Slashdot Mirror
The Walking Dead of Silicon Valley
Frisky070802 writes "CNN has a column about a liquidator who refers to thousands of Silicon Valley startups as the walking dead. It states: 'Pichinson, a self-described "doctor of reality" who helps liquidate companies, says he wouldn't have moved from Los Angeles to Palo Alto a few months ago had he not smelled more high-tech trouble looming.... "There's still another 6,500 to 7,500 companies out there who are among the walking dead."'"
And small companies can raise $59m for the owners, even if they only have 21 employees.
I used to work for a rather large and well known national (US) retailer in their store operations division. One of my responsibilities was to deal with stores that were slated to close for any number of reasons, perhaps up to 30 a year. If a facility is due to close or upper management is thinking about this (ignore what they tell you - trust me), the one thing they will inevitably do is try to save money on something that won't be around. Executives simply can't resist the allure of saving these costs when they can "get away with it".
The first place to save said money for a closing or may be closing facility is operational maintenence. These are the kinds of things that can function for a while before their lack of maintenence can be noticed. On a routine basis, it makes economic sense to do certain preventative and aesthetic work on a schedule. Maintenence and building engineers know this, and they know what tends to be put off in the event a building will be closing. While they may not get the official word first, they will almost always know that a facility is closing before someone like the executive secretary.
Here is what to look for, even if you know your company is in healthy financial shape and that your facility is not about to close. Pay attention to these because the good times are not always so good.
Parking lots striping, is the parking lot badly in need of painting those lines that tell everyone where to park? Parking lot potholes, are the only potholes that are fixed the massive ones?
Paint on the walls, most businesses will paint their walls every x number of years, it saves money on electricity (brighter walls allows less light ergo less electric), and this is one of those subconcsious things that can reduce or enhance worker productivity.
Electrician, does your facility have a dedicated electrian, and if it does, has he been deemed unneccasary? This is a big one, electricians aren't cheap, but their vital to maintaining a smooth facility.
Light bulbs, most businesses don't wait for those overhead lights to burn out to change them. It costs too much in terms of time when you have thousands of them. It's cheaper to change them all at once over the holidays or the like before they burn out. This is done on a schedule, learn what this schedule is, for this is also a big one that is easily overlooked.
HVAC, heating ventilation air conditioning. Preventative maintenence like coil cleaning can be put off for a while if you know the facility will be closing, but would never be put off otherwise. Coils are typicaly cleaned at least once a year in the spring, and you can seem them from the outside. HVAC equipment is extremely expensive to service and even more expensive to fix. This is a big one, pay attention to if units are working properly (not if your hot or cold).
Carpet, this is less obvious since it can last longer, and sometimes a really cheap company is perfectly content to let 15 year old carpet remain in place regardless. This can be a red herring, but it bears watching.
It is not uncommon for maintenence and building engineering people to feel that the people in their building are stuck up and pretentious, and as a result they will probably feel no need to warn the occupants of the coming closure. While the facilities people probably want nothing to do with you, your security and janitorial staff aren't so biased. They work with facility maintenence on a daily basis and they can often also get wind of what is coming up.
it seems to me that a lot of firms over there that file for Chapter 11 protection eventually emerge from it and become successful again
Yes, as explained here, Chapter 11 bankruptcies allow the company to reorganize and keep going. It is up a judge to decide if this is in the best interests of the creditors. If the company can make a good case that continuing the business would help them pay off more of the creditors, then that's the route they will go. Companies in chapter 11 can even get funding with debtor-in-possession deals that sign the assets of the company over to whoever is providing the money. Chapter 7 bankrupties (more like true bankruptcies) liquidate the assets of the company and divide the procedes among the creditors.
With both types of bankrupties the creditors get pennies on the dollar and the shareholders get nothing.
Two wrongs don't make a right, but three lefts do.
Funny you should mention it, but it's pretty spooky around here now. Driving around, I see all around me empty buildings and "For Lease" signs everywhere. Go by the old 3Com/Palm building and the parking lot is just empty, (well, almost empty). Run over to AMD (Spansion, it's called now)and most of the buildings have been vacated, once again, "For Lease" sign proliferate everywhere. While we're in the neighborhood, we can stop by Fry's and find the store mostly empty, where we used to be able to find all the tech-heads here during lunch hour. D2 (Intel) seems to be ok, meaning it's still hard to find a parking space during the day. Many other companies such as LSI Logic, HMT, HP, Read-Rite, and others have been bought out by another company and liquidated, gone by the wayside and closed up shop, or just relocated and combined operations elsewhere.
The traffic also shows a dramatic change as well. What used to take me about 2 hours to get home to the Central Valley, I can usually make it in just over an hour, oddly enough, the worst is when I get to Tracy, wjere everyone seems to have moved (It's become a bustling little city, which I woulda never imagined growing up near there back in the 70's.
Back from the minor digression, It seems sad to me that the whole valley has become fairly lifeless and droll, considering this was where the whole technological revolution began. Thinking optimistically, this may only be a temporary condition until the next great advancement. Or things have just settled down from the great boom of the 90's and are back to normal. I guess we'll see.
Posted AC because, well, it doesn't matter.
Here's another article on small/new business failure rates.
Or do the google search yourself.
Dogma - "let's just say we'd like to avoid any empirical entanglements."
The were not money LAUNDERING operations for the venture capatilists. They were PYRAMID SCHEMES for the venture capatilists, with the ipo as the big payoff.
-------- In Soviet Russia, "Soviet Russia" sigs hate Slashdot.
Ok VC's are evil, we hate them, they stole our company, they were nasty to us when we pitched, they were nasty when the company ran, they were nasty when the company folded...
VC's are mostly: clever; honest; brutal; gamblers. Ok, it's not a great set of characteristics, but they're like sharks, not fun to play with in the pool, but noble beasts by their own lights. Don't hate them for what they are!!! All the VC's I have dealt with have been straight with me "it's our money, it's our company, you will do what we say, if it goes wrong we blame you, your ideas and you lose." not nice, but honest.
Most people who take VC funding do it for one of three reasons:
they have to or they will be bust in a month; this means that they have already lost their company and just hope for a few more paychecks and a reasonable pay off in the best case
they are in a strong position, they want to expand, they are quick hard and clever and have a strong enough cash position not to have to take a follow up deal (that will kill their stake)
they read stories about how dumb VC's are just handing out money for free. They think that the VC's are dumb and that the VC's will get ripped off, by them... oh dear, oh dear...
The reality is that venture funds have to make money and the successes (Amazon, eBay, yahoo) of the last tech wave have paid for the failures. I would love to see the sums though but I imagine that the investment in Amazon has paid for hundereds of misfires..... My point is that driving companies to ipo or a trade sale (much preferred) is not evil; who knows what the health of a company after 5 years will be in any case?
--------------------------------------------- "In the end, we're all just water and old stars."
Sure, a few smart guys in a garage will always outmanuevre a mound of VCs and suits. Thing is, the VCs don't care about small potatoes, even very well run and profitable small potatoes. They want big potatoes. They have A LOT of money to manage and they need a MAJOR payoff to make it worth their while. This kind of company doesn't 'scale' in their minds.
.com thing came and went. The VCs (and Wall Street), who have the money, created an evironment which led to lots of 'fluff' in the form of huge headcounts, 'internet presences' and above all, growth (profits be damned!). Heck, they essentially automated the creation of companies very much like the music industry automates the creation of music (ok, write a business plan, get a valuation, hire, make a website, etc.).
And this is really why the
Does it hurt to hear them lying? Was this the only world you had?