launching in November 1999. EZiba offers handcrafted home furnishings, art, and apparel through an online catalog and auctions.


Chunka Mui

DiamondCluster International Inc.
Chicago, Illinois

The market appears to have turned against startups, but the startups still won the game. When you look at the last four years, it was the startups that recognized the Internet’s technological capability, built the infrastructure, and created new business models that enabled us all to understand the possibilities. As a result, several enduring brands remain.


Nevertheless, if we learned anything from the last year, it’s this: The Internet race is a marathon, not a sprint. It’s about fundamentally transforming the way that you operate; it’s not a get-rich-quick scheme. It’s still important to be early to market, but it’s more important to be first to reach critical mass. A lot of dotcoms got big on the backs of irrational marketing plans that didn’t pan out. That time is over. Companies that survive today will have sustainable models that can scale.

The big question now: What will large Net companies do next? The issue of privacy could easily be where companies trip themselves. The critical thing that the Internet allows is a strong consumer relationship. Selling out that relationship for a quick direct-marketing opportunity won’t pay. Smart companies will turn the respect of privacy into a quality of their brand.

But large companies also should look closely at the horizon: There’s a whole new set of disruptive technologies looming that will completely change the game. The move to mobility, for example, means that customers will no longer be sitting at their PCs; they’ll be using a range of new information appliances that will dramatically affect how they expect to be served. Things will get better for customers — but harder for companies. Companies that don’t see this new wave coming will end up creating opportunities for another generation of startups.


Chunka Mui ( leads DiamondCluster International’s innovation programs. He is coauthor, with Larry Downes, of Unleashing the Killer App: Digital Strategies for Market Dominance (Harvard Business School Press, 1998).

Josh Newman

Oakland, California


In a startup, most of your hand is dealt at the very beginning. You bet that you’re going to get a good hand. The rest is about doing your best with what you have.

At, there were remarkably few opportunities to make decisions that would have greatly changed the outcome. One was an early offer for funding at a lower valuation than we were looking for. Perhaps if we’d taken the money then, we could have established enough of a lead to block the competition.

But who knows? After all, it was war from day one. We hadn’t expected that. When we first started talking to VCs, we were the only player in the category. But to raise funding, you have to educate the market — which can stimulate your own competition. We went from being the only people talking about the pets category to being one of 20.


Even so, we were still first on many dimensions. We went from zero to 300 people in 10 months. By February 2000, we were shipping 4,000 orders a day. But the competition stayed nip and tuck, copying our every move.

All of this was happening in a market environment that looked rosy. Then, overnight, things fell apart. Our biggest partner lost its appetite for investing heavily in the space. We’d had essentially free money, and then we had no money. Next time around, I hope to do something that’s structured to succeed with fewer people — and to work in a field where people are motivated by the project, rather than by the chance to make a billion dollars.

Josh Newman ( founded in October 1998. He served as the company’s CEO until its acquisition last July by ( subsequently closed its operations in November.) Newman is now working at his sixth startup, this time as a consultant and an angel investor to London-based Altgate Capital, an Internet company that provides financial products to private European banks.

Philip Kaplan

New York, New York

Since last spring, the Internet has been like a body rejecting a liver transplant. Even now, some 95% of dotcom managers should not be running Internet startups. And 12 months from now, they won’t be. Why? They’re not fit to survive because they aren’t passionate about the actual business that they’re building, let alone the industry. Many joined the revolution because of the glamour and the promise of a quick buck. But here’s the dumb reality: Just because every business can be on the Internet doesn’t mean that every business should be.

We’re better off because of the shakeup. When the tough get going, the e-holes get lost. Fading fast are the opportunists who fell into cyberspace for extraneous reasons, peddling bad ideas.

Philip Kaplan ( founded, the virtual rumor mill on the demise of struggling dotcoms, in June 2000. Since then, more than 1,300 companies have been inducted into the “dotcom deadpool.” Kaplan is also the founder and president of PK Interactive, a New York – based Web shop, and he has held positions at Booz-Allen & Hamilton and Think New Ideas Inc.

Bill Stensrud

General partner
Enterprise Partners Venture Capital
La Jolla, California

Entrepreneurs who complain about the fickleness of VCs are right. I’ve been on the other side of the table, trying to fund a company, so I understand that feeling. But I also know that worse than not getting funded is getting money when you shouldn’t — and pouring years of your life into a bankrupt business model.

The last two years took a lot of people down that road. Probably three times as much money was pumped into the venture industry than should have been. Today, without a thoroughly defensible business model, you won’t get funded. Do people get mad when they’re told that their plan isn’t fundable? Sure. It’s like saying that their baby is ugly. But sometimes, that’s what they need to hear. What I look for today in business plans are the same things that I looked for before last April. First is a huge market. Second is a sustainably disruptive solution: The idea has to fundamentally change how a customer does something — and it has to be sustainable, so that somebody with a buck more than you can’t copy it. Third is a great team.

Ninety-nine percent of the plans that come across my desk fail the second test. They don’t offer a quantum increase in value, and the value isn’t something that they can defend against competitors.

The best opportunities on the Net will belong to companies that use the medium to do something that no one could do before. Successful companies will leverage their place in cyberspace to reinvent how business is done — not just how products are bought and sold.

Bill Stensrud (, whose career includes a stint as a roadie for the Grateful Dead, was president and CEO of Primary Access Inc. and founder of two other successful high-tech companies before joining Enterprise Partners Venture Capital in 1997. A boutique business builder and one of the largest VC investors in the San Diego area, EPVC has about $800 million invested in 110 emerging companies.

Nirav Tolia

Cofounder and CEO
Brisbane, California

At Yahoo!, I learned to focus not on the competition or other externalities, but on creating the best user experience possible.

Since that same focus defines the culture at Epinions, we kept pretty sane when the tech market tumbled last year. I couldn’t even tell you what makes Epinions different from other companies, because I don’t know what other companies are doing. I know only what Epinions is doing.

Of course, there are things that I wish we’d done differently from the beginning. We had an unhealthy obsession with speed. We launched in about 16 weeks, and in the race to market, we took shortcuts. We probably hired too quickly and didn’t put enough of a premium on experience. When you’re young, you think, “I’m smart. I can figure it out.” But you can’t. Now I see that both intellect and experience are very important.

When you’re obsessed with speed, you don’t develop robust plans. When we started out, our strategy was our execution. But we learned that being the first mover doesn’t matter. You have to be the first mover who does it right. This last year has made it clear that you can’t take success for granted. Nothing’s guaranteed. You learn that lesson the hard way every single day.

Nirav Tolia ( worked in Yahoo!’s marketing group and represented the company on CNN and MSNBC before founding in May 1999. He is also founder and president of Round Zero, a nonprofit organization that brings Silicon Valley professionals together to discuss high-tech issues., a company of about 90 employees, provides product and services information to consumers.

Laura Rippy

Hurst, Texas

Tenacity is a core value at our company. Maybe that’s just because I’ve run a marathon, and I’m a lousy sprinter. But rather than being driven by a particular funding event like an IPO, I’ve been really focused on building a long-term business. I think that’s a business fundamental that many dotcoms who got crushed last year didn’t follow.

For example, we’re huge believers in $38 folding tables from Wal-Mart. If you’re working on a $38 table, that frugality tends to pervade every decision you make. That’s a lot different from some of the flashier dotcoms that bought billboards on buses. We’re focused on making every dollar count.

One positive that we’ve learned from the dotcom era is the importance of partnerships — and of choosing your partners well. In a small business, the most important decisions you make are the things you decide not to do. So find what you’re good at, and recognize where your weaknesses are. Then bring on an appropriate partner who can fill in the gap.

We’re one of the lucky ones. The market environment in the last year has actually benefited us. We’re in a hot, growing space: handhelds, software, and wireless. We’re a magnet for talent during an all-out talent war. And we know that in the shakeout for resources, it’s the best business models, the best teams, and the most tightly focused execution plans that will attract the capital, the partners, and the customers long term. That’s what we’re counting on.

Laura Rippy ( spent six years at Microsoft, where she worked on the e-commerce sites MSN and MSN Launched in 1999, Handango is one of the world’s largest Internet marketplaces for handheld and wireless applications.

Bill Malloy

WorldStream Communications Inc.
Bellevue, Washington

I joined Peapod after 11 years at AT&T because I wanted to do more than just sit on the sidelines of the Internet revolution. I lasted about 6 months.

Even before my dotcom stint, the Internet world had gone completely wacko. Most businesses were nothing more than a series of exit strategies on the way up. And then there was Peapod — customer focused and bottom-line oriented. But Wall Street wasn’t convinced. Pressured by investors to move online, Peapod morphed into an e-grocer. When competitors built distribution warehouses, Peapod added distribution.

Walking in, I faced a dilemma: The numbers looked better on the original model. I didn’t know if I should return to it or cut to the distribution model that the capital markets would support. I listened to investors. But just because we acquiesce to Wall Street doesn’t mean that the business model will work. We compromised our values for fickle opinions. My lesson? Don’t let Wall Street whipsaw you around. Tune out the noise and focus on your core business.

I resigned last March from my spin in cyberspace because of a simple realization: I didn’t belong in an online grocery play, because I didn’t belong in the grocery industry. You don’t just have to believe in the business you’re in — you absolutely have to love it.

I’ve reaffirmed what I already knew: Honor your value system, because the deeply personal elements make the work satisfying. When it doesn’t feel right, there’s a reason.

Bill Malloy ( president and CEO of Peapod Inc., the Chicago-based online grocer, from October 1999 until March 2000. Before joining Peapod, he was an executive vice president at McCaw Cellular Communications/AT&T Wireless Services. WorldStream Communications Inc., an interactive Web-casting technology company, was founded in 1997.

Tod Francis

General partner
Trinity Ventures
Menlo Park, California

Sometimes you learn the most valuable lessons from what you decide not to do. We passed on some early-stage companies whose valuations were beyond our comfort zone. And at the end of the day, at least one of them went on to be worth $10 billion. We didn’t recognize that the valuation multiples on really great companies could be so significant.

We learned from that. We learned that when a company is proposing a true platform change, businesses of significant scale can be created. It’s worth being part of high-quality companies — even if it means you have to step up in valuation.

But today, one truth remains: There’s no easy money. The unreal market of 1998 and 1999 was based on fantasy. Now that the market has returned to core metrics, we have a healthier environment in which to do business. Companies will be built and measured over the long term. And only the best teams and business models will survive and provide robust returns for investors.

Many people think that the Internet economy has come and gone. I say we’ve seen only the first inning of the Internet ball game. As the game progresses, the Internet will become as accessible and consistent as your telephone dial tone. Accordingly, a whole new attitude and set of ideas about what we can do with it will emerge.

Think about it. The pc was Time magazine’s Man of the Year in 1982. But when did it actually achieve relevant impact? It has taken 20 years. As the Internet becomes more reliable, it too will prove an indispensable part of our daily lives and of the way that businesses and consumers interact.

Tod Francis ( was vice president of marketing and sales for a consumer-products company before joining Trinity Ventures in 1993. Trinity manages a $1 billion fund, focusing on early-stage software, communications, and e-business companies.

Tandeka Guilderson

Center for Women & Enterprise
Boston, Massachusetts

My colleagues and I see about 250 female entrepreneurs every year — women with big dreams, who are seeking equity financing. But about 75% of them get disappointed, because their business plans are inappropriate. My job is to find the narrow segment of entrepreneurs with scaleable businesses and coach them on early-stage financing. When it comes to equity capital, women have been rejected time and again.

Women are fabulous leaders. They have an intuitive and informed sense of what it takes to build great companies. But as a group, they’ve simply had too little access to the venture community. As a result, women have been late entrants in the Internet revolution.

Among the many business violations in the last few years, entrepreneurs, male and female, didn’t think through their revenue models. With the enormous amount of Web traffic, they assumed that customers would just show up. They didn’t stop to think about how to drive traffic to their site, and they certainly didn’t give enough consideration to the competitive environment.

Giddy ambition also got in the way. Entrepreneurs weren’t screening themselves or analyzing their business models to see if accessing capital was even appropriate. vcs aren’t mercenary — they’re just bottom-line oriented. Money is sexy, but you have to be pragmatic. Don’t count on venture capitalists. They aren’t about to buy you dinner.

Tandeka Guilderson ( was a junior partner in a small-service business before joining the Center for Women & Enterprise in 1998. CWE acts as an entrepreneurial boot camp with a mission to accelerate access to venture funding for women-led startups.

Mark Breir

Los Altos, California

I believe that there’s lots of room for optimism when it comes to the Internet. and Barnes & Noble might have books all sewn up, but there are still some huge categories up for grabs. Think about the big-ticket items: where you go to buy a car, to buy a house, to buy jewelry. The race has yet to be won in those areas.

That said, there are clearly lessons to be learned from dotcoms. For example: You can’t be all things to all people. At, it took us a while to realize that. Beyond expanded into four divisions, but we could really do only one or two of those things well without placing impossible demands on the engineering team. We eventually decided to major in being an Internet-commerce-services provider of software. Should Beyond have narrowed its focus sooner? In hindsight, the answer clearly is yes.

Another big lesson that most dotcoms have learned the hard way: Pay attention to your financial systems from the beginning. At Amazon, I saw firsthand what happens when you don’t. Success can be your biggest enemy. When you get lots of traffic, your ability to build the financial-reporting system beneath that just gets harder. If you don’t deal with the financials in your first 6 months, you’ll be up against a wall in month 12. Amazon had to add a financial system on the run. The moral? Figure out your system from day one. Because in Internet time, a day is a week, and a week is a month. In no time, you might be a public company.

Mark Breier (, former VP of marketing at and former CEO of, spent his early career as a marketing executive in the brick-and-mortar worlds of Dreyer’s/Edy’s Ice Cream and Kraft Foods. His book, The 10-Second Internet Manager, was published in 2000 by Crown Business.

Craig Moffett

New York, New York

When you translate a bricks and mortar to the Web, consumer expectations are a lot higher — especially if you’re a 257-year-old brand. The spotlight is on you the second you put up your site. You don’t have the luxury of working out kinks. That goes double if you’re doing auctions. The day we launched, we had to create an immediate conflagration of supply and demand, an active market between buyers and sellers. The sand started running out of the hourglass on each auction the moment we launched.

That’s why it’s been critical for us to get the fundamentals right from the beginning. Having a clear vision of where you’re going and making sure that everyone understands that vision can insulate you from the emotional roller coaster that defines daily life at an Internet company. You have to measure yourself constantly against a longer-term goal and not get wrapped up in any kind of day-to-day perturbations.

Many dotcoms that lost their stamina last spring had overpromised to begin with. There wasn’t a lot of “there” there. They relied on hyperbole, and they got burned by it. That’s an important lesson: We should quietly stick to our knitting. Get the basics right. And build your business one customer at a time in the marketplace — rather than eyeing the stock exchange.

Craig Moffett, a former vice president and a partner at the Boston Consulting Group, once worked as a contemporary art dealer in Philadelphia. is an auction site with more than $50 million in sales that launched in January 2000.

Geoffrey Lewis

Editor in chief
Fort Lee, New Jersey

When I left Business Week for, I knew I was jumping from the biggest, safest, most powerful ship on the high seas of financial journalism. I loved my job, but I also wanted to stretch professionally. I didn’t want to turn around in 10 years and say, “I missed my chance.” I needed a challenge.

That’s exactly what I got. The experience of building and managing a newsroom in cyberspace was fantastic. What I didn’t anticipate was just how vulnerable even well-funded startups are. When there’s a storm at sea, the SS Business Week may rock a bit — but the little boats can sink. At Business Week, I never had to worry about the company itself. On the Net, there’s no guarantee that it’s going to work out. It’s hard to love what you’re doing when you’re constantly keeping an eye on the life rafts.

Today at — part of the strongest brand in markets news — I have a bit more stability. And that’s important, because I have a family. They’ve been incredibly supportive. But they also like to eat every day.

Now I can focus on the reason why I was attracted to the Internet to begin with: the opportunity it presents. Demographics are destiny. As a baby boomer, I was just one of many in my age-and-experience bracket competing for those few top jobs at places like Business Week. On the Net, I’m working as editor in chief, managing at a higher level than I ever have before and helping craft the strategy to make the site succeed editorially and financially.

Although my year on the Net has been more of a learning experience than I bargained for, I wouldn’t trade what I’ve come to understand — both professionally and about myself.

Geoff Lewis ( was managing editor of, a Web-based provider of financial news and commentary, before he joined last September. He previously spent 15 years at Business Week, where he was a senior editor.

Yong Kang

Cofounder and vice chairman
New York, New York

Think of the last two and a half years as Kozmo’s prepubescence. We were kids with rich parents. We had the keys to the Ferrari and tons of cash to spend without consequence. With the e-commerce explosion, we got giddy. Like every other dotcom that was carried away by the hype, we got ahead of ourselves. Our spending was out of control. Our growth? Frantic. We went from one city in June 1999 to a total of 11 markets a year later.

As a result, we spread our resources too thin; we couldn’t grow every market. When you’re focused on fast growth and fast money, you definitely lose sight of your company’s soul.

The April crash was a wake-up call that forced us to focus on our existing business and return to our roots: Why did we build this company in the first place? Whatever happened to an old-fashioned ROI? A company can’t justify any type of valuation without profits. Revisiting the fundamentals renewed our commitment to generate profitable business in all of our markets.

We may have lived five years within the last two and a half, but we’re better off for it. We’ve walked away with a particularly valuable lesson: Ignore the market, no matter what. Concerning ourselves with short-term fluctuations is a sure way to lose focus.

Today, we’re riding a more moderate course to meet our bottom line. Whether we go public in six months or in five years doesn’t matter to me. To build a truly great company, we can’t play the game day-to-day. We’ve got to make steady progress, one year at a time.

Yong Kang ( cofounded in 1997 with his college roommate, Joseph Park. Before stepping down as president to become the company’s vice chairman, Kang forged partnerships with, Columbia TriStar, and Starbucks. Previously, he was an assistant vice president at Société Générale.