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NY's Silicon Alley Feels The Crunch
ephraim writes: "During the last year, I worked for dot-coms in NYC. About four months ago, I began to feel that a downturn in the industry was imminent, so I left to join a more traditional company. Far too many of the companies I consulted for seemed to have serious internal problems that appeared to preclude them from ever making any real money once their venture capital dried up. It turns out that I made the right move.
This article from the NY Times Web site (free registration required) discusses the general trends in the industry, while another article on the site looks at the phenomenon through the eyes of one employee of a doomed company. What he says about people sitting around doing nothing is true for quite a few of these companies.
While there are still plenty of jobs available for technology people in NY, those looking for work should begin to ask some more discerning questions about prospective employers."
I've been in the "dot-com" industry before it was called that (from 1995) and worked in the software biz before that. During this time, I've started a couple dot-com's in NYC. One is turning a profit. The other didn't work out and we closed it down. I've also consulted for dozens of firms large and small -- some are making money, some are struggling, some have closed up shop. BIg deal.
Is it a suprise that companies with bad business models fail? Duh. It doesn't matter how much money VC's throw at you, if your business model is flawed, eventually, you'll fail. The truth of the matter is that many, many companies get started and MOST fail within a few years. This has always been true -- the "downturn" is nothing new and simply a reflection of the disenchantment of financing sources (VC's, wall street, angel's) towards the dot-com "industry". This will turn around -- it always has. The street and VC's are herd animals. They follow each other with abandon.
One of the things that also bother me is people who say "they won't turn a profit for years!" as if that's some big suprise. The vast majority of new businesses don't turn a profit for years. Magazines typically take 5 years or more to reach positive cash flow. Electronics manufacturing is even worse. Even consulting firms (real ones, not 1 man shops), which you'd think can turn a profit from day one, often take a year or more before they stop bleeding cash. Such is business -- you can't make money without spending it.
On a side note, can you guess the background of many people at the top of the VC food chain? Most people would say "Wall Street" or "Finance" or something sane like that. Truth is, many (if not most) of the top VC's are ex-"journalists". I use quotes because many of those were that special breed that write those pontificating editorials rather than "reporters" (again in quotes because I'm using that term VERY loosly). No wonder they're (usually) so stupid.
Anyway the bottom line is that we're almost through the worst of the VC drought. How can I tell? Simple...the mainstream press is writing about it again and again. By the time they start harping on something, you know the worst is almost over.
Cheers
(That is, "an empty or forsaken place; a wasteland"; not something you would put whipped cream on.)
I spent a year and a half at a start-up on 23rd St. (just across the street from Madison Square Park). For the last six months, my title was "Manager, Content Acquisition Software"; I had about half a dozen programmers reporting to me. We shipped client software (and hardware) and ran a production service, but never signed up anywhere near enough customers to approach our expenses.
One problem was how hard it was finding good technical staff. The quality of the average candidate was pathetic. Most of the C/C++ programmers I interviewed didn't know how to do pointer arithemetic!
Worse, everyone with even a shred of talent was heavily recruited by Wall Street. The guys down there offered $100K if you could even spell HTML; but they'd expect you to show up, wearing a suit, promptly at 8 a.m. every morning, and wouldn't think twice about expecting you to work until midnight for long stretches. After all, they're paying you big bucks! (Compared to everyone but the traders.) Techies on The Street are lucky to last two years before burning out.
So where's the nearest techie oasis? Believe it or not, central New Jersey. The legacy of the Bell System, and the huge Bell Labs installations here, has created a seed of talent not often seen outside Silicon Valley. I have friends at half a dozen startups founded here, and several more at companies based in the West Coast but opening offices here to take advantage of the great people. Ten minutes to the east is the Atlantic Ocean; fifteen to the west, horse farms. If you hate surburbs, forget it; if you like them, it's wonderful. Real estate, both residential and commercial, is relatively inexpensive, especially compared to the Valley or the Alley.
Stupid job ads, weird spam, occasional insight at
Luckily, like the poster, after a few weeks of a general market downturn I had a feeling the tide had turned and working at an Internet company wasn't as attractive as it had used to be. One nice benefit of the whole Internet saga is that traditional companies started becoming more casual - such as starting casual Fridays, and then casual all week. I recently interviewed at virtually every Wall Street company - Goldman Sachs, Morgan Stanley, Bear Sterns and so on - at every one of them and more the dress code for engineers and others is business casual all week. Someone here said they work you crazy hours - sure, but how is that different than a startup? Ultimately, the only solution to getting paid for the hours you work is to be a consultant getting paid by the hour. Anyone with a few years experience who is working full-time on Wall Street and is not in management is a fool, who usually has what I call a "martyr complex", or an H1-B, who is basically an indentured servant for the company.
If you are working in New York City at a startup I would strongly suggest you at least interview at some good traditional companies. Then see if they will take you and what they will offer you. If you are rejected from several places, that should be a wake-up call as to your employability if/when the Internet startups finally hit bottom and crap out. You may know that Apache is superior to Netscape and know how to modify Apache source code to do bizarre things in your sleep, but that knowledge is next to worthless in many traditional companies, your magnus.conf knowledge should be magnusificent. Only about half your skills are transportable, and you will flunk like hell when asked how EMC and Veritas Clusters work. So get cracking now.
You talk about VC and IPOs as if it were about separating a fool from his money. The people with this money are not fools. They do it knowing full well what they are getting into.
The VC/IPO route is a way to get big, fast. The Internet is the Wild West. It's a land grab. Run out to the territory, stake it out, own it. If the land you grabbed has enough revenue in it, you make a killing. The richer the land you grab, the richer you get. You can argue that the land these companies have grabbed isn't worth as much as they think, and in many cases you are right. Some of these cases, however, are going to simply mint money. There is money to be made selling things on the web.
These people who invest their money look at a company's prospects first. They estimate the worth of the territory and the costs associated with growing the company. They make an educated decision to buy or sell. Thankfully, there is no law like the one you describe. Investors don't need you to protect them. They know how to make their own decisions.
These people are not trying to inflate the values of their companies and then jump out of the plane. They are trying to grow their company fast, to take more territory and discourage competitors. They don't leave when it is done; they grow it even bigger, just more slowly.
Isn't it good to ask those kinds of questions for any company that you plan on working for? A basic tenet of job hunting and career building is also using the interview process to your own advantage by taking the company to task, especially after the first couple of interviews.
Asking the right questions and really getting to know the company and some of the employees is essential. If you have the time to actually pull a few employees aside during a whole-company "tour" before they put the offer on the table, make sure you have some to-the-point and quick questions that have concise answers. These questions can then hopefully give you a good sense of whether or not the people currently at the company feel it's going somewhere or not. Questions like, "On average, how many hours a week are you working here?", "Is your boss reasonable and easy to deal with?", "Have there been any recent lay-offs?" can really help to set things straight. Of course, if you can find ways to ask those and perhaps be a little more subtle than go for it.
In fact, I'd argue that any company that doesn't let you talk to some of you just might be working with, it's time to start getting worried.
Remember, we are in demand right now. For your own career and well-being, please do your homework before signing the big money contract because, lo and behold, the big money contract doesn't mean much when you're on the street without a job, or at a company that's poorly manage.
This is a pretty pathetic business model, if you ask me. Is it so desireable to become filthy rich that you screw over your employees and investors? Is it okay to create a company that you know is doomed to fail within a year after it goes public?
The current laws prevent people from selling out right after IPO, but perhaps it should be lengthened even more for the top shareholders, just so that this model becomes undesireable.
"You spoony bard!" -Tellah
You need three people to have a successful startup:
1) A "Visionary"
2) Someone with technical know-how
3) Someone with business sense.
This isn't unique to dot-coms. It is true for any sort of startup.
Apple, for example, had Woz (2) and Jobs (1 and 3).
Most of the dot-coms that go under have a (1), some have a (2), and few, if any, have a (3). That's why they fail. And the truth is, the earlier they fail, the better, because the bigger they get, the more investor money will vaporize and the more people they'll throw out of work.
For some reason, dot-coms got a free pass over the last few years, which is unfortunate. It is fortunate that this now seems to be ending because the dot-coms that do survive will be the worthwhile ones.
This is not very helpful to someone out of a job, I know. I've been thrown out of work when working for a (non-dot-com) startup as well. So take it as a learning experience, and when you look for your next job, look for Mr. (1), Ms. (2) and Mrs. (3). Because there are some dot-coms out there that will succeed.
In the '80s, there were a lot of young, hi-tech startups, too. I had the misfortune of picking two that failed. One had only a (1) and the other had only a (3). Other people picking startups in the same era ended up getting in early on Dell or Oracle.
There Dells and Oracles right now. But there are 10,000 dot-coms and there can only be a couple huge sucesses.
The cake is a pie
Two consulting companies which friends of mine work or worked for have each laid off web development people in the triple digits within the past month. I believe that in both cases, this included programmers. My roommate's company, which is exclusively devoted to web development, has put a hiring freeze on programmers.
A fourth company I know of is suffering from lost business, because even though big corporations still want good websites, with the .coms failing, there is less pressure on them to get them out there. So there will be business in the next 2-3 years for web development from the big companies, but it won't match the boom we've already had.
If this is the anecdotal evidence I have on hand, it makes me wonder how bad the overall scene is. I think that the HR departments for "solid" tech companies must be getting swamped with resumes from all the people losing work from the .coms. If I weren't looking for work at the same time, I would find it merely interesting...
I work for a smallish web design company in NYC, so I get to see the Internet strategies of a lot of companies. Here are my impressions:
* Even though the Fucked Companies are many and growing, the web design industry itself is still HUGE and growing. Organic and Razor Fish, etc. seem to have tried too hard to cash in on the Dot Com phenomena, so they may crash a bit. But there are other companies and organizatons, besides Dot Coms, that want websites. All kinds of websites, not just ones that are meant to make billions.
* The so-called "dot coms" can be either good or bad, depending on the same things any businesses depend on. We have one client that has millions in investment from big venture capital firms and big tech players. But their site (which will remain nameless to protect the guilty) is the worst piece of crap imaginable. Why? Because no one there has any idea that they need a real plan. They hear that "medical sites" are going to be big, so they start a medical site. On the other hand, we have another client who is meticulously trying to do everything the "right" way...with lots of planning, slow steps, aliances, hiring appropriate talent at appropriate moments...they will potentially be big. Not Amazon, but many millions of dollars in revenue.
* The tech industry is everywhere. Why work at a Dot Com when you can do your wizz-bang computer stuff elsewhere? Even if you work at a sleezy bar, they may well be willing to pay you to set up a good computer accounting system, a website, or something else.
(This goes for all job interviews, by the way)
Unfortunately, when HR types interview people, they often do it alone or with other HR types. If you're ever interviewing for a job and this happens, this should throw up a red flag. You should be in an interview with other people who will be working with you. You obviously can't expect the truth from anyone in an interview ("So, what do you think of this company?" "It sucks, all I do is sit around on my ass and watch the marketers decide which sporting event to spend their money on next"), but you can tell a lot from enthusiasm, involvement, and whether the questions being asked are "I want to hire you" or "I don't want to hire you" type questions.
I prefer the latter type questions. If company employees come into the meeting with a "I don't want to hire you," kind of attitude, that means they want you to prove their worth to the company. That means they're looking for qualified people, not another warm body.
But I'm sure most of you know this already.