It’ll be okay with
Casey Kait and Stephen Weiss if their book Digital Hustlers (ReganBooks/HarperCollins,
344 pages, $26) becomes known as the Please Kill Me of Silicon Alley.
They readily admit that the oral history of punk rock was a model for their
oral history of New York’s dotcom rise and fall.
There will surely be a
lot of books published in the next couple of years on the rise and fall of
Silicon Alley, and
I bet many will use Digital Hustlers as a primary resource. Tiled together
from hundreds of interviews with players large and small, it’s a chronological
composite portrait of New York dotcom culture–at least, as remembered
by those insiders, with both nostalgia and chagrined hindsight, as they stood
among the ashes and ruins of that culture in the fall of 2000. The interviewees
are spread across that blasted landscape, from early pioneers like Red Burns
and Stacy Horn to last-wave VCs, from worker bees to geek-chic celebrities
like Pseudo’s Josh Harris, Razorfish’s Craig Kanarick and Silicon
Alley Reporter’s Jason Calacanis.
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both 25, were insiders themselves. Kait came out of small press publishing to
be involved in the startup of MP3Lit, which was later sold to Salon.
Weiss came out of magazine publishing to join Red Filter. They met when MP3Lit
and Red Filter "started to partner up," Weiss says. "Casey and
I were the ones planning the parties. We used to throw these parties on the
Lower East Side."
in Silicon Alley’s life cycle. "Everyone knew the bubble was going
to burst," Weiss recalls. "But I don’t think we realized how
close we were to the total decimation. At the parties we were throwing we circulated
these questionnaires, and one of the questions was ‘What will be the first
sign that the bubble burst?’ [It was] February of last year, and you could
feel it, it was palpable, but we were still chugging along with our projects."
freelancing for Vogue, Kait’s been concentrated on writing the book.
It started as an idea to cowrite a rise-and-fall-of-Silicon-Alley movie; their
agent, Jim Fitzgerald, talked them into the book. They began working on it in
August. Doing it as an oral history made eminent good sense: they already knew
a lot of the players, people who’d become very used to talking about themselves
and the industry, and it was the fastest way to turn a book around.
made it difficult was we were interviewing these people under the most hostile
circumstances," Weiss says. "Everyone was doing their best to put
on a good face. Because for so many years they had just told their stories and
enjoyed this freedom to give their story. But now people were–you could
just see the fear in their faces."
made for natural interviewees, Kait says. Silicon Alley "was really an
environment of storytelling. The businesses were about telling the story of
the business. That’s what you learn when you’re writing your business
plan for the first time. You’re telling the story of the business, how
it started, how it will grow, how it will succeed. So in some ways people were
comfortable talking, because they had done a lot of talking."
agree with several of their correspondents that there were two generations in
Silicon Alley: the original Internet visionaries and pioneers, and the money
people they attracted. SiteSpecific’s Seth Goldstein recalls in Digital
Hustlers, "Some time in ’97 it changed. But from mid-1995 to the
end of ’96, it was magical. In ’97, as the IPOs started to hit the
market, it became more of a real business, and the investment bankers started
to leave their jobs to go to dotcom startups and venture capital started to
flow in: ’97 to ’99 was really about the money. Now it’s about
the morgue and the funeral."
say it changed around 1996, and the Gold Rush probably started in ’97 going
into ’98," UrbanDesires founder Kyle Shannon says. "That transition
makes me a little sad. Because prior to that, the only reason people were quitting
their day jobs and starting businesses was because they passionately believed
in something. And after that, no one really gave a shit if the business was
good or not–no one was passionate. It’s like, ‘Oh he’s doing
a travel thing? I could do a travel thing–fuck it. Give it a different
name, get a new URL, IPO baby, yeah, whoo.’"
dotcoms were attracting not just mad money, but stupid money. Startups that
would have benefited from small, intelligently applied investments literally
had too much cash thrown at them, pumping them up to steroidal growth levels
they couldn’t manage. With the flood of money came the inevitable explosion
of useless, redundant sites and businesses.
was a moment in 1997 when we said, Wait a second–in a world of supply and
demand, if supply is infinite, price falls to zero," SiteSpecific’s
Clay Shirky says. "That’s why you can’t charge for content. It
was a total mystery. Other people had figured that out; I’m not saying
I was the first. But no one had ever published it that I read, and everyone
was still banging on about ‘content is king,’ and suddenly I woke
up one day and went, Oh, that’s why we can’t charge for content.
It’s just macroeconomics. Once people had figured that out, you didn’t
need to ask me or anybody else why that was true–it was just absorbed by
CEO Kevin Ryan concurs. "This is exactly what we thought was going to happen.
To me it’s no different from if you opened 12 pizza parlors on this street.
It’s not the pizza that’s the problem, you just have too many parlors.
What would happen over the course of two years is that 10 of them would go out
of business. You’d end up with two, maybe one upscale, one downscale, and
they’d be very successful. Meanwhile, all the guys going out of business
would say, ‘You know, these people don’t like pizza.’
exactly what’s happening on the Internet. There are just sooo many sites…which
is healthy and good. But remember the normal math of startup companies. For
a while people forgot that eight out of every 10 businesses don’t make
it. That’s just a reality. And it’s going to continue here. What you’ll
see, if you do the math for any sector, is that if you reduce it down to three
or four players it works fine. Because the volume doesn’t go away, but
the costs do. So you’re going to see a lot of consolidation."
up," Shannon admits. "We got seduced into thinking that a slick pitch
for a screenplay is a good movie. There were a lot of people pitching slick
screenplay ideas, and a lot of people funding movies, for people who never made
a movie before, didn’t have a screenplay to back up the pitch, didn’t
know what they were doing, and didn’t know anyone who knew what they were
investors will believe in the potential of what’s out there, but we shot
ourselves in the foot with all the companies that weren’t really businesses,
just a bunch of yutzes that got together with 10 million dollars to blow. They
blew through their 10 million dollars, and I guess it’s probably because
we live in a world of such perfect information that when one goes, they topple
cofounder of TheKnot.com, says, "I think the pendulum has swung far across
the threshold of what equilibrium is. I’ve used the phrase ‘the class
of ’99’: any company that got its initial financing in 1999–and
I’ll go out on a limb here–was categorically overvalued. They raised
too much money on too high a valuation. I don’t care what category you
are–fiber-optic networking, B2C, B2B–if you raised money in the year
1999, you were overvalued."
of the rise and fall of Silicon Alley, most everyone cites the spectacular flame-outs
of TheGlobe.com and Pseudo.com. And Pseudo’s Josh Harris remains the one
guy who embodies the epoch’s exuberant dreams and ludicrous excesses. As
much funky fun as the idea of Pseudo was, the stark fact is that it was
cable access tv for the Internet, with an audience you could count on one hand.
The amounts of money thrown at it–and quickly thrown away by the high-rolling
Harris–were like a sick joke.
the right-minded people in Silicon Alley always thought there was something
incredibly ridiculous and impossible to understand about what was going on at
Pseudo," dotcommer-turned-VC Jason Chervokas opines. "The thing always
seemed loony, because (a) it wasn’t a business, obviously–it was never
run as a business, it was never built to be a business; (b) the notion of creating
tv for an alternative distribution platform was ridiculous. We already had perfectly
good tv. Why did we need something else? Down to its most fundamental assumptions,
the whole thing made no sense. I think people in New York were so caught up
in the sense of creativity and revolution, and the fun of the party scene, that
there were a lot of people who didn’t step back. Though, actually, people
did: Pseudo didn’t raise real money for years.
back I think we should have taken it as the sign that the end was coming when
Pseudo raised as much money as it did from what looked like sober investors.
I remember thinking at the time, Gee, they got this money from Tribune and Prospect
Street? These guys ought to know better. What do they see in this? And I spoke
to some of those guys and asked them what they saw in it, and they were very
much enamored of the fact that broadband was beginning to become a reality to
a very small collegiate test market, and they thought, We’ll learn some
lessons here. But I think it was really a sign that a sort of investment mania
had finally driven all logic out of the way we invested. I wish I had realized
it at the time."
might still wonder why the bubble burst, Harris continues to be an instructive
emblem. Comparing himself to Warhol, he theorizes, "Marilyn Monroe–maybe
that’s his signature piece, or Chairman Mao. I’m doing Gilligan. ’Cause
Gilligan is really the body of work that changed the culture. Marilyn Monroe
was the surface of that change, but it was really Gilligan, and the mores that
he brought to a generation of culture, that really shaped their behavior and
shaped who they are. Gilligan, to me, was a primal force in terms of other mediation
than physical. That was my formative Wonder Bread, my formative years. Gilligan
Kait and Weiss,
This was late
Weiss is currently
For those who