Tales From the Dotcom Darkside

Harvard's Class of 2000 had the world in its hands.for a while. But what was it like to work at a dotcom--not start one--during the Net's heyday? HBS grads dish the dirt.

Coveted by Fortune 500 behemoths and courted literally from their first steps on campus, the graduates of the Harvard Business School have historically enjoyed the dizzying spoils that come from earning a spot in the nation's most prestigious MBA program. Matriculation at HBS has historically been the gateway to high-profile positions in investment banking and consulting.

It's a de facto farm system for producing talent that top firms court the way a professional sports team trades up in the draft order to grab an all-American. Contact between those in the program and potential employers and recruiters is closely regulated, and the Fortune 500 have traditionally enjoyed the advantage of name recognition and deep pockets in landing HBS graduates upon graduation.

What does it take to succeed as an entrepreneur? For many, it takes a healthy dose of courage.

The Internet revolution changed all that. Buoyed by the dizzying procession of fast wealth and a subversion of the time-proven paradigms of business, the HBS Class of 2000 stood for more than just the numerical symbolism of a new era. Their post-graduation strategy was a wildly different one than that of their predecessors. People were getting rich, small dotcoms were enjoying unprecedented stock valuations, and the buzz was hitting the HBS grapevine with all the aplomb of a new kid in town taking the place by storm, with the Old Economy and its prospects suddenly relegated to the agate type.

Their stories have both a common thread and unique elements among them, and the lessons learned will endure, even if the dotcom revolution didn't.

Remember Webvan?
As a former Army captain with a background in production, Dan Krehnbrink, 31, hardly fits the stereotype of the downsized dotcom dreamer. He entered HBS with a desire to get exposure to different areas of business and augment his business skills--not an unusual criterion, nor a foolhardy one. As his graduation date approached in June 2000, Krehnbrink couldn't help but notice the deluge of new ideas and concepts among his classmates.

"Everyone was walking around with four or five business plans in their pocket," Krehnbrink says. "It was obvious there was a lot more excitement about what was going on and things to be learned."

Still cautious as graduation loomed, and having reviewed numerous dotcom opportunities, Krehnbrink took a program manager position with Webvan's operations wing. His decision was based on the merits of a business plan that seemed relatively robust compared to most in the industry.

One of the more relevant ideas of the dotcom boon, Webvan operated a catch-all home delivery service for groceries and was a fitting metaphor for the fast-paced climate that spawned its inception: Those who didn't have time to shop could simply have someone else do it for them, obviating the nettlesome problem of the 8 p.m. run to the store after a 12-hour workday.

"Our long-term plan was to [start] out with groceries, and then branch into electronics, pet foods, etc.," says Krehnbrink. "I saw a lot of flaky business models, then looked at Webvan and said, 'Here's a company that has a lot of assets.' In retrospect, the problem was too many assets."

The company's notable linchpins were its enormous distribution centers, located from Chicago to Los Angeles. Once the home delivery business caught on, these high-tech distribution spheres would form the backbone of a nationwide network to help the company sustain the projected growth.

"It was an incredibly big plan, and a product of the market at the time was to get big fast. There were hundreds of thousands of square feet in these distribution centers," Krehnbrink recalls. "Somebody had done the analysis that we could break even by selling so much, but the costs were much higher than anticipated."

Fittingly, the day Krehnbrink arrived in California to start working for the company, Webvan acquired HomeGrocer, a chief competitor. Already feeling the bite of a rapid expansion punctuated by soaring infrastructure costs, his position in the operations department was further complicated by the directive from management to identify and implement HomeGrocer's best practices in an effort to streamline costs: "Their facilities were much more streamlined, and their technology platform was not as complicated. In retrospect, I wish we could've started in a simpler format like HomeGrocer and added complexity as we added profitability."

The company, feeling the financial crunch of not meeting its goal to raise $1 billion to reach its operational goals, laid off Krehnbrink, along with 2,000 other employees, in July 2001. Yet Krehnbrink speaks positively about his experience and evidenced no ill will about his 13-month whirlwind ride.

"Webvan recruited a lot of people with a consulting background, and I have a tremendous respect for the talent that was there. Perhaps we hired people who were too talented," he says. Currently in bankruptcy proceedings with numerous creditors, Webvan is still operating with a skeleton staff to sift through the fallout of the post-boom aftermath.

At this article's writing, Krehnbrink was waiting for an offer on a program manager position from an established firm. "I don't want to name names," he adds, only half-kidding. "But I don't have dreams of working for a dotcom. I've been talking to more traditional companies that've been around for 10 or more years. I still feel there is tremendous industry in the concept, though." His future goals are geared toward getting more experience in technology platform development.

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This article was originally published in the July 2002 print edition of Entrepreneur with the headline: Tales From the Dotcom Darkside.

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