Perspective: Take the money and run

When it comes to detested professions, opinion polls often put journalists and lawyers neck-and-neck in the competition for low man on the totem pole.

I can understand why. Reporters grate on peoples' nerves while lawyers simply have no scruples. (I'm teasing...though not entirely.) But pose the same question to Silicon Valley entrepreneurs and I'd bet they'd award that dubious distinction to venture capitalists.

Maybe I'm setting the bar too low but it's not that VCs are less moral than lawyers or journalists. This is more about the psychology of scapegoating. Money and power nourished many a speculative boom-and-bust cycle. So when a lot of people who should have known better got seduced by over-the-top ambition in the late 1990s, the story ended with a predictable denouement: in the rubble of Internet Mania 1.0, venture capitalists became favorite fall guys.

Everyone's got a favorite sob story from that era about how some venture hotshot persuaded a gullible client to reject a serious buyout offer. Instead of taking the money at the height of the bubble, they got bamboozled into believing a public stock offering would vault their company's capitalization into the billions. Only to wind up bankrupt.

I suppose demonizing a greedy MBA consigliore is better than looking into the mirror and admitting to a lobotomy.

I suppose demonizing a greedy MBA consigliore is better than looking into the mirror and admitting to a lobotomy. After all, who wants to fess up to stupidity? Remember PointCast's founder Chris Hassett? He's the guy who decided to let lapse a reported $450 million offer from News Corp. It didn't take long before customers discovered that PointCast's push technology caused more grief than it was worth. The company never recovered from that once-in-a-lifetime opportunity.

Whether they lived through those times or just read about them, the newest crop of Internet entrepreneurs have taken away their own lessons. Thus, MySpace took the $580 million buyout from News Corp., while Facebook continues holding out for a bigger payday. Who's the smarty and who's the sucker? Too soon to tell but you have to admire the size of founder Mark Zuckerberg's, um, moxie. Word on the street has it that Zuckerberg rejected a buyout offer of more than $1 billion. He apparently thinks Facebook is worth several times that sum. Maybe his confidence will be one day borne out by a spectacular initial public offering in the future. Or he might wind up becoming the second coming of Chris Hassett.

Meanwhile, the deals keep coming. Just this week, France's Hi-Media Group announced it had acquired Fotolog for $90 million. Fotolog CEO John Borthwick calls the company a social-media network. That's the hot buzzword today and Fotolog did the smart thing by selling out. Someone's got to say it: the French acquired a gussied-up photo-sharing site and good luck trying to recoup that investment.

A company like Fotolog or MySpace or Facebook remains cool and coveted until somebody else flips a switch and turns it into yesterday's hot story. That's been the case forever in high tech. Digital Equipment put a major hurt on the mainframe makers. Then the workstation and server makers did the same to DEC. And then came the march of the PCs--and the rest was history.

These days the barrier to entry's never been lower. All you need is a PC, an Internet connection and a great idea. Personally, I hope each and every one of these start-ups get gazillions. If big companies are incapable of innovating and instead are willing to pay ridiculous sums to buy Web doodads, then "Laissez Les Bon Temps Rouler."

Some will take the money and run. A few will hit the IPO jackpot. But if history's a good predictor, most will wind up bitching about how they were led astray by their venture backers.

Biography
Charles Cooper is CNET News.com's executive editor of commentary.

More Perspectives

[Len Bullard]

After The Goldrush

Big money, big dreams, big egos, big promises, big declines all Cash At Light Speed.

Sound like an industry from our childhood, Charles?

One wonders when the rash of drug suicides will start? Neil Young said it: "After the Gold Rush".

I'm glad I stayed in Alabama. It's awfully hot here and yes, they passed a law against sex toys (really embarassing that one), but it is nice to be pushing software to demo, shopping for a new dog, and playing the guitar with old friends who want nothing more because I have nothing more.

Wisdom is knowing how much money and how much stuff is just enough. Happiness too.

[fluffytheecat]

agreed...

yeah, what you said... I am up here in little Olympia with 4 cats, a great wife, time for my kids, etc.

Life is sweet and a little calmer without the TV interviews, etc.

[fluffytheecat]

Facebook, another word for "fool"

I mean... how much money can he spend.

How I wish I had sold out in the end of 1999 instead of ending up in the middle of a takeover attempt by a large shareholder, which tanked the company until a certain day in 2001. Sept 11, as a matter of fact. We shut down early that morning.

So Facebook, good luck and I project that you will never see another offer that good-unless it's within the next 30 days.