Part 1: Silicon Valley and the dot com climate

Hi Sally, you live in Silicon Valley. How is it out there with the electricity crisis?
Well, it's bad right now. If you're making chips or R and D stuff, you've got to keep running. A lot of companies are thinking of moving and I think a lot of them are thinking of moving to Texas, in fact.

We're going to start seeing companies move out of state because of the cost of energy and, once they start implementing fines if you overuse your energy allotment, that's going to really be tough. My electric bill was over US$300.00 last month and I live in a small house. I keep my radio and computer on all day and that's it.

You are the culprit of all the over usage!
(Laughs.) Yes, it's me!

Let's talk about your book. Guy Kawasaki, CEO of Garage.com said of your book, "Sally has found industry leaders and entrepreneurs who give valuable one-on-one advice that will help waterproof your business plan for the rough waters ahead." Can you tell us how the climate is currently?
I would say the climate is still very rough. And there were lots of signs of this happening way before it actually happened.

It's like when you go to a movie and it's really good, and you want to suspend your belief. Even if you see a glitch in it, like in the plot, you just say to yourself, "Ok, I'm ignoring that." You've already got your popcorn, you've already paid your ten bucks and you just want to enjoy something so badly. You suspend your beliefs and just hope you can enjoy it. That's what happened in the last two years of this dot com mania.

That's such a great metaphor.
Yeah, and it really fits, it really was like the movies. All the players were there, these young MBA's with their goatees and their jeans and glasses. And they really started up a whole counter culture: ties went out the window, people brought their pets to work. There were several companies where you could bring your pets to work, like pets du jour.

And there was one company where it was really popular to bring your boa constrictors to work. So people would bring their snakes to work, and the snakes would curl up on the keyboards and monitors to keep warm. And then these computers started shorting out and it turns out the snakes were peeing on the computers. So that was a glitch and a lesson learned.

Don't have a boa constrictor on your keyboard?
(Laughs.) Exactly - also, a lot of the snakes disappeared into the vents! Little things like that were happening that should have been signs. But honestly, I saw people working so hard - I'd come in at 10:00am in the morning and people would be sleeping under their desks. I'd have to wake up CEO's to interview them. They'd been working all night, so it was also an amazing time of hopefulness at the beginning.

And the Valley has had a long history of providing a mentoring climate, less about money and more about nurturing ideas?
Yes. Back in the 70's, there was a thing where engineers from all different companies would meet in a bar and there was a kinship kind of environment, and really fantastic nurturing. They would work together, have informal problem solving and it just really furthered the technology. But people got greedy, so now it's not what it used to be.

What people do now, if you're a new entrepreneur, you go and look for an angel to give you the first round of venture money. Now, VCs really want you to be ahead with your technology and patents - be way ahead. You have to have two or three revenue sources and your business plan needs to go out five years. With the dot com early on, everyone kept saying, "Well, they'll figure it out on their own." And the lesson learned is that this did not work.

Does the start up culture still exist? What about the incubators?
Somewhat. Panasonic has the greatest incubator, they are founding a lot of good companies. They work with the Women's Technology Cluster in San Francisco, they try to bring everything together. Panasonic has done some remarkable things with their mother company in Japan. For the companies they have in the incubators, Panasonic brings in their executives from Japan, to come in and do internships with the startups to see what the culture is all about.

The startup culture is still here, it's just with stronger companies. A lot of these companies should have never happened. People got really greedy, and stunted their belief systems completely. Netscape started this whole thing. And all of sudden everyone started thinking "we can do it."

Jeff Bezos, if he had shown someone his business plan today - they would have laughed him right out of the office. And rightfully so. He should have never have been. He didn't look at the margins and I really believe they're going to replace him soon.

Yet there are tons of people who still want to model themselves after Bezos!
Yes, but they shouldn't. They should log onto Mike Daisy's  site and read about what was really going on at Amazon. There are tons of people who keep saying, it's like the gold rush. But people don't realize there were ugly sides to the gold rush as well.

There are really ugly sides to this dot com rush. Human casualties have happened and they are very dark. I'm on the list of Sfwow, and people are always posting, "I'm out of a job, I've got to move etc." It's really very sad.

It's remarkable that when you were writing the book, the downturn had not really begun, yet you were aware of these little signs.
The way I started gauging there was going to be a crash was when my real estate agent was telling me that escrow was falling through. Then there were more luxury cars like Hummers and Porsches for sale, and you started seeing the little indicators of what was to come.

The companies I chose for my book, 'Dot Com Success' were companies that have in a way been through this before. They were companies that have been through different technological events and survived them. I interviewed Fred Baker and Vince Cerf for the book and they were just amazing fellows. These guys have all been through this before and they all have startups now, except for Fred Baker.

The book I'm working on right now is about the past, present and future of the Internet, called "FutureNet." And it's very interesting to look back and see the signs, and now look toward the future and what will happen.

Continued...