Tales From the Dotcom Darkside
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.
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.
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.
Another One Bites the Dust
Compared to the relative sensibility of Webvan's model, Kibu.com was the classic case of a highfalutin dotcom that disintegrated as the industry entered its revaluation phase in mid-2000. Hired as director of technology, Arcadia Kim liked the concept of marketing exclusively to teenaged girls. Among Kibu.com's oeuvre of marketing strategies were chat rooms, Web site personalities that gave advice on everything from school to makeup, and an accompanying retail and entertainment venture designed to capture and convert teenage girls into loyal users.
"My job was probably the most interesting one I ever had," Kim says. "Once a month I would get dressed up and do a photo shoot and write a column. There was a lot of high energy and shifting goals. Almost immediately upon being hired, I started questioning the business model. My responsibilities were to implement core technologies on the site to connect to teens, with content, community and commerce attached to it."
Kim's sense of alarm, which started "almost immediately" upon being hired after graduation, was compounded by the fact that virtually everything at Kibu.com flew in the face of what she'd learned at HBS and in the business world: "When you're on the outside looking in, all you see is the hype. The whole Internet bubble was about dreamers being about to dream, and when you want to believe something, you will take everything in your heart to believe it." Kim was laid off in September 2000 along with most of Kibu's staff, and the company returned nearly half of the $22 million in venture capital the following month, a rare act of probity in an industry where Other People's Money was burned through as fecklessly as it was ventured.
Now happily ensconced in Silicon Valley, of all places, Kim, 29, landed her dream job 18 months ago as a director of development with Electronic Arts. A longtime video game junkie, she's doing what she's always wanted to do, and she's working on a Lord of The Rings video game for Playstation 2. "My whole dotcom experience has turned into the cornerstone of my experience. Managing risks and learning how organizations work is just sort of ingrained in me now," she says. "I talked about it a lot while I was interviewing with EA. I took an entry-level position with them on the production side, where there aren't too many MBAs. Ultimately I learned what was really important was setting expectations about what can happen in one's career."
The Road Ahead
While Kim was lucky enough to bounce from a dotcom misstep to an ideal job, other HBS grads are still milling in the wake of the layoffs, trying to retool their approach and find the shoe that fits. Maya Dani, 29, started with Gorefer.com in August 2000, and immediately was waist-deep in the ensuing organizational chaos that ultimately led to her leaving the company in December 2000.
"Gorefer.com was building technology for people to use the Internet as a platform for sales leads. They wanted to target every market, and for various reasons we began on the home improvement side," Dani says. "We would pay people $2 for leads, and then a partner would pay us twice that."
Like all HBS alumni, Dani's business acumen didn't jibe with the frenetic positioning efforts and constantly changing focus of the company. Four years' experience in investment banking didn't help her achieve the suspension of disbelief that seemed so readily available to coworkers.
With a '95 HBS grad also working at Gorefer.com, her reservations were only compounded by a fellow alum trying to make sense of the situation. The two were in constant conversation with the CEO--they tried to sway him to adopt a more centered, prudent approach, but it didn't take. The repercussions of the 2K slowdown were immediate, and 20 percent of the staff was laid off two weeks after her arrival. "I was hired as director of business development, then I sort of became director of marketing. I was whatever I wanted to be," Dani adds, a whimsical recollection underscored with the clarity of hindsight. "The CEO was spending more time in-house when he should have been pounding the pavement."
Gorefer.com closed for good in February 2001, after having raised $12 million in venture capital--a relatively small figure by the industry standards at the time. Meanwhile, Dani took a job in banking, left that, and then worked as a consultant for five months. She's still looking for that proper mix of structure and entrepreneurial spirit.
"I ended up quitting the banking job after six months. I decided if I was miserable, I should just leave," she says. "The decision to leave Gorefer was the beginning of several cascading events in my life. I really felt like many of my classmates at HBS, and I felt we could think up the next great idea as opposed to thinking out a long-term plan.
"I think my expectations were really high coming out of B school. I talk to headhunters, but quite honestly I am not putting 100 percent into my job hunt. I am really nervous about picking the right thing. Just this last week I've really started looking."
"What was interesting," says Kim, reflecting on the dotcom effect on the Class of 2000, "was that HBS was a reflection of what was going on in the market at that time."
With hard roads behind them and lessons learned, the Class of 2000 is taking the road back, one that is uniquely theirs.
|"The entire thing
was a giant Ponzi scheme," contends Tom Arnold, 30, another
member of HBS 2000. "It was essentially the process of waiting
as long you could until the other guy got chicken and sold
Arnold, who interned at Chipshot.com during the summer of 1999, was not swayed by the alluring dotcom industry upon graduation, but he still got laid off as a consultant for Booz-Allen-Hamilton in November 2001 despite playing it smart and going for the "old school" approach upon graduating.
Ponzi scheme or not, there was a definite undercurrent of weirdness at the epicenter, and I recall it well working as a Web hosting consultant in Silicon Valley in 2000. Finding myself deemed an expert on hosting at all of 28 years young due to a background in facilities management, I had the job of giving 15 to 20 top-down weekly facility tours. Typically the CEO, CIO, COO and all the other acronymed employees were under 30, leading these groups; the thirtysomething midlevel-management types stayed back in the second echelon with the elder bean counters in silent tow.
Dress code was inverted according to rank, and more often than not, you could pick out the CEO according to who had the loudest shirt. As large companies go, this one was a little slow to send the higher-ups to investigate this suddenly lucrative end of the business, but like smart middlemen, they stocked up on Levi's and shovels after the gold rush kicked in. One group of East Coast headquarters heavy-hitters materialized unexpectedly one day, clad in garishly overdone suit-and-tie getups. The dominant monkey of the group lit into me for wearing the business casual retinue that was standard fare in dealing with dotcom companies.
"Does anybody have a jacket this guy can wear for today's tours?" he asked, horrified. The tactful rebuttal to this overture was that a) This is the West Coast, and therefore anybody in a tie is not perceived as tech-savvy, and b) dotcommers tend to trust people who look like them. Walk the walk, talk the talk, and make small talk as prescribed were the proven keys to making the sales.
Unfazed by this perfectly logical line of reasoning, Mr. Old Guard stalked furiously into the break room to find my superior, who was engaged in a heated foosball match. His party of a half-dozen suited cohorts, looking a little uneasy at the exchange, waved me off and urged me to disappear for my own safety, job-related and otherwise. I nodded and met my appointment, a trio of start-up folks whose CEO was named Boogie.
In the end it all came tumbling down, of course. But for one brief flash, I witnessed something brilliant and funny and patently untypical. Things have since returned to normal, thankfully, as many of us, no doubt, have stocked up on ties in anticipation of returning to its environs.
Jason Probst is a freelance writer in Southern California. He has written for ESPN, maxfighting.com and Gridlockmag.com, among other publications. His next project is comprising a dotcom business plan written entirely in Haiku.