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ArsDigita Founder Responds to Closing
An anonymous reader sent in: "Net celebrity and ArsDigita founder Eve Andersson has written a brief history of the firm, documenting its downfall from her point of view. Fascinating reading, and yet another example of how a good thing can go so wrong."
I guess I'll just have to get my MCSE now.
You can't legislate goodness. Let each to his own destiny, by will of his freely made choices.
Eve's story was an interesting read, and it's quite similar to the history posted by Greenspun. To make a long story short, greedy VCs drove an otherwise good company straight into the ground. Greenspun's account of the action has been removed, but a cached copy is at archive.org.
If you want to know what really happened, I'd say that a combination of the two journals is likely a good start.
She was sacked last October.
Now she's blaming it all on the managment that kicked her out.
Is she bitter?
The short answer is "No".
The longer answer is that Greenspun's own account of Ars' downfall matches hers in a number of ways. They both felt that the venture capitalists made horrible decisions.
I can understand if she's upset that her dream for Ars will never manifest itself, but I doubt she'd stoop so low as to manufacture incidents that never happened just to make herself look good and make others look bad.
From all I've read about them and her, she seems to be a bright and honest person.
If you celebrate Xmas, befriend me (538
From the account ... Or might it have been because I was dating Philip Greenspun
... you can easily have 2 accounts of the same event that read very differently depending on which details are left out and which are emphasised ... just that this is unlikely to be the authoritive account.
so the fact that Greenspun and she have similar recollections is hardly surprising.
I didn't say she was lying
Another classic example of the group project that falls apart because no one can fall apart.
The company was doomed the minute they brought in the "VC's" because their vision of the company's future was drasically different then the people who started the company.
Just like getting into bed with someone who has different views on sex is a bad idea, so is going into buisness with people who have different views on buisness.
It may work for a little while, but eventually everyone is going to get disillisioned and go do their own thing.
quote
"In late March 2001, ArsDigita received $38 million in financing... In early April, Allen Shaheen... took Philip's place as CEO.
'ArsDigita University was one of the primary reasons I decided to join ArsDigita Corporation.'
- Allen Shaheen, early April 2000"
end quote
What the heck is that? Shaheen commenting on the company a year before he joined? All the quotes in the "Venture capital and new management" section are screwy like that. Is Eve trying to pull a fast one, or is it a mistake?
The reality is that the TCL version of ACS was abysmal. It did not scale in any reasonable way; it leaked memory like a sieve (we actually had to write a script to restart the server periodically), and it was a pain to use. Worse than that, the code was an ad hoc spaghetti mess, full of hacks that work around bugs introduced by other hacks. For example, a common joke among the developers was that any method prefixed with "philg_" could be replaced by the pseudocode "if(rand() > 0.5) crash();" Eve's own code was in the same league.
When the same people who wrote this monstrocity got their hands on Java, they made all the same mistakes -- hence, the failure of ACS-Java to accomplish anything remotely useful. The VCs are not the only ones to blame for aD's failure.
Anyone with an interest in Greenspun's ideas or the ACS should come over to OpenACS.org http://openacs.org where the FULLY GPL OpenACS 3.x and the (currently in late alpha) 4.x are developed and maintained by a talented global developer community and several companies.
6
For general info read first: OpenACS FAQ
http://openacs.org/faq/one?scope=public&faq_id=
Aolserver is the native webserver of OpenACS, but you can use Apache if you like
http://openacs.org/software.adp
A list of companies that offer various OpenACS (and ACS) services and support
http://openacs.org/companies.adp
We all hang out at http://openacs.org/bboard
Come check it out for yourself.
Eve characterizes Phillip Greenspun as being victimized by the evil VCs.
But according to her story,he was victimized to the tune of 7.6 million dollars from a company about to go fuckedcompany? Not so bad.
His story (see link above from solman) doesn't mention money changing hands, so what do you believe?
My company is committed to not growing, and it's amazing that I found so few other companies with the same princples, given the obvious success of the idea. ArsDigita is just one of any number of companies that went through the same trajectory.
My partners in Hammerhead Productions all worked at the same company, Pacific Data Images, before they closed their LA facility. I started with PDI when it was quite small, and was terribly fortunate that the management of PDI was committed to open books -- that is, they allowed the employees [at least the early employees, more on that, later] to see exactly what the revenues and expenses were. PDI was committed to growth, as most companies are.
The thing is that the company as the company went from 8 people to 100 people, the profits went down. They went down on a per-capita basis, but they even went down on an overall basis -- more people are much more expensive, as you add layers of overhead and spend much of your time on internal communication. Personally, I found the company less and less interesting -- as people you hired for their creative talents ended up supervising others instead, so you lost the spark that made the work interesting. I would point out over and over again, at meetings, that growth was killing us. I'd try to correct the historic graphs for inflation, to show that the numbers were even worse than they appeared at first glance. This made me quite unpopular at these meetings.
When we started our new company, we decided that we'd never grow. We've stabilized at about 10 people over the last five years, and it's worked out marvelously. The people we have are talented, creative, and are allowed to exercise their talents and creativity. The company is reasonably profitable, and shows every indication of staying that way. We are small enough that our overhead is low, so we can pick projects that interest us, instead of being forced to 'feed the machine', as larger facilities have to do.
The author of this article, Eve Andersson, says 'to make a substantial impact on the world, you gotta grow.' This is a well accepted fact, that just happens to be untrue. Even in the world of film visual effects, dominated in many ways by ILM (1500 people) and other big companies, Hammerhead holds its own. For the last two years, we've been in the Academy's Visual Effects Bake-off, showing that we can compete with those big companies.
When contracting with a company to do work, often it is more important to the person paying for the work to get a few key people working on it, rather than a slaveship of hundreds of drones.
I've gone on long enough. Just think, when you have to decide whether to grow or not, that there are substantial good reasons for staying small. Don't ignore the numbers, if the numbers are telling you that growth is killing you.
Thad Beier
Hammerhead Productions
ps. Ok, ok, PDI went on to make 'Shrek', which needed 300 people. I still stand by my thesis.
I love Mondays. On a Monday, anything is possible.
A company grows from 5 to 50+ in a year, then seeks VCs to accelerate growth. That's not greedy? Wasn't the first stupidity going for the VC money when things were going well?
Her story sounds like the classic "if I ran the company, everything would be perfect" rant usually heard from holier-than-thou engineers covering for their own incompetence.
And poor, poor baby had to take three months off to travel before coming back to be sacked. I know we all weep for her and her dire plight. If only everybody else were as competent, intelligent, and insightful as she....
*yawn*
VC's are gamblers. They're not intersted in funding the expansion of Jim's Donut Shop, even if Jim makes a good profit every month.
Their business model is that a very small fraction of their businesses hit the jackpot while the rest fail trying to get there. The real world business model is that most successful businesses are like Jim's. No jackpot. Now, what happens if, for some reason, Jim manages to get a lot of VC cash. Well, you'll see Jim opening up dozens of franchises, building donut-baking warehouses, buying trucks, etc. Odds, are, Jim will fail.
Now in the Internet Bubble there were a lot of good, sound businesses that were really more like Jim's and less like eBay. Duh. In fact, I think the internet is more suited for small profitable outfits -- it doesn't scale very well. With an office, some good coders, a few routers and you can reach the world. But you don't see enormous revenues, and getting 10x as many good coders as when you started is impossible. It's very hard to scale up on the net. But the surreal economy fooled a lot of people into shooting too high. It's hard to imagine ArsDigita -- basically some support for a community database/website -- taking over the world. So the VC's drove it into the ground.
When in doubt, have a man come through a door with a gun in his hand.
they hada good buisiness model, once...
You mean the VC's?
;)
When in doubt, have a man come through a door with a gun in his hand.
This account is accurate, according to more folks than just herself and Greenspun. Many of the original pre-VC employees have said much the same thing, i.e., the VCs were complete incompetents both at the business and the technology that made the business. The ArsDigita fun 'n games is old news to those in the field.
Not-so-surprisingly, I've heard *many* accounts along these lines from people in various companies that were ruined by VCs. Formerly profitable endeavors saw an opportunity to expand so long as they relinquished control to MBAs, were grateful to do so (thinking the MBAs would relieve them of the chores of management, accounting, and payroll), and then found to their dismay that the new folks were complete morons interested only in padding their own bank and expense accounts. It sounds somewhat naive in hindsight, but the programmers who built the companies found the business side of it to be a tedious pain in the ass and wanted to do what they loved best, program; turning over these non-programming aspects to a 'professional' seemed logical.
Only the thing is, the 'professionals' in business are often incredibly stupid and even more greedy. My own experiences with executive management in various corporations is one of disbelief combined with wonder: disbelief that someone so stupid could hold such a position of power, and wonder over how they got that position in the first place. Clearly, the world of management *isn't* Darwinian, else all of these fools would've been weeded out of the corporate gene pool a long time ago. Instead, they run the show.
Never underestimate the potential incompetence of an MBA, especially a VC MBA. Years of experience have taught me that the most likely person to stick their fingers in the pie and screw things up are just these kinds of folks. Especially the ones (which seem to constitute the majority) who never progressed beyond the kindergarten level of maturity and are constantly whipping out their peckers to measure them against everyone else they encounter.
Max
My god carries a hammer. Your god died nailed to a tree. Any questions?
I've just finished reading Ms. Andersson's account, and most of the comments currently posted here at the time I write this.
I don't know Ms. Andersson, nor have I had any connection with her company, so I can't say whether her account is correct or not.
I have noticed a lot of negative statements about her, though, in these comments. And I find it interesting that the vast majority making those negative comments have chosen to be wimps hiding behind the name "Anonymous Coward" (a very appropriate name).
Even if Ms. Andersson is wrong, at least she has guts enough to put her name on her comments.
I want a new quote. One that won't spill. One that don't cost too much. Or come in a pill.
A small group of developers earning lots of money, making clients happy, and developing and releasing a useful software product is wonderful, but ... to make a substantial impact on the world, you
gotta grow.
This is where it all began. ArsDigita had earnings, had satisfied clients and had a useful software product. What they didn't have was an impact on the world. What I'm saying may not be popular, but it seems to me that after an initial success, egoism got the better of them. It isn't enough that they are a big fish in a little pond, they gotta be a big fish in a big pond.
There is nothing wrong with growing, but Greenspun and cohorts should have realized that as ArsDigita grew, it will change its character: It will need funds, it will need expert managers, it will need a longer list of clients.
Funds: Conservative companies don't go to venture capitalists for funds. They go to financial institutions for that. VC's ask too much control in return for their cash. FI's only ask that you present them a viable business plan and a reliable payment schedule. Perhaps ArsDigita never went to the large FI's because it couldn't present a viable business plan? Or because their ego told them that bricks and mortar FI's are not the way to growth in the internet-age?
Clients: So they got three or four big clients initially. Considering that ArsDigita had no office, no letterhead and had only 5 employees, that's a big deal. But if they grew to a hundred full time employees and an office, even 10 big clients won't be enough. Did they have a plan to increase their client list or at least knew where those clients will be coming from?
Expert Management: The most important rule for entrepreneurs: This company is your baby, you gotta take care of it, nurture it, and help it grow, because no one else will. When the company grows, the owner's expertise must grow with it. ArsDigita was forced to grow so fast that the owners never had a change to gain the expertise to manage the enterprise. ArsDigita had to hire outside ``experts'' whose only probable interest is how to bail out with a golden parachute.
If ArsDigita didn't try to match the company's size with the owners inflated ego, it would be probably still be profitable today. Compare ArsDigita with John Carmack's Id Software and you'll understand everything I just said.
Just my half cents worth. ;-)
Someone else gets hurt.
Eve really did write a beautiful article, and I thank her for writting it. She did, however, try to wipe her hands clean of all responsibilty. Not to say she is responsible, but ArsDigita's death was not due to just the capitalists that sealed its fate, but the capitalists within.
ArsDigita was one of the few net companies actually developing a useful product that people wanted. It should have weathered the dot-com bombs, but it fell into a cycle of greed. Rather than making modest earnings, they wanted to get richer faster. It was easy to ignore the fact they were making tons of money, and doing a good job. They had the potential to make more, and being good young american capitalists they went for the opportunity.
A web developer no matter how talented is not actually worth 7 million dollars. This is not to say they aren't "the best" or any other such nonsense, but rather 7 million dollars is a HUGE amount of money.
Think of ID games. They keep their number smalls, their business controlled and make solid, strong, modest, earnings for the most desired product of its kind. They are extremly successful and will continue to be because they hold similar ideals to ArsDigita.
ArsDigita, however, let it be controlled by big fish who offered to front more money. More money, more profit, everyone's happy? No, because everyone was trying to get rich quickly. Sure you were trying to make a good product, but you were so bedazzeled by the money that ArsDigita's creative control was lost. If you invite sharks into your pool, expect to get bit.
Eve I'm sorry you got screwed. You did your job well, but no matter getting rich quick means someone else is paying for it. Your company tried to raise too much capital, too fast. You got your ass kicked by the best, but we're all alittle wiser for it.
Oh well, I invite you to join my world. A soon to be college graduate looking at a very tight job market because a few dot-commers wanted little red sports cars.
Welcome,
Rob
...Phil was widely known to be a bastard ...
Well, I don't know the guy, but I've read a lot of what he has written (see here ). It appears to me that his manner is a bit rough around the edges (I've wanted to send him flame mail myself on some occasions), but he hardly seems to be a bastard or a jerk. There's this story about how he paid MIT students their tuition money (for one class) back, out of his own pocket . Amounted to more than $2000, if my calculations were correct. How many people would do that? Also, he seemed genuinely devastated by the death of his dog. People who are that civilized are usually 'good' people in my experience.
MSN 8: Now Microsoft even has bugs in their ad campaigns.
Cool that you offer some of your software for sale. Also interesting to see that it is available for the SGI MIPS/IRIX platform. We primarily use SGI Octanes in our (research) institution but the bigwigs are pushing for a move to x86/Linux for PR reasons. (Though next week they'll probably jump on the XP bandwagon). Interesting thing about our situation is that our current workstations are already much faster than we need... the limiting factor, the bottleneck in our case is on the human end.
Sure, just because a company is big does not mean it will fail. I was just trying to point out that being big does not guarantee that you won't go bust.
Having said that, some big companies do have a hidden protection (by governments) against bankrupcy. To name two examples, Airbus is essentially subsidized by the European Union, and Boeing is essentially subsidized by the US government through military and space contracts. Why? Because they produce a strategic resource (commercial airliners). Neither Europe nor the US can afford to be in the situation where they have to rely on a single foreign source for commercial airplanes.
MSN 8: Now Microsoft even has bugs in their ad campaigns.
This is like saying "Its hard to imagine an auction [ebay.com] website taking over the world." ArsDigita's target market had the potential to satisfy VC's required returns many times over.
I think the market for online auctions -- basically people selling stuff, could be estimated as on the same order of magnitude as classified ads -- pretty big. How many organizations will develop these community message boards and be willing to pay for a service contract with aD?
Also, you have two "first on the market" players. Ebay has an advantage (just like slashdot) because it organizes people, so it snowballs (scales) better. People sell stuff there because its the biggest and so people buy stuff there, etc. This amplifies the advantage of being the first on the scene. The advantage of being the first on the scene with aD is a prestige factor. This doesn't scale as well as soon as, say, IBM or RedHat started offering support as well (the code is GPL'ed). So it's harder to scale and a smaller market in total.
VC's try to avoid risk like the plague. But for them the biggest risk is getting left behind by other Venture firms. So they act like lemmings, out of fear that deviating from the norm will get them in trouble
True, but this is just a finer distinction. They act like lemmings because of the risk. Just like gamblers develop strict rules of when to take an additional card. Everyone knows the rules and, apart from small personal tweaks, the rules are followed obediently because of the great risks involved.
This is not to argue with your other points, and the fact that often VC's make horrible managers and don't understand the market well. My point was that some of these decisions (getting rid of GPL software, etc.) make sense if you're willing to take any risk to for a shot at exponential profit growth. The others are just bad management.
When in doubt, have a man come through a door with a gun in his hand.
I am not particularly familiar with the ArsDigital company but a lot of stuff i've read in the Eve's sounds familiar to me. I just want to tell that we should go with not our emotions (although I think for Eve that would be quite difficult at the moment). We should stop and think.
Look we went through two bubbles. First DotCom bubble bursted then Telecom one (that was the one I went through). A lot of people got greedy, a lot of people lost their money, some people made a lot of money. And a lot of people, mostly engineers (hardware, software take your peak) saw their dreams comming to the crushing end for a moment. Not just dreams of financial stability but dreams of making something that a lot of other people will need. There is a lot of lessons to be learned here.
First of all VC's are not evil and very often are neccessary. NSF and DARPA are not limitless money pits and not every one can have 30 credit cards to run his/her own company. May be in software for a while you can operate from you basement but if you talk about hardware you talk about some significant burt rate almost from the start.
But when you start dealing with VC's you have to remember a few things. They are people with money (well, duh) but for them money make money and this is as far their thinking very often goes. That is when they give you money they expect substential return and FAST. This is veary banal thought I agree but this is where a lot of people stumble. This is what driving most of them. And the most important thing they do not understand the tech (although they think they do). They understand it on such level that it would make geeky kid from high school laugh.
Just an example a few years back I've overheard a conversation in student cafeteria between a bunch MBA students. First they were talking about getting internship at Morgan-Stanly and other "nice" places then they started a "technical" argument. The point was: "who the hell needs optical fiber communications when everything goes wireless?" Well hello!?
But you know what? I bet in a few years somebody may be me may be you will knock on one of those guys door with a buisness plan and really really high expectations.
For them the most important thing is to catch a trend invest some money and get lot's of it in return a few years later. So their understanding of thech goes as far as somthing like "everybody will need high bandwidth right into their living room" and that's it.
There are few exceptions like Intell or IBM when you meet a guy with real engineering experience who actually would come to your place at work and will actually understand what you do down to very small and unglamorous details. You get this guy you are lucky but be warned ppl like that don't take bullshit.
Other than that they know nothing so they hang on to the people they know be it consultants from universities managers CEOs etc. And if they don't know you they don't "feel comfortable" with you for a long time. Hell, I've witnessed one very good manager being demoted just because the board did not know him. So instead we've got people with "names" who drive that guy, me and many other people I work with crazy.
So naturally when everybody was plaing IPO game they wanted growth. And if there was no real growth you were supposed to show it. Like for instance, I don't know about other places but in Bay Area two years ago there was a formula. Each Ph. D. automatically ment extra 3-6 millions of dollars to valuation of the company. Naturally everybody was hiring. When market fell a lot of people got two hours to clean up their desks.
So don't say you got screwed by VC's. You just went along with their game and neither them nor you actually new the rules
So any way learn your lessons. Get rich quick schemes won't work for a while (and may be this is actually good). One thing did not work move on and start a new one. Be good at what you do you will survive one way or another.
- Back off man. I am a scientist
Interesting now that I really can't find an english equivalent
Schadenfreude is the English equivalent - it's been adopted into the language (at least according to my dictionary).
Wow. I've been on the product team at ArsDigita for almost three years now. From my perspective, there are a gazillion egregious inaccuracies in the article. Anyway, I just wanted to say that Eve/Philip/etc. represent only one side of the story, and that there are many other sides to the story as well.
I have tremendous respect for a lot of people at ArsDigita. Her story is absolutely insulting to the people who have worked so hard to ship something, and it has certainly caused any remaining goodwill I have towards her (because I do think she IS a nice person) evaporate. Her indictment of Richard Buck and Michael Yoon is completely unfounded and complete bullshit. One stunning example is that Richard Buck is a poor manager because he was not able to "motivate the product team to work more than 40 hours/week." I find this to be disgusting and utter nonsense. One, just because you don't drive your employees like slaves doesn't mean you suck. Two, Eve was never at the office, so how could she know how long we worked? She was too busy working on her VoiceXML book that she told no one about!
Still, for all its faults, building a website on top of ACS Tcl was a lot easier than starting from scratch with a web server and RDMBS. So there was and is (openacs.org) real value in the software. ArsDigita didn't so much 'give it away', more like they made it free software because there was no good reason not to. The sort of customer who'd pay for a proprietary boxed website-building product wouldn't want something in Tcl, they'd go for something more buzzword-compliant. Hence the venture capitalists' attempt to create a new ACS Java.
(There was actually an existing port of the ACS to Java, a straight translation from Tcl. It wasn't an unworkable monster like the aborted version 5.0, but certainly less successful than the Tcl version.)
-- Ed Avis ed@membled.com
No where in her write up does she note that it
was the original management of Ars Digita who
went out and raised the VC money. They chose
the firms they sold part of their company to,
they chose to put those people on their board.
They chose to have them as their business partners.
Check references? Do due diligence? What did that
turn up? I'd like to see that in the story.
If you go into business with someone and don't
set expectations ahead of time, in writing, and
check that those agreements will be honored -
well then, that's just a bit naive.
You don't use cutting edge technology to serve web pages. That's just silly.
Dynamically generated web pages are the simplest little things there are. They are a short text file. They can be produced in any language. (Indeed, Microsoft selected BASIC for their web server. Talk about "not exactly cutting edge technology")
Here's something to remember about "cutting edge technology". It is big, slow, and crashes a lot.
It is big and slow because developers these days know that they have access to amazingly fast CPUs so they get code whiz-bang features that slow it way down rather than making small tight code that is all you need to serve up little text pages.
It crashes a lot because it is new and hasn't had the bugs worked out of it yet.
Coding Blog
An Anonymous Coward logs in to trash on two people whose profitable company was driven into the ground? And then has the nerve to tell us to take Eve's account with a grain of salt? That is cowardice, in its most purified form. C'mon, pal, if you're going to make comments like that and expect to be believed, put your name forward. Otherwise, how do we know you're not just some flunky from that VC coalition, trying to blunt the edge of some rather pointed commentary? Mind you, having your name on this message wouldn't prove that you weren't, but to anonymously make these kinds of comment shows a lack of guts that Eve, regardless of what you think of her, didn't exhibit.
Believe nothing, not even if I say it, if it violates your sense of reason -- Buddha
People who sign with VC's make a deal with the devil. Sometimes they run a company to the ground (ArsDigita), other times they turn the company into money making machine (Cisco). In ALL cases the VC has an end goal of taking control of the company and either a) Pushing the founders out, or b) if the founder is a figure head valued for marketing, taking away all power.
PBS did a great Documentary on VCs in the tech industry back in the 90's. I still remember the the VC who funded Cisco bluntly talking about how It's the VC's responcibility to push the founders out the company.
The dot-com VC rush pretty much matches up with the silicon valley tech rush back in the early 80's. And the success rate between the two is actually pretty similar.
I think the problem bringing in a VC is the same as brining in any new management team. If you bring in a new team you've basically saying we have to change everything. This can work well if things are truely broken. But in this case the comapny wasn't broken. What it needed was someone to stay the course and manage the expansion.
Managing expansion is a very tricky business. Expand too far, leverage too much, you leave yourself open for failure. All of a sudden a small bump in the market looks like a tidal wave. A one point raise in interest rates could make you default you loans. Very few business manage this well, let alone greedy VC's.
It's a gamble. So when looking at all the money waved in front of your face read "Cryptonomic" and ask yourself "Ever danced with the devil in the shaddow of the moonlight?"