Cyberspace Stars: Can They Stay Online?

For the very young men of Silicon Valley who got very rich very quickly during the last year and a half, one day stands distinct from the blur of midnight coding, anxiety dreams and fast-food to go.

On the day their respective start-ups first sold shares to the public, or agreed to be acquired--on the day they cashed in, albeit mostly on paper--the newest generation of high-tech entrepreneurs took a few hours off.

Netscape co-founder Marc Andreessen, the 25-year-old godfather of the Internet wonder kids, slept in. Yahoo’s Jerry Yang, 27, partied at a neighboring office park. Rival Joe Kraus, 25, snipped off his waist-length rattail to celebrate the start of trading in his 22-month-old firm, Excite Inc.

Then, millionaires, they went back to work. “Except now I get the large fries,” says Joey Anuff, 25, who sold his infant online publication, Suck, to Wired magazine for much less than $1 million but for much more than he had before. “And I don’t even bat an eyelash.”

They are buying condos and cars and lots of consumer electronics equipment. They are basking, with sometimes puerile glee, in the media spotlight. But at the same time they are struggling harder than ever to make their fledgling companies fly, and to clinch a spot in the high-tech hall of fame.

That is because these scions of the storied Silicon Valley entrepreneurial tradition have deviated sharply from it, reaping extraordinary financial rewards with nowhere near the same investment of sweat and blood as the personal computer pioneers who came before them, or the chip-makers who came before that.

In a peculiar reversal, now comes the time when the overnight Internet moguls have to prove themselves. “It wasn’t like someone handed us the trophy,” says Halsey Minor, 31, whose stake in the online service he founded is worth about $45 million. “It was like someone said, ‘Hey, kid, we’re going to let you into the game.’ ”

The scrutiny is especially harsh because Silicon Valley long has been lionized as one of the richest repositories of the American Way, the place where--unlike Hollywood or Wall Street--young people could, and should, get rich with honor.

“This is not a community that judges people on what they’ve purchased on Rodeo Drive or the length of limousine they’re chauffeured around in,” says venture capitalist Michael Moritz, whose firm helped fund Yahoo. “Here people work on companies. It’s a difference in the mentality. This is a marathon we’re setting ourselves, not the frenetic sprints of Hollywood.”

But the high-tech tyro capitalists of the 1990s may be more like fast-burning movie stars and high-flying bond traders than the techno-entrepreneurs who preceded them.

At best, they are the vanguard of a new way of doing business in a fast-changing technology environment where products are obsolete in months and no one can even pretend to look ahead more than a few years. At worst, they are pretenders exploiting the financial markets for quick personal gain.

“We worked for six years at Apple before we went public,” sniffs Steve Jobs, co-founder of Apple Computer and longtime poster child for the PC revolution. “They are obviously operating with different rules.”

“I have one piece of advice for them,” says Oracle Chairman Larry Ellison, who was 41 when his software firm went public in 1986. “Acura NSX. Before it’s too late.”

Unlike Apple, which had annual profits of $11.7 million when it went public in 1980, or Microsoft, which operated for 11 years and had sales of $172.5 million and a profit of $33.3 million for the four quarters before its public offering, most Internet start-ups that have promoted themselves in public and private markets are still bleeding red ink, and some hardly even have any revenues to speak of.

As in the early days of the PC industry, the Internet tinkerers suddenly found their hobbies and school projects turning into businesses. And, carried by the wave of cyber-hysteria that began in late 1994, they moved out of their garages a lot faster.

“They’re certainly younger, and they’re achieving their wealth faster,” says Regis McKenna, a Silicon Valley marketing guru who helped launch Apple. “There’s also clearly more competition for this generation than there was 10 or 15 years ago.”

Plenty of middle-aged entrepreneurs have made money off the Internet too. And many PC industry veterans have been recruited to finance and run the new enterprises. But even under the supervision of baby boomers in suits, the precocious founders still supply the soul.

If they fail, the cyber-tycoons stand to lose much of their personal wealth.

They already have weathered one steep decline, and partial recovery, in Wall Street’s valuation of the stocks to which their fortunes are tied.

But money isn’t all that’s at stake: They’re also jockeying for a place in the history of the information revolution. For amid their rigorously pragmatic approach to the world lurks an incongruous and often facile devotion to the social promise of high technology.

And the fate of these young men and their companies--and virtually all the young guns are men--will no doubt help shape the future cyberspace.

How they fare will determine the chances for others to follow, as a more skeptical financial market awaits the results of its first wave of digital speculation and larger firms that once fought for the right to snap up Internet ventures exercise more caution.

They are marked by the acutely self-conscious irony of their generation, half-believing skeptics’ contention that their success resulted from being in the right place at the right time, rather than any true innovation.

But this new generation of entrepreneurs shares with past generations an intensity of dedication to their work. And in many ways they are savvier, striving as they are to combine technology with communication and media.

Smart, irreverent, somewhat cocky and definitely scared, they are growing up fast, learning to handle their fame and fortune and trying to balance personal relationships with business at the same time.

Here, then, is a snapshot of five of Silicon Valley’s most influential Internet up-and-comers. Each, in different ways, represents the character and culture of high-tech start-ups in the ‘90s.

The Yahoos

https://www.yahoo.com

Jerry Yang bought a house. It’s a $1.9-million house, in the Los Altos hills, with five bedrooms and a nice view of San Francisco Bay. And he’d really rather not discuss it.

“It’s not a big house. Well, it is a big house. It’s a bigger house than I’ve ever seen, but there are bigger houses,” says Yang, in a rare moment of fluster.

Two years ago, he was an engineering graduate student procrastinating on his dissertation by surfing the World Wide Web. In a cramped trailer at Stanford, he and fellow slacker David Filo had begun to keep a list of their favorite sites on the anarchic computer network.

Dubbed Yahoo for “Yet Another Hierarchical Officious Oracle,” their homemade electronic index quickly became the most popular organizing force in cyberspace. In April 1995 the duo got $1 million from Sequoia Capital to turn it into a business, and abandoned school.

A year later the company went public. Before the IPO, Yang and Filo sold 2 million shares to investor Softbank, netting $12.5 million each. Together they own about one-third of Yahoo, which today is valued at more than $500 million.

The vault to fame and fortune has frayed their friendship (“I see Jerry whenever there’s a photo shoot,” Filo says), but their divergent dispositions and the roles they fill at Yahoo act perversely to knit their fast-growing firm together.

“Mr. Inside and Mr. Outside,” sums up one observer.

If conspicuous consumption is frowned upon in the start-up set--and it is, even though one might think they’d earned a little fun--Filo’s ascetic habits compensate for his partner’s new abode.

Known for sleeping under his desk, Filo, 30, still shares the apartment that he and other employees rented to be close to the office. But that was three offices ago. He’d like to replace the 1980 Datsun that periodically strands him at the bottom of inclines, but claims he has no time to shop.

It’s not clear exactly what Filo’s job is--Tim Koogle, an older, wiser manager-type, is the firm’s chief executive--but a stream of visitors drop by his cubicle bringing engineering crises that eventually will be attended to.

His favorite part is still getting instant feedback from Netizens who use or want to be listed on the site. Many of them bought Yahoo stock in the initial public offering, which attracted an unusual number of individual investors.

“The pressure is a little worse now because we’re a public company,” says Filo, with just a trace of Louisiana drawl. “The big funds and institutions are one thing, but when the little people buy stock in you and the stock goes down and they lose their money, that’s kind of a bummer. Especially when it’s people like your family friends. I’ll talk to my parents and they’ll say, ‘Oh so-and-so just bought some stock’ and I’ll think, ‘Oh, great.’ ”

Filo’s reflexive fatalism is one reason why Yang, a Taiwan native who grew up in San Jose, has become Yahoo’s chief evangelist. Articulate, tireless and perhaps a bit too relentlessly upbeat, there are for Yang no “problems,” only “challenges,” no “obstacles,” only “hard questions.”

But his patter is spiked with moments of frank honesty, a combination that has endeared him to investors and the media even as competing services lure Internet seekers and advertisers--the firm’s main revenue source--demand more for their money.

On a typical day last month, Yang hopped a red-eye to New York, addressed an audience of Yahoo wannabes at 8 a.m., posed for a Vanity Fair photograph with other recent IPO stars like fashion designer Donna Karan, and dined with his investors at Reuters before packing to leave for Washington the next day.

That was the week after he moved into the house, purchased largely at the behest of his fiancee, who has lived with him and a large dog through the tumultuous period in a one-bedroom apartment in Palo Alto.

“[Filo and I] both admit we were lucky,” Yang says. “But we did something no one else did, and we did it first. We’re going to make a big impact one way or another. Either we’ll be very successful or we’ll go up in flames.”

The Sucksters

https://www.suck.com

“They didn’t call it Yahoo for nothing,” repeats Carl Steadman, co-founder of Suck, a webzine dedicated to, among other things, exposing the fraudulence of its own medium. “Write that down. That’s a perfect segue for you.”

Steadman, 26, is saying what the “net.moguls” don’t particularly like to hear--but with a caustic twist that is classic Suck.

“They didn’t do anything. They just happened into something. But you’re assuming some people produce things of value such that they do deserve the riches they come across. I’m not sure that’s a valid assumption.”

A hyperlink to Steadman’s unrelenting irony can be found on his home page, which includes some heavy stuff about adolescent life in rural Minnesota, his father’s suicide and his attempts at taking his own life. (“My story, for your consumption.”)

After graduating from the University of Minnesota, Steadman came to San Francisco to be production director at Hotwired, the Web’s first splashy interactive magazine, hiring UC Berkeley rhetoric major Joey Anuff as his assistant out of the reject resume pile. Anuff, who looks a lot like actor Jeff Goldblum, is a wit who on a good day can make even Steadman break a smile.

As for Hotwired’s cheerleading editorial stance toward all things digital, neither of them found that very amusing. In fact, they found it a gross distortion of their reality.

So, combining technical skills and a dash of sincerity with a flair for contrariness and an open desire to make money (if no plan for how to do it), Steadman and Anuff began publishing Suck at night in the summer of 1995.

At first, it was anonymous. But a year later the site had become a blockbuster by Internet standards, attracting 10,000 visitors a day. By then, its producers’ identity was an open secret, and Hotwired persuaded its dissidents to sell out.

The pair did not make millions; in fact, with Wired’s cancellation of its public stock offering last week, they got a raw deal, since much of their payout was in stock options. As much as they try helpfully to give pointers on this story, the Sucksters--as they refer to themselves--insist they should not be in it. “Maybe a good angle would be, we’re the people who should be very rich and what a travesty it is that we’re not,” Anuff suggests.

Despite the stock offering’s failure, Steadman and Anuff’s lives already had changed substantially. They both, for example, got girlfriends (for a while). And some new stuff.

Examining Anuff’s Armani frames at a recent cyber-gathering, one party-goer noted, “You never had glasses like that before!”

Steadman bought his own apartment and is working on a book and some new Hotwired projects, leaving the running of Suck to Anuff, who has hired six employees and instead of writing everything himself is figuring out how to make the magazine turn a profit.

But some things don’t change. The Suck mission statement still reads:

“We abide by the principle which dictates that somebody will always position himself or herself to systematically harvest anything of value in this world for the sake of money, power and/or ego-fulfillment. We aim to be that somebody.”

The Media Climber

https://www.cnet.com

Halsey Minor became a father this month, so perhaps he can be excused, briefly, for likening the task of running a newly public Internet company to changing a diaper.

“The first day it took me 20 minutes. Now I can do it in under 30 seconds,” he says. “It’s the same thing. You get better at optimizing your time.”

Might the 2-week-old Carter Coulston Minor upset that delicate balance? “Everyone predicted the demise of Microsoft because Bill Gates was going to have a child,” Minor says. “It didn’t happen.”

No comparison intended, of course. Minor would rather be the next Rupert Murdoch than the next Bill Gates. His company, C/NET: The Computer Network, combines cable programming and a Web-based information service that provides instant technology news. Microsoft co-founder Paul Allen is a major investor.

For now, Minor is pitted against the giants of computer trade publishing. But the Web site already has expanded to include entertainment news, and Minor plans to eventually compete with all of today’s media masters.

“The PC revolution happened in the 1980s,” he says. “It destroyed the hegemony of companies like IBM. The media revolution is going to destroy media companies.”

Brash and bearing an uncanny resemblance to Steve Jobs, Minor takes pains to separate himself from the hard-core geeks who are his peers: for example, “I think TV is a good thing. I like ‘Friends.’ ”

He also likes to play golf, not the most popular sport among computer jocks.

Growing up on a farm in Charlottesville, Va., where his father sells real estate and his mother breeds horses, Minor read computer trades like “Byte” and “PC World” and decided that he wanted to come to Silicon Valley and start a company.

Later, he set a goal for himself: go public by age 35. He made it, four years early, after stints as an investment banker at Merrill Lynch and executive assistant to his first financial backer.

Young Carter Coulston came home to a new house in tony Sea Cliff, with a view of the Presidio that cost, Minor confirms, “almost” as much as Jerry Yang’s.

But if he sometimes seems a trifle too pleased with himself in his converted warehouse office near San Francisco’s Embarcadero district, C/Net’s chairman also wakes up sweating some nights.

“It’s not a fear that we’re going to fail. It’s a fear that we’re not going to do something right, that we’re going to make a mistake,” Minor says. “The Web is too competitive for anybody to be at peace. It’s like trading--everything is moving incredibly fast, and you’re taking huge risks all the time.”

The Grunge Geeks

https://www.excite.com

Graham Spencer’s altered position in life didn’t really hit him until the incident with the Craisins:

“I was in Lucky and I saw these cranberry raisin things, and they were $2.35. And I thought, ‘They’re expensive, what if I don’t like them?’ And then I thought, ‘Well, what if I don’t like them?’ So I went ahead.”

Spencer, 24, gave up his punk rock show at Stanford’s radio station to create an Internet search service with four friends from the computer science department and fellow student Joe “Phone Boy” Kraus just before graduation three years ago.

In a scenario that’s almost too cliched to be true, they worked out of a garage in Palo Alto, subsisting on burritos and Campbell’s soup. More than once, when they were using the clothes dryer to keep warm, a fuse blew and their computers went dark.

Kraus’ marketing efforts paid off quickly when venture capitalist Vinod Khosla of the elite Kleiner Perkins Caulfield & Byer agreed to fund them in January 1995. Fifteen months later they went public.

“We were lucky,” Spencer says. “We were able to ride the wave of hype about the Internet. If we’d come a year earlier or later, it might not have worked out.”

Terms like “growing the company” sound incongruous coming from the intense programmer, the son of a military chaplain who says he hopes to help reclaim the democratic aspect of the Web that allows anyone to publish anything at little cost.

But Spencer, who owns about 5% of Excite, still programs in the evenings and on weekends, leaving management chores to the hired help.

“The highs are tremendously high and the lows are tremendously low,” says Kraus, who owns about 3% of the firm. “This could be very much like Hollywood now, where today’s star is tomorrow’s has-been.”

The six founders are still surprisingly close. And they are well aware of the tenuousness of their newfound status: Excite’s stock has fallen from its close of $20 the day of the IPO to just $7 on Friday, and the competition between them and other Internet search firms--including Yahoo--is escalating.

“Ever since the six of us were in the garage, we’ve been talking about going to Hawaii,” Spencer says. “For awhile we couldn’t do it because we didn’t have enough money. As the company got bigger, we kept promising, ‘once we make this deal,’ ‘once we do the IPO,’ but it just never worked out. We haven’t really had a big celebratory vacation. I hope we get around to it someday.”

The Graduate

https://www.netscape.com

It’s lunchtime, and Marc Andreessen, author of the software that transformed global communication, technical lieutenant in an epic war against the mighty Microsoft, net worth about $80 million, wants to know: “What’s risotto?”

The bowl that arrives is clearly way too small for the Wisconsin native, whose beefy blond looks and unassuming style mark him as a Midwesterner from a mile away. He could do without the arugula, too. But he’s been in California for awhile now, and he’s learned to adjust.

Nominated overwhelmingly by his peers as Net geek most likely to become icon, Andreessen has in many ways already graduated from young millionaire school. Netscape, though far from a sure bet to prosper in the long run, is already large and well-established.

Rather than being self-conscious about his overnight riches, Andreessen vehemently defends the process that created them.

“There’s nothing wrong with going public with zero revenues,” Netscape’s chief technology officer declares. “If there is a market demand for that, that’s what you should do.

“One of the coolest things about the whole Silicon Valley experience is that hundreds of people benefit from Netscape’s IPO.”

The browser program that Andreessen worked on in the early 1990s at the University of Illinois--where he was paid $6.85 an hour--suddenly made it possible for ordinary computer illiterates to click their way around the Web.

In a story that’s already lore in the history of capitalism, computer entrepreneur Jim Clark, who got rich off computer manufacturer Silicon Graphics Inc., tracked down Andreessen the next year and recruited the seven other browser engineers.

Almost all signed on, moving to Mountain View, where pounding out a commercial version of the software before anyone else cornered the market was crucial to their success.

Netscape’s public offering in August 1995 was among the most spectacular ever.

Now the company has six buildings and shuttle buses bearing the Netscape logo.

But it also faces potential destruction by Microsoft, a formidable foe that has launched an all-out offensive. Andreessen admits freely to being scared. And to being glad the day-to-day management of the battle falls on chief executive Jim Barksdale.

Meanwhile, he has bought a house in Palo Alto where he lives with his girlfriend, his bulldogs and his computerized home theater system.

He doesn’t see his friends from Illinois much any more. “Most of them believe that managers are evil, intrinsically,” Andreessen says. “Right now I’m just doing other things.”

Those include occasional off-road spins in a friend’s red Hummer behind the Netscape parking lot, reading copious amounts of magazines (Time attracted him only when he was on the cover), and perusing his extensive movie library.

But he has considered pursuing a PhD in history, or going into politics--the type of post-business pursuits that most entrepreneurs don’t even think about until they start turning gray. Andreessen is fascinated by James Carville and Dick Morris types, and has just finished reading political consultant Ed Rollins’ new book.

Even Andreessen, mostly serene and with credentials beyond reproach, has moments of self-doubt. “Other companies should have done a browser. Lotus should have. Novell should have. Microsoft should have. It was obvious,” he says. He’s moved on to dessert, and there is powdered sugar all over his face.

“But they didn’t. Now they’re coming back with some really good stuff, and we have to find a way to deal with it.”