I learned on the Web the other day that lemming suicide is indeed fiction: “Contrary to popular belief, lemmings do not periodically hurl themselves off of cliffs and into the sea.” But this myth was reinforced during the filming of Disney’s 1958 nature documentary “White Wilderness.” Apparently, the film crew “induced lemmings into jumping [translation: picked them up and threw them] off a cliff and into the Bow River in South Alberta to document their supposedly suicidal behavior.” Note: Several dozen lemmings gave their lives for the making of that Disney film.
Similarly, Disney recently deep-sixed its Go.com portal while pushing 400 employees off the employment cliff last January, along with another 135 employees a month later. Amazingly, Disney Chairman Michael Eisner quipped, “The advertising community has abandoned the Internet.” Hardly. What it means is that Disney is clueless about how to go about building a profitable online portal.
Keeping Eisner company in the clueless department is CMGI Chief Executive Officer David Wetherell, who asserted in an Internet World speech, reported by NetworkWorldFusion, that “technical smarts trump managerial ability… We’re looking for great technology first and great management second.” Wetherell continued, “It’s easier to add the latter than the former.” Now doesn’t that strike you as being completely back asswards?
Look closely at today’s failing online ventures: Are they failing because they didn’t have great technology or because they lacked the managerial acumen to turn the zillions of venture capital (VC) dollars they had raised into a profitable business model (before they ran out of money)? The technology was there; the failings were clearly human.
Another amazing statement by Wetherell, reported in the same article, was his attempt to absolve VC companies of blame for the market downturn in Internet stocks. Wetherell claims that the downturn is “a different type of millennium bug” — one caused by the government injecting additional money into the banking system out of concern for a run on banks in the wake of possible Y2K computer failures. Now it doesn’t take more than the cranial capacity of a ladybug to appreciate both the absurdity of this statement and the creativity involved in dreaming up such silliness to divert blame for one’s own failings.
Rather than try to place the blame on the Y2K bug, perhaps Wetherell might have done better to study year2000.com, the Y2K bug portal (developed through a Tenagra joint venture) that was one of the biggest early success stories in profitable advertising-supported Internet publishing.
And speaking of VC companies, one of the most common failings out in the VC community continues to be a tendency to assume that the business environment today represents the way things are always going to be. Rather than simply investing in good people with good business models, venture capitalists are following the herd and focusing their efforts on the “hot technology of the month.” First it was business-to-consumer Internet. Then it was business-to-business Internet. Then it was telecommunications. Now biotechnology seems to be the favorite son of the VC community.
What many in the VC community have overlooked is that the five-year financial bubble that existed in the Internet industry was almost certainly a one-time fluke that most likely won’t be repeated again with similar duration. Instead, we are going to see much shorter-term cycles where different industries and technologies become hot and then cold again with investors. And if VC firms wait until a technology becomes “hot” to start investing in it (like biotechnology is now), by the time those investments mature, the cycle for that industry will most likely have already passed.
This is why I cringe when I go to technology panels and hear people from the VC community explain that they are no longer investing in the Internet because the market is so dead and are instead focusing their investments strictly on biotechnology.
Back in 1999, when the Internet bubble was out of control, the investment community followed one another off a virtual cliff, investing in business models that had no chance of success, all in the hopes of making a quick killing. Those who invested too late lost their shirts. Two years from now, when an investment made today in a company with a viable business model matures, the climate toward Internet ventures likely will be much more positive, and the biotechnology wave most likely will have cooled.
The bottom line is that sanity is coming back into the market. Those VCs who invest in good people with good business models will find profit, regardless of the industry. Those who lack the constitution to think for themselves and follow the pack by investing in the hot technology of the month will find themselves falling off the cliff every time.
Hmm… Perhaps lemming suicide isn’t fiction after all.