Burn Rate

by Michael Wolff

  “I said if he got it done, I’d give him my Mustang.”

  “That’s a joke, right?” (I had actually heard this before. If you were really serious in business, if you were really a player, you’d give a car.)

  “Yeah.”

  But when the meeting did begin, it was pretty clear pretty quickly that we were a long way from a done deal here.

  Indeed, we were starting all over again.

  There were new faces.

  There were new considerations.

  Why were we here? What did we have to offer? Etceteras, etceteras.

  People went in and out of the meeting.

  The AOL Exec actually seemed to be in several meetings at the same time, working the hall.

  “Let’s do it. To me it’s done,” he said to his colleagues puzzling over the details. “Just figure out how you want to do it.”

  He left the room.

  His colleagues, each in turn, left the room, got involved with something else, then returned to our deal again.

  More meals were served.

  Hours passed.

  I saw how this would happen. I saw how it could happen. You could have anything you want, you could do anything you want. If you didn’t make someone say yes. No big yes. No grand decisions. No one wanted that. Someone would have to take responsibility for that. But if it just started to happen, just began to move here and began to move there . . .

  It was like the army. We were all in the army, the cyberspace army. And if we didn’t make a big deal out of something but just figured out how to do it, or do something, without anyone having to make a decision that no one had the experience and foresight to make, then it would happen, and the war would be fought in the same condition of absurdity and occasional personal profit that all wars are fought.

  We were left there in the conference room—with occasional visits and expressions of interest from the top AOL brass—to our own devices.

  And I had the feeling that I could do it. I could move down the corridor, introduce myself, get a thing going here and a thing going there. Yes. Get a hotel room. Stay the evening. Come back tomorrow. I could do it. If I weren’t so tired.

  And I was exhausted. Beat. Beaten.

  Well past evening, with no formal end to our meeting (Jon Rubin had long since left, and the factotum had gone in his own direction), the EVP and I got up to head back to New York.

  “We’re going to do this,” the AOL Exec said, catching us on the way out. “It’s a no-brainer.”

  Chapter Nine

  Exit Strategy

  I flew out to another conference in San Francisco, where I was scheduled to speak to beg for my future. More VCs mingling in the event rooms of a downtown hotel. More pastries. More fresh fruit. Many of the same entrepreneurs from the last conference, a few fresh from successful IPOs, a few with recent funding in hand, most running out of dough. There was a new crop as well, as determined as the old. And, as always, our PR people, our $40,000-per-month PR people in black garb, moving in their snarky fashion through the crowd.

  Push was the word. Push instead of pull. Because users were not reliably coming—that is, being pulled—to most of the five million Web sites (or six or seven or eight million. They were growing in some weird Malthusian inversion: population grew arithmetically, Web sites geometrically) that resided in cyberspace, there was a new technology whose strategy was to push the Web to them.

  “Destination is bullshit,” my former assistant, Seth Goldstein, now cyber ad agency CEO, lectured me. “If you build it, they won’t fucking come. Forget about it. If you don’t got distribution, you don’t got nothin’.”

  By which he meant, you had to get your Web site in front of people’s faces—like television. PointCast was the company to beat in the push field; virtually everyone, including Microsoft, was trying. PointCast wired your PC to serve the Web up to you in your idle moments. The Web was your screensaver. Neat.

  Except that it didn’t exactly work. And if you did get it to work, the question people seemed to ask was, Why? Why do I need this? If I want television, I have a better one. People in the know were saying, “Push.” People really in the know were saying, “Push is stillborn.”

  I had no opinion.

  I do not believe I have ever been so tired. I looked at the cheese Danish in my hand and wondered how it had gotten there. I stood at the podium in front of the VCs in my little hotel conference room and thought it is not at all unlikely that I was going to throw up. I watched myself, out-of-body like. There I was. Precise. Sober. Elegant. Gray double-breasted suit. And about to deliver a projectile vomit.

  “Need I say more?” I hoped I’d have the aplomb to say to the financial and technology community after my hurl.

  Exhaustion, this kind of exhaustion, is not just what happens when you haven’t slept enough. It happens when you’ve roamed the far reaches of your mind and experience and just don’t know what to think anymore. There was no exit from the cell.

  I was scheduled to go home on the red-eye, too.

  I wondered how other people here, the people who were doing what I was doing, begging for money for months and months on end, did it. I sure hoped they weren’t wondering how I did it.

  After I did my pitch—by the book, with numbers on projected growth and return on investment—without an upchuck, I had a few hours to kill and decided to stop in at Wired. I found Louis’s empire to be both profound and comical. A magazine, an electronic media company, a book group, many projects to come, 350 employees, real estate all over downtown San Francisco. He had achieved the commercial manifestation of exactly what he believed in. Of how many visionaries can that be said? But the financial prospects of the Wired empire were slim to none. He had failed at his second IPO. At the end of 1996, he had been forced to take money on terms perhaps even more onerous than the terms I had taken money on—$20 million with impossible-to-meet performance hurdles. I wondered if he thought he could yet pull this off. Certainly no one who knew anything about the rules of preference thought he could. What do you do when you know that you’re fucked?

  Louis looked even more tired than I felt. He sat in front of a big monitor doodling with his mouse. His eyes were deeper. His face gaunter. I would have liked to reminisce, to spend a moment remembering when there was no Internet, no cyber business, no millions to die for. A lot had happened in a short time, after all. That was worth something. More than just something. Many people would certainly be willing to regard Louis as heroic, if not entirely successful. I would.

  He had made a revolution. Hell, me, too. In a way.

  I suppose, though, it would be a little while still before we knew if it was a revolution in the way people think and communicate and relate that we had helped make, or just a revolution in the way people shopped.

  I did not succeed in getting Louis to open up.

  I went out to the airport and was back in my office in New York just a little after dawn.

  I knew the rule. Just keep showing up. If they can’t move you, if you just stay put, hang on, hold out, you become part of whatever gets built.

  I can’t place the exact moment when I started to question that logic. But I know that once you do, whether it’s in a relationship or taking a test or running a race or building a business, once the willing suspension of disbelief fails, you’re in big trouble.

  Is this worth it? is a very subversive question.

  Alison quit. She would help me, but she wouldn’t work for the company anymore.

  “You decided to go into business with people who you thought could make you money,” she said.

  “Make us money!”

  “It wasn’t relevant to you whether you liked them or trusted them. That seems relevant to me now.”

  “We made a business decision. This industry was moving so fast that we needed to get the resources to grow with it.”

  “Yes. That was your decision.”

  The Internet itself was also starting to close in on me, I felt.<
br />
  We were publishing as many words a month on the Internet as a monthly magazine publishes in print. And we weren’t stopping there. We were moving to a schedule where we would be publishing that many words every week. Given the speed of the Net, given its ability to deliver information at a speed that made television seem sleepy, we would be publishing more and more words faster and faster. Ever spiraling. Already we had five million words residing out in cyberspace.

  We were building an audience, too. We were making our distribution deals. We were getting traffic. We were selling ads.

  Because this was cyberspace, because this was server technology, because this was a revolutionary new medium in which we could monitor the interests and habits and behavior of our users, we knew something about the users of the Internet that I deeply, desperately even, wished I did not know.

  Here is the incontrovertible truth:

  No one reads on the Internet.

  Not conventionally. Not as I read something printed on paper. Not as I write. Not in word, sentence, paragraph, article, and longer-version form.

  We could see the “user” hover for a second, or a half second, and alight, like a bug, on a paragraph and then linger for a moment and be gone. Bolt. Vamoose. Vaporize.

  I used all the tricks: screaming headlines, audacious jokes, in-your-face conflict. I used short sentences. Shorter sentences. Exclamations!

  Nothing worked.

  There were many explanations. We hadn’t configured lines and pages right for the eye. People had to get used to monitors. People still didn’t really know what they were doing on the Web. It was early. Behavior was still in flux.

  But I knew. I just knew.

  In some perfect irony, we had invented this new publishing medium, and no one read.

  And no one would read. They would do many exciting things. They would be stimulated and informed in ways that we had not yet invented and could not begin to imagine. But they wouldn’t read. I understood that.

  I was lonely but not alone. I had Jon Rubin. He had me. We were each other’s tar baby. His taking control of the company, a move that had made me feel something like a prisoner of war, was, I think, a big blunder for him. A version of the Soviet Union in Afghanistan. He was Andropov; I was a mullah. He didn’t have the will or the attention span to effectively occupy what was now a sullen and rebellious colony.

  As we battled—a kind of terminal bickering really; death by last word—over each decision, I disengaged a bit more and began to understand and accept that I no longer had the responsibility that bound me here.

  His company, First Virtual, had made it out; it had completed its public offering. But instead of being a victory, it was a chastening experience for him. Two of the three underwriters had dropped the offering. The third, Bear Stearns, had held tight and completed the offering, albeit below the estimate, because of its connections to Rubin’s family. The rich kid effect. Not the ideal way to play the market.

  Rubin was starting to realize that he might be stuck with us a lot longer than he had ever intended.

  One evening, after hours of disagreements and recriminations (God, we detested each other! We glared across the conference table, each, I think, truly astounded by the contempt he felt for the other), we were exhausted enough to relax a little and to take stock of our horrible relationship and the strange fates that had inflicted each of us on the other.

  “You know, your friend Machinist promised me, absolutely promised me, no doubt, no question, he’d have me out in a year,” Rubin said, his pain apparent. “You think I would ever have gone into this deal without that promise?”

  I nodded. “He made me the same promise. He swore he’d get rid of you in a year. I would never have done this if I thought I’d get stuck with you.”

  He bitterly laughed. “God, that Machinist is a fat fuck.”

  While it was not always easy in the cyber business to distinguish between companies in good shape and companies in bad shape, I wondered if I couldn’t glimpse the light at the end of our tunnel. In some sense, the discovery that people didn’t read on the Internet was a profitable one.

  The most costly aspect of a cyber business is content. If you could cut down the amount of content you were creating, and if you could cut down on the quality of the content you were creating, your costs would start to seem manageable.

  That was the most depressing piece of good news I had ever received.

  There were two new investors who came into the picture in the middle of February 1997. Let me call them Little One and Big One.

  Little One was in his mid-fifties, a name-on-the-door partner in a midtown law firm. Big One, in his sixties, was his principal client. Together they had gained control of some forty companies over the last ten years and taken them public.

  Little One had a monkish haircut and a carefree manner; he tended to the details and conducted most of the business. Big One, a tall man with very large hands and a rubbery face (Walter Matthau–like) and a big fortune, did the smell tests. He’d step into a meeting, listen for a few minutes, and then make a decision. “Let’s do it!” or “I’m in.” Or ask a few questions: “What’s the worst we can get fucked?” or “Any bad guys involved in this?”

  They specialized in “undercapitalized situations in which a company’s managers and investors hate each other’s guts,” according to Big One. He seemed to think this was amusing—amusing that it provided such a wonderful opportunity for him and for Little One.

  Their play was to cover short-term capital requirements and then bring the company public. As soon as they possibly could.

  “We don’t fuck around,” said Big One.

  “We always get it done,” Little One shrugged. “Don’t worry about that.”

  They seemed to regard the Patricof people as white-shirt, risk-averse, fuddy-duddy players.

  “Didn’t I see Alan Patricof on the list of people who slept in the Lincoln Bedroom at the White House?” Little One asked, as though this suggested that Alan Patricof’s interest had turned from making money to vain and idle things.

  Little One and Big One had interests in several technology companies: an Internet provider, a city listings service, a nuts-and-bolts company that for $300 could make any PC a Windows-compatible machine. But they knew nothing about technology and did not particularly want to take the time to find out.

  “I’m too old,” Big One said. “But it’s great, it’s wonderful, all of it. I believe you. If you tell me it’s Internet, it’s Internet.”

  “We know enough,” Little One said. “We do.”

  I said, “Tell me again why you think you can get our company out?”

  “Most of our companies were in much worse shape than yours when we got involved. What? You lose a little money. So what Internet company doesn’t? Look,” Little One said, “you’re just overstaffed. Cut back and you’re almost profitable. Your problem is that you all hate each other. You had expectations. You were going to be on top of the world. Boom boom boom. Higher, higher, higher.” He shrugged. “People get disappointed. People disappoint each other. Business is not so complicated. A fresh start is always good.”

  Little One invited me out to dinner. “No business. Just social. Now I want to get to know you. It’s our relationship with you that’s important here. If we don’t like you, if you don’t like us, then we shouldn’t do it. But if we like each other, if the rapport is there, bingo. Bring your wife. We’ll break bread.”

  Alison wouldn’t go. I didn’t try to push it.

  I made an excuse—“Our five-year-old . . . a cold . . . baby-sitter problems,” I mumbled—when I arrived at the Four Seasons and greeted Little One. I was introduced to his wife.

  She was tall, blond, coiffed, expensively accessorized, and in her twenties.

  I thought to myself, Why should I be judgmental about this?

  She was actually very pleasant. Young people who spend lots of time with older people become mature fast. Their interests and concerns
and style meet the higher water level, in my experience. I felt like the kid.

  Little One and his wife talked about the theater, about restaurants, about politics, about city real estate and Hamptons real estate. They talked about her knowledge of the Internet—she was helping a charity group build a Web site.

  What the hell? I thought. They weren’t pretending they could run my business.

  Little One explained to his wife: “Michael has a partner who doesn’t have enough to do. He’s gotten too involved in the business. A smart guy,” Little One said about Rubin, “but you got to understand that putting up money is putting up money, and running the business is running the business. They’re different things.”

  Now while I didn’t believe that Little One actually believed that, or that Little One was describing anything other than an unattainable ideal, I did think, Well, at least I’ll be starting over again. And now I have experience dealing with investors. I’ll be smarter next time.

  There was a lot of wine and Little One kept calling for more and refilling everyone’s glass. I had to make a special effort not to drink too much, I realized, precisely because I wanted to blur this all a bit.

  “Let’s do it!” Little One said.

  “Let’s do . . . ?” I wasn’t sure where he was heading.

  “Let’s go into business together.”

  “It really sounds great,” his wife said. “It really, really, really sounds great. The Internet is going to be so important in our lives.”

  “Can you get Jon to agree to—”

  “To take a haircut?” Little One laughed. “He has to give up his preferences, we’ll deal with that.”

  “Do you know his lawyer, Jesse Meer?”

  “Oh, Jesse. We’ve been in a couple of deals with Jesse. He’s not so bad. A blowhard.”

  He went over again, sketchily, the terms of the deal they were prepared to offer me. He emphasized the thirty percent of the company I would be left with “at the end of the day,” after he gave Jon his haircut and dealt with the Patricof interests (“I’ll deal with Alan”). Still, of course, as you bring in more preferred money on top of the other preferred money you’ve already brought in, you recede ever further from your own piece of the action. (“The most expensive thing you’ll ever buy,” I recalled Bob Machinist saying, “is money.”)