The dot com era was crazy. Companies that had no business plan, no revenue, no customers, but a great team, web site and investors would IPO for $100 million. Everyone had stock options and got rich on paper. Once all of these companies went bankrupt and were delisted in the crash of April 2000, everyone was poor again since their options were underwater and worthless. The common phrase is “I wallpapered my house with my useless stock options.”
I too wallpapered my apartment with Zagat Survey stock options. I was the Chief Technology Officer for two years during the .com era and saw it all. I got there as a consultant in 1998 when the company had just 30 employees and the server for the web site was under Sal’s desk. (Sal being the entire IT department at the time.) When I joined as CTO in late 1999, I helped with my colleagues secure $34 million in Venture funding from General Atlantic and Kleiner Perkins and build a great team.
The place became a true .com with 27 year old Harvard MBAs running around, employees bringing in their dogs to work, an air hockey table, and a web site that had one mission: drive traffic. The company swelled up to 200 people, but I build out an amazing web farm and an .NET application a year before .NET shipped. We filed for an IPO. Then the crash happened. I then had to preside over massive layoffs and the eventual loss of my own motivation and left in January 2002 to start Corzen.
Today it was announced that Zagat is up for sale and at a valuation of at least $200 million. When General Atlantic and KPCB invested in the height of the .com bubble, Zagat was valued at $96 million. That means that all the employees and former employees with vested stock options (including myself) now have .com options that are above water. Well above water. I am going to scrape down the wallpaper and deposit them into my brokerage account (I hope Fidelity Investments does not mind the glue.) I guess the .com era is not over if some companies are still paying out.
Why would Zagat sell? They do a nice little business of book sales (estimated 5.5 million books sold a year) and online paid subscriptions. The problem is that Zagat is so Web 1.0. While it is technically user generated content (the ratings are not by reviews, but surveys), Zagat is still stuck in the Web 1.0 mindset (no-one pays for content anymore! Wait that was Web 1.0 too!) and has to compete with Chowhound, Facebook applications, blogs, and scores of other user generated sites. Its business model is obsolete in a Web 2.0 world. It is adapt or die. Or adapt or sell to the highest bidder and let them figure out how to make Zagat 2.0.
