Saturday, July 13, 2013
the last book I ever read (dot.con: How America Lost Its Mind and Money in the Internet Era, excerpt eleven)
from John Cassidy's dot.con: How America Lost Its Mind and Money in the Internet Era:
IVillage’s IPO, which took place in March 1999, was another milestone. The women’s Web site, which had fourteen “channels” covering subjects like relationships, health, and astrology, had been racked by management turmoil ever since Candace Carpenter, a former executive at QVC and Time Life, founded it in 1995. In three years, iVillage had burned through more than $65 million. In 1998 alone it lost $43.7 million on revenues of just $15 million. When Morgan Stanley turned down the opportunity to take iVillage public, Goldman Sachs stepped in and placed its reputation on the line. This seemed to have been a dubious decision when, a week before the IPO, one of iVillage’s four former chief financial officers accused the firm of using “inappropriate” accounting practices to boost its scant revenues. “Based on my experience at, and my knowledge of, iVillage, I would not be comfortable today being the chief financial officer taking this company public,” Joanne O’Rourke Hindman, who had previously spent twelve years working for The Washington Post Company, said in a statement. In other circumstances, such a charge, which iVillage strongly denied, would surely have derailed an unproven company’s IPO. But investors ignored Hindman’s allegations, and Goldman pressed ahead. A few days before the IPO was due to take place, the investment bank raised the estimated issue price to $22 to $24, from $12 to $14. On March 19, 3.65 million iVillage shares started trading on the Nasdaq and jumped from $24 to $80, a rise of 233 percent. At the end of its first day as a public company, iVillage was valued at about $1.9 billion, and Carpenter was worth $80 million. Even by Internet standards, this was a startling valuation for a troubled company that faced imminent competition from Oprah Winfrey and the Walt Disney Company. (Winfrey and Disney had both invested in a rival multi-media company aimed at women, Oxygen Media).
Meeker was stunned. “With every IPO the envelope is being pushed a little further and a little further,” she told a reporter from The New Yorker, who was working on a profile of her, a few days after iVillage’s Wall Street debut. “At some point you have to scream, Uncle.” These days, when Meeker went to see Internet entrepreneurs they weren’t content to make tens, or even hundreds, of millions of dollars in an IPO: they wanted billions. Many of them compared their firms to Yahoo! or eBay, which were now valued at $35 billion and $20 billion, respectively. If Meeker expressed any doubts about the prospects of achieving such a valuation, the entrepreneurs would choose another investment bank to take them public. “We are seeing the second generation of Internet entrepreneurs, and they have market cap envy of the Jerry Yangs and Marc Andreessens,” Meeker complained. “Their expectations are starting at a much higher level. The first generation was, like, ‘Hey, isn’t this great? I’m a billionaire. Well, that’s kind of embarrassing. What am I going to do with all this stuff?’ The next generation is saying, ‘Well, if he’s a billionaire, then I’ve gotta be a billionaire too.’”