Lessons from the Bubble

March 13, 2007
Tony Perkins was the founder of “Red Herring,” the Bible of the so-called Web 1.0 business bubble. That magazine ballooned to 600+ pages twice a month in the late ’90s. The pages were filled with investment bank announcements of IPOs (initial public offerings) from which all dreamed of great wealth. Then the bubble burst and the magazine crashed. Perkins is back with a Web-based media business—The Always On Network—and is reflecting on lessons learned. I think his lessons are important for all of us. Here are Perkins’ Seven.
The first principle is to keep your eye on the money, because cash is king. Perkins quotes Don Valentine, of Sequoia Capital, who said “All companies that
go out of business do so for the same reason—they run out of money.” We all need to watch cash flow in our businesses.
The second principle doesn’t apply to all of us, but it certainly does to some readers. It is focus your venture money on overcoming risks. Tom Perkins (no relation to Tony), founding partner of VC powerhouse Kleiner Perkins Caufield & Byers, said, “If we have any investment formula for success, it’s that we try to isolate whatever the biggest risk is in a given deal and structure our investment so the money is used to eliminate that risk.” Where are your risks?Avoid Snappy PeopleThird is “stay away from ‘Snappy People.’ ” Tom Jessiman, anonymously penned a column for “Red Herring” called “The Snappy Guy.” Snappy People, Tom explained, were people like him. Overeducated (i.e., Ivy League graduate degree or equivalent), highly inexperienced (e.g., only previous employment included a summer of binding IPO prospectuses in the middle of the night for Goldman Sachs), and overpaid (north of $100,000 per year). The key is Snappy People don’t make or sell anything. Know anyone like that? Avoid them like the plague.Perkins’ fourth point probably should be number two. This principle is for long term viability customers (and prospects) are everything. “You don’t have to be Jack Welch to understand that the only way to create a real company is to have lots of real (that is, paying) customers,” says Perkins. Believe it or not, ignorance of this maxim wasn’t wiped out when the dot com bubble burst. I occasionally meet an entrepreneur who doesn’t know this.The most talked about presentation at the recent ARC Advisory Group Forum (that I didn’t see because I was at a press conference) contained an admonition to suppliers to “make it simple.” This fits principle number five—bring in design experts. “As far as users are concerned, your hardware and software interface design is your product. If you are going to splurge your company’s precious resources on anything, invest in the outside experts who understand and translate the science of user-friendliness,” states Perkins.Most of the people I deal with have no trouble with principle six, but all of us need to step back at times and re-evaluate what we’re doing. The principle—base your PR strategy on the principle of attraction rather than promotion. Finally, “Do it for the passion, not the money.” One of the sayings Steve Jobs is famous for is, “The journey is the reward.” That’s the bottom line. If you are not in it for the journey, then you might as well do yourself a favor and go get a real job. I’ll leave you with this poem with which Perkins ended his essay, which suits me just fine.With passion pray.With passion work.With passion make love.With passion eat and drink and dance and play.Why look like a dead fish in this ocean of God.Rumi     Gary Mintchell Editor In Chief, [email protected]