Didn’t I predict this article in my Globe and Mail dispatch? 🙂
Sunday March 11 8:01 AM ET Internet Stock Flop Zaps Dot-Com Lifestyle
By Michael Kahn
SAN FRANCISCO (Reuters) – Last year the struggle for dot-commers was finding a car dealer who still had the latest BMW in stock — this year, it’s affording one.
Welcome to the brave new world of dot-com workers, where the once promising prospect of stock-option riches from Internet start-ups has faded into a grim reality of lay-offs, bankruptcies and plummeting stock prices.
“The atmosphere has definitely changed,” said Sheeraz Haji, co-founder of LocusPocus, a San Francisco area Internet start-up that allows nonprofits to communicate with their members. “There was an expectation of joining a start-up and there would be a big payoff in three or four months when the company goes public.”
This once unbridled enthusiasm of mostly young dot-com workers sparked a second California Gold Rush as many hopped from job to job looking to hit the stock-option jackpot.
While the dot-com lifestyle shimmered in golden ghettos stretching from Boston to Austin and points in between, the frenzy peaked in San Francisco and nearby Silicon Valley — where high-tech workers happily assumed their jobs were automatic tickets to fortune.
That dream, however, began to crumble as dot-com companies hit the skids last year, leaving many workers scrambling as their paper riches evaporated.
Haji, for example, said his stock options in his former employer Digital Impact (NasdaqNM:DIGI – news) were worth some $2 million before shares in the online direct marketer dropped so low that he jumped ship last June, leaving those dreams of riches behind.
But Haji was lucky in that unlike many other dot-commers, he held off using the promise of future millions to finance a new sports car, fork out an exorbitant down-payment on a new home or plunk down wads of cash on some other flashy big-ticket item.
“It’s hard to believe it but people actually made purchases on unvested stock,” he said in a recent interview.
It wasn’t just dot-commers who were tempted by the lures of the New Economy. Venture capitalists poured billions of dollars into Internet start-ups and the Nasdaq soared, hitting an all-time high of 5,132.52 on March 10, 2000.
But one-year later the tech-heavy exchange is hovering around the 2,200 range, while surviving dot-coms have tightened their belts in hopes of making it to the next quarter rather than plotting lucrative initial public offerings.
“People had the impression they had made it already,” said Paul Nock, director of mobile technologies at MedicinePlanet, which provides health care and well-being content to wireless portals. “It was kind of believing their own hype, really.”
>From Launch To Pink-Slip Parties
The dot-com bust has also marked the end of the lavish launch parties that trumpeted the arrival of yet another Internet firm, where dot-commers munched shrimp, sipped champagne and toasted the New Economy.
Taking their place today are pink slip parties for newly laid-off workers and Web sites tallying the mounting number of dot-com failures such as well-funded Internet retailers eToys Inc. and Pets.com.
Even worse for dot-commers, their Internet jobs no longer carry the cachet they did a year ago. Most start-ups firms that once sought to highlight the .com in their name now seek to shed that suffix.
“The attitude used to be: ‘I’m doing the hippest, coolest thing,”’ said Haji. “It is no longer fashionable to work for an Internet start-up.”
This does not necessarily mean that experienced tech workers are crowding the unemployment lines.
Industry experts say Northern California has such a wealth of established high-tech firms that many have simply traded in their dicey dot-com credentials for cubicles at giant corporations such as Cisco Systems Inc. (NasdaqNM:CSCO – news), Intel Corp. (NasdaqNM:INTC – news), or Oracle Corp. (NasdaqNM:ORCL – news)
Nevertheless, expectations among workers looking for jobs at dot-coms have also changed, Nock said. Employees once swayed by perks like stock options and pool tables at the office now worry more about job stability and salary, he said.
“I didn’t join on the basis of what stock I might get,” Nock said.
Dot-Commers Rein In Spending
The Internet stock free-fall has also put an end to a spending frenzy that saw dot-commers burning through money like there was no tomorrow, said Michael Gilmore, CEO of SnapHire, a San Francisco start-up that provides software to help corporations to recruit employees.
These fashion-conscious, paper millionaires networked their way through the trendiest bars and restaurants, shopped at the most expensive stores and raced to car dealerships to snap up the latest model BMW or Mercedes, he said.
But the stock-market dip translated into a hard dose of reality for the high-flying high-tech workforce.
“It was meet as many people as you can and just spend money basically,” Gilmore said. “People are now having to look at their checkbooks just as companies are doing,” Gilmore said.
But the decline and accompanying layoffs have had a silver lining, he added. It’s now easier to find a place to live in a still-pricey housing market, last-minute dinner reservations are not as big a hassle and driving on northern California’s notoriously gridlocked highways is less stressful because there are fewer drivers headed to work.
And maybe the best thing about the Internet shakeout is that it is no longer necessary to live the frenetic lifestyle where every waking minute is spent chasing the dot-com dream, he added.
“Hopefully, it will become more like real life again instead of this kind of sick fairy tale,” Gilmore said.