CHAPTER 4
Party Like It’s 1999
I’m no big fan of public confessions. But at this point in the book, it feels important to admit it: Reader, I used to work for an Internet company. In 1999, pretty much anyone under forty with loads of ambition was looking for a way to get into the Internet business. Internet usage, once a novelty, was rapidly becoming the norm, as connectivity improved and cable and telecom firms started laying down broadband fiber—millions of miles of which would be laid in the next decade. Between 1990 and 1997, the percentage of households in the United States that owned computers jumped from 15 to 35 percent. Talk of “surfing” the Web was becoming commonplace, and people began selling stuff on eBay and checking email via Yahoo and America Online. Meanwhile, Amazon was growing so fast that Jeff Bezos was named Time’s 1999 Person of the Year; that was the year that Americans’ online Christmas shopping doubled, and Bezos took the lion’s share of the orders.1
Markets were booming, but they were also creating what would become a bust. It was a time of easy money and low interest rates, not unlike the years leading up to the financial crisis of 2008, or indeed, the period since then. Back then, one of the triggers for the creation of the dot-com bubble was the Taxpayer Relief Act of 1997, which lowered the top marginal capital gains tax rate in the United States from 28 percent to 20 percent, and in turn made more people more interested in becoming speculative investors. Fed chair Alan Greenspan had actually encouraged this by talking up stock valuations, but that would, ironically, only help facilitate what he himself called “irrational exuberance” in the market. All of it was made possible in some senses by the Telecommunications Act of 1996 and other pro–Big Tech laws that allowed Internet firms to avoid many of the pesky regulations that other companies had to deal with.
It was around this time that I got my own opportunity to jump on the dot-com bandwagon, as—no, I’m not joking—a venture capitalist myself. The fact that a bunch of millionaire investors were willing to hire a journalist who’d never worked in either technology or finance to scout “pan-European B2C media deals”—meaning “business to consumer” for those who don’t remember the jargon of those days—and give her a six-figure salary and thousands of stock options to do so was clearly the sign of a market top. That seems obvious now, but was less clear to me back in the fall of 1999, when I was wooed by the London-based high-tech incubator Antfactory, a start-up venture group comprising former investment bankers and emerging market investors whose Panglossian goal was to become the Idealab of Europe. Antfactory didn’t have a Bill Gross–type innovator at the helm, but had nonetheless managed, in those days of easy money and overconfidence, to somehow convince bigger fish to give them $120 million to invest in European dot-com start-ups.
They found me because I had just written a cover story for Newsweek on Europe’s Internet boom. “Europe’s Got Net Fever,” screamed the headline. “The Symptoms Are Clear—Hot New Companies, Job Offers Featuring Ferraris and a Certain Swagger as Bright Young Businessfolk Stake Their Claims in Cyberspace.” Yes, it’s a tad bit embarrassing to write these words now. If I had thought much about it, I’d have realized that I was coming in just as the roller coaster was beginning to shift into free fall. The covers of American newsmagazines are generally a reliable counter indicator of what’s happening in the markets, and this one was no exception. The market slide began a little over a year after that cover ran.2
I’d gotten the idea for the cover during a trip to London with my then-husband, Kambiz, who’d grown up in the United Kingdom after his parents fled Iran following the 1979 revolution. Like most expat Iranians in London, he hung out with a well-heeled group of hipsters, and through these friends, we had been introduced to some of the players in the burgeoning London tech scene. In London, the tech elite congregated in the poshest parts of the bustling city, rather than the bland, suburban enclaves you find in Silicon Valley.
It was at the peak of the “Cool Britannia” era, and the scent of euphoric optimism, thinly veiled snobbery, and, of course, money was in the air. New Labour (which was Britain’s version of the corporatist wing of the Democratic Party, then powerful in the United States) still seemed like a good idea, and Tony Blair was widely regarded as the Bill Clinton of the United Kingdom (in a good way). Oligarchs looking for tax breaks and Americans looking for quick deals and easy money were flocking to the city, and everything—most notably property prices—seemed to be moving in a single direction: up. Business plans were being sketched on bar napkins in private members’ clubs like Soho House and Home House, an eighteen-room Georgian mansion on the chichi Portman Square in London’s Marylebone neighborhood: places where only rich expats and “toffs,” the dismissive term for Britain’s own native upper class, could afford to live and play.
Home House was, in fact, where I had my first interview with the partners of Antfactory, who had contacted me following my cover story, which was picked up widely in the British and international press. The partner who made the initial phone call was a South African transplant to London, Rob Hersov, a onetime Rupert Murdoch protégé who had launched a curious venture called Sportal, a pan-European sports “platform” (translation: website) that worked with local sports stations and teams like Italy’s Juventus, Germany’s Bayern Munich, and France’s Paris Saint-Germain. Despite the brand names, there wasn’t really much there. Yet Rob himself was quite a marketing man. His most memorable features were a stunning head of wavy blond hair and a megawatt smile. He reminded me of a Ken doll, albeit one that drove a Range Rover and had a socialite wife.
Rob had rung me up in the weeks following the story and made an interesting proposition: Would I like to come and be a part of a great new London-based start-up that was looking to build “scale” and “synergy” in the as-of-yet-fragmented European Internet market? Unlike the United States, which already had a captive base of 250 million consumers who spoke the same language and wanted to buy more and more of the same stuff online, Europe was a collection of countries, each with a unique culture and individual markets. The euro had only just begun to unite the underdressed young partygoers who wordlessly undulated to the beat of pounding techno music in clubs from Ibiza to Berlin. They didn’t need words—optimism was the common language.
This was the moment when Europe would finally and truly come together in an economic and political union that was to be the greatest-ever experiment in benign globalization. And Antfactory, Rob explained, would be right in the center of it, leveraging all these wonderful new economies of scale. It would find the best European dot-coms—in travel, in music, in finance, in health—and mash them together, boosting their global presence and stock valuations accordingly. Exchanges from London to Frankfurt to Paris would compete to take these new companies public. Riches would be had by all. It was so logical—after all, why have six different travel-booking sites (serving France, Italy, Spain, and so on) when you could have one?
From where I sat—in a dark, low-ceilinged newsmagazine office in midtown New York, where I spent hours upon hours rewriting prose sent in by correspondents from abroad—this seemed like an appealing proposition. In the States, companies like Yahoo, eBay, and Amazon had begun their meteoric ascents, and the migration from print publications to online ones was well under way—spawning glossy new magazines and sleek new websites dedicated to the digital economy, like Wired, Fast Company, the Industry Standard, and Red Herring. At Newsweek, we were all beginning to suspect that our world wouldn’t be the same for much longer. True, free dinner was still being served to editorial staff in the wood-paneled penthouse floor that had once been a conference room for General Motors. But the company had, much to the dismay of “the old-timers” who had been around long enough to experience the creature comforts of an earlier era, finally started cutting back on the expense-able (and often excessive) drinking on the late nights that we’d go to press. That, too, was the sign of a seismic market shift.
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bsp; So were the fortunes of people like Laurel Touby, one of the freelance writers for the last magazine I’d worked for, a business publication called Working Woman. Laurel had left journalism to start up a networking group for creative types working in online media, which she called mediabistro. Laurel wasn’t a star writer. But she was an incredibly capable entrepreneur, and a gracious hostess at the salons she organized at Lower East Side bars, wearing a brightly colored feather boa so that people could identify her. I attended some of her events, which were fun, and we would occasionally hang out and lament, over coffee or a drink, about the decline of the media industry and how we could barely afford to live in New York City on a newsmagazine salary. I remember once saying to her, “Laurel, you should really give up journalism and start a business.” In fact, she did, eventually growing her informal networking group for freelancers into mediabistro.com, a go-to resource for writers, reporters, and editors that cornered the market for media and PR job listings and was later sold to a tech firm for a cool $23 million. Laurel, who owned 60 percent of the company, promptly bought an apartment so stunning that it was featured in The New York Times, got married, and became a start-up investor herself.3
The idea of trading in the punishing demands (and even more punishing paycheck) of the reporting life to partake of the riches of the Internet was certainly swirling around my own mind as I considered Rob’s offer. I already had plans to relocate to the United Kingdom—my husband’s father was sick, and the idea was for us to move closer to his parents’ home in Brighton. Not only was my employer willing to relocate me, I also had offers from two competitors—The Wall Street Journal, and Time magazine’s European edition—and planned to make a decision within the next few days. I loved my work as a journalist, and I was grateful to have options. But these jobs offered predictable trajectories—write more features, maybe become a senior editor or a columnist, watch my salary inch up by a paltry 2 percent every year. Antfactory, on the other hand, offered something new and inherently appealing to a business journalist—the chance to get into the game, rather than just write about it. I told the Antfactory guys (they were all guys, of course) that I’d come meet them in London and discuss the offer. I obsessed over which outfit to wear to the meeting, eventually deciding on a fifties-style retro suit and a pair of Sigerson Morrison T-strap heels, which was indicative of the fact that I knew a hell of a lot more about fashion at that point than I did about technology.
The partners, as it turned out, didn’t know much more. Rob had worked mostly in entertainment and the luxury brands industry. Two others were former finance guys, one from Salomon Brothers and another from Morgan Stanley. There was a handsome but morose American named Charles Murphy, who wore a Savile Row suit and seemed unusually formal in both dress and demeanor for a would-be dot-com guy. And then there was the founder, Harpal Randhawa, a fast-talking Indian investor who had made his money in emerging markets in ways that I didn’t quite follow. But the new CEO, another Rob named Rob Bier, made sense to me. He was a cheerful American with a can-do spirit who’d been a partner at the consulting firm Monitor. He would, like Google’s Eric Schmidt, be the “adult supervision” at the Antfactory.
I was a good enough reporter to see that none of them were top-shelf. Still, the idea of being able to waltz into a high-tech incubator as a partner and scout deals at the height of the dot-com boom—and in London, by any objective measure a better place to live than a Silicon Valley suburb—seemed like something worth thinking about. I figured there was probably a 60 percent chance that the operation would eventually go belly-up. But the partners had enough money to fund it for a couple of years, and I had no children or serious financial commitments at the time. Plus, the stock options they were giving me might actually be worth something. And in a worst-case scenario, I told myself, I would go back to business journalism knowing a whole lot more about the tech industry than I did before I worked in it.
Ferraris and a Certain Swagger
We moved to London in December 1999, and I immediately plunged into the dot-com scene, where I soon encountered the London equivalent of Laurel’s brainchild—a networking salon–cum–headhunting site called First Tuesday. It had been founded by Nick Denton, a former Financial Times journalist who’d eventually go on to start Gawker, and a Silicon Valley transplant named Julie Meyer. Both of them were more businesspeople than technologists. The real engineering on this side of the pond was happening in Cambridge, England, or in Estonia (where there was a thriving community of cheap coders), and Scandinavia (which was already big into mobile), whereas the DNA of the London start-up scene reflected the DNA of the city itself: It was about money and dealmaking.
Of that, there was plenty. New jobs—and new companies—were being posted on First Tuesday’s website every few minutes. Within a few months, the corner bar where Nick and Julie held their monthly mixers could no longer accommodate the hundreds of eager minglers who would regularly spill out the doors. By 1999, the operation was expanding to twenty-five other cities. And there were investors lining up to give it money. The idea that venture capitalists would pay millions for a cut of a venture that served solely as a gateway to other ventures seems like an “only in America” kind of story. But the entrepreneurs and investors who made up First Tuesday felt themselves to be, as Nick Denton put it to me at the time, “spiritual Americans,” people who blended American charisma with European style.4
At the First Tuesday networking events, Denton and Meyer made it easy to see where the money was—potential investors wore red dots on their lapels, and the “talent” wore green. The reds, who were rarer and inevitably more popular, would often emerge exhausted after a couple of hours of fighting off eager greens over cheap wine and snacks provided by the organizers. The group claimed that $100 million worth of deals had been cut in this manner. I didn’t really believe them, but I didn’t entirely not believe them. Either way, one thing was clear: There was money to be made. And it was always a fun scene, full of glittery people.
Some of the city’s better known success stories included Ernst Malmsten, who looked a bit like a Nordic Elvis Costello, and his partner Kajsa Leander, a former Elite model. Back in Sweden, they’d started bokus.com, at one point the world’s third largest online bookseller. After selling the company in 1998, they’d turned their attention to the fashion market, specifically targeting the young, tech-savvy customer who they thought would pay full price for tough-to-find sportswear items like Vans sneakers or Cosmic Girl T-shirts. Turned out that Bernard Arnault, the head of the global luxury conglomerate LVMH, thought so, too, as did the Italian retailer Benetton. Malmsten and Leander’s Boo.com quickly raised three large rounds of capital, opened offices on Carnaby Street, and launched simultaneously in seven countries.5 Another good-looking and posh pair, Old Etonian Brent Hoberman and Martha Lane Fox, the daughter of an Oxford historian, started Lastminute.com, a successful travel site that specialized in great deals on eleventh-hour vacations. They eventually took the company public in a £577 million listing.6 Even First Tuesday itself was eventually sold for roughly $50 million.7
Meyer, to her great credit, admitted that First Tuesday had been “in the right place, at the right time.” That was rare in the dot-com world. Although I had met many smart and savvy entrepreneurs who didn’t make it for one reason or another, those who had made it all had something in common: They invariably chalked their success up entirely to their own inherent abilities. The idea of luck was all too often dismissed as a factor.
Many of the entrepreneurs bopping around London in those days were savvy Americans, often Silicon Valley types looking for less-trodden pastures where fortunes could still be made. Some, like Flutter.com cofounder Josh Hannah, an affable Stanford Business School graduate who played in my husband’s poker group, had come to set up sports betting sites, something you couldn’t do so easily in the United States. Josh had come over a few years earlier, with just a business pl
an and his hard-driving American work ethic. His shop was like all dot-coms and many tech firms today—filled with nerds in T-shirts and flip-flops, seemingly carefree and even slightly goofy, but actually as rapacious and laser focused as any high-powered corporate types. I remember getting in fights with him about the need for work-life balance, which he eschewed and claimed (perhaps correctly) wasn’t really possible in a start-up. All the hustling paid off for Josh—Flutter ended up merging with the online bookmaker Betfair.com,8 and the company later went public in a $2.2 billion offering on the London Stock Exchange.
He wasn’t alone. By the end of 1999, the stories coming out of London were starting to rival the tales from the Valley, even if the companies themselves did not. I remember hearing about a hiring battle for a particular executive who was being courted by the London dot-coms. The funders of one financial services website invited him to lunch. When he got there, his would-be employer asked if he noticed all the cars in the parking lot. Then he pointed to one—a Ferrari—and told the exec that if he signed with them, he could have the keys on the spot. The executive replied that he didn’t like red, and went and signed with another eager start-up.
It was the roaring ’90s after all, and not just in Silicon Valley. If the 1980s began the age of greed, then the late 1990s cemented it. It was the age of Clinton and Blair, who continued much of the market deregulation that had started under Reagan and Thatcher. It was a period when the last vestiges of the labor movement and the old-fashioned notion of retiring comfortably with a gold watch and a pension began to slip away, replaced by the glamorization of Gordon Gekko and soccer moms reading Money magazine and hoping to become stock-picking millionaires overnight. Wall Street guys were raking in money, but not nearly as much as the Silicon Valley geeks who had the trappings of money, and yet also somehow a greater sense of having earned it, by creating real value in the form of their companies. Yet most of that value would prove to be on paper only.
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