Thursday, August 13, 2009

Burning up Silicon Valley

My friend and fellow SJSU entrepreneurship prof Steve Bennet is recommending a new Silicon Valley-oriented novel, Burn Rate. The novel is by Daniel Marcus, an operations guy in one of his portfolio companies.

According to Amazon:

Ross and Lori Williamson are living the Boomer version of the American Dream. Ross is a Silicon Valley entrepreneur, battered but still standing after the Internet collapse. Lori has quit her upscale corporate law job to make pottery, study martial arts, and start a family. Unable to conceive, they hire Annie Day as a surrogate to bear their fertilized egg to term. Annie has a few skeletons in her closet, including an ex-boyfriend desperate for cash and on the run from the Italian and Russian mobs.
For those outside the Silicon Valley milieu, “burn rate” refers to the monthly negative cash flow of a startup company. The equation I tell my entrepreneurship students is

working capital ÷ burn rate = time to extinction

For those who have a sense of déjà vu all over again, Burn Rate was also the title of the 1998 memoir by Michael Wolff. As Publisher’s Weekly via Amazon describes it:
After operating a small media company for a number of years in New York City, the author joined the ranks of Internet entrepreneurs in 1994 when he formed Wolff New Media and found himself operating in an industry with few rules, much venture capital money and lots of companies losing that money at a rapid rate. Wolff's own burn rate (the rate at which his company was losing money) was several hundred thousand dollars per month.

In an effort to keep afloat, he and his financial backers met with numerous companies about a variety of business combinations ranging from an outright acquisition of Wolff New Media to a partnership arrangement. Wolff failed to reach agreements with such companies as the Washington Post, Ameritech, Magellan and America Online. He describes his negotiations with these firms in a witty fashion that provides readers a glimpse of the operating style of some of America's best-known companies. Wolff's most entertaining account concerns his dealings with AOL, which he calls the most dysfunctional company in the country.

Although Wolff (Where We Stand) was an early believer in the ability of the Internet to deliver powerful content to a mass audience, by the time he resigned from his own company in 1997, he had come to see the Net as more of a transactional medium. Combining humor with his firsthand experiences, Wolff has produced a book that fledgling Internet entrepreneurs would be wise to read.
The Wolff book was highly engaging, ideal for a course on high-tech entrepreneurship. The one time I evaluated Wolff’s book, I ended up using Charles Ferguson’s High Stakes, No Prisoners, because people at the time had heard of his technology (FrontPage, sold by Ferguson’s Vermeer Technologies to Microsoft).

I haven’t seen the Marcus book in stores yet, but I’ve requested that my local public library buy a copy. I’m guessing that by fictionalizing the Silicon Valley story, Marcus has a freer hand at commentary and humor than the autobiographical stories of greed, love and excess.

On the other hand, it’s hard to see how he could top the dysfunctional big company stories that Wolff and Ferguson tell about AOL Time Warner. After all, this is the failed conglomerate that is the subject of at least three other books, by Alec Klein, Nina Munk and Kara Swisher.

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