0.cached.png
By Newsweek Editors
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
Josh Felser and Dave Samuel should be sailing the tropical seas in luxury yachts. The pair lived the dot-com dream, selling Spinner, their Internet-radio start-up, to America Online for $320 million in 1999. After leaving AOL two years later, the newly minted millionaires attempted lives of leisure. But the pungent scent of opportunity finally lured them back into the high-tech game last year. "It felt like the time was right for big ideas," Felser says. Grouper, their new 17-employee start-up, makes free software that allows friends and family to share photos and music over private, encrypted networks.
Things are heating up all over Silicon Valley. Even while the NASDAQ sputters, starting a dot-com has become fashionable again, drawing back entrepreneurs who thrived or merely survived in the first round of activity on the Net that began a decade ago. These tech leaders are inspired by a variety of factors, not just the prospect of replicating Google's blockbuster success. Many want to take another crack at leaving a lasting impression in high tech, or have simply discovered that they miss the frantic pace of life at a start-up. And they are intrigued by the proliferation of broadband and mobile phones, and the insinuation of the Internet into the fabric of everyday life.
Many dot-com ideas proposed, funded and ultimately ridiculed a few years ago are suddenly viable. That's why so much of the activity stoking this high-tech renewal feels oddly familiar. Many of the new ideas are actually old, with fresh angles. Last week a Seattle-area start-up called Jobster launched yet another service for job seekers and recruiters. The twist: it asks users to pass on news of job openings to friends and colleagues who may not even be looking for a new job. Entrepreneurs are hawking new peer-to-peer file-sharing software, new search engines that comb through video files and travel sites that look for the best deals by... scouring other travel sites. Sound like deja vu? "We thought about all these things in the '90s but it was too early," says Joe Schoendorf, a venture capitalist at Accel Partners in Palo Alto, Calif. "The management teams were too inexperienced, the ideas were not well thought out and the infrastructure was not in place to support them. But now every one of those factors has changed."
Read More on News
As recently as last year, it was hard to find tech veterans who would admit to even considering a dot-com aimed at consumers. Then a funny thing happened: Internet users came to the rescue. They migrated online in droves, spending more time, money and particularly creative energy on the Web. Google bought a start-up called Pyra Labs in 2003, which was making it easy for users to build the online bully pulpits called blogs. The acquisition showed that there were financial opportunities in catering to vibrant communities of active Internet users. Meanwhile new advertising technology, rolled out by Google and Yahoo, paired specific ads to Web pages with related content and showed that entrepreneurs could make money in every lightly populated nook of the Net--what techies like to call "the long tail."
The odor of opportunity lured back the prodigal entrepreneurs like dogs to a T-bone. Andy Rubin, who a few years ago founded Danger, the cell-phone maker, says many of his entrepreneurial friends did lots of "hanging out" for five years. But now, he says, "they are starting to realize there is still opportunity and still technology that needs to be created." He includes himself: Rubin is now working on another mobile-phone venture--still secret--called Android.com.
Now the byways of high tech are again bursting with optimism even while the overall economic climate remains dicey. Job growth in Silicon Valley is stagnant and commercial real-estate prices are down. But the traffic on the Bay Area's Route 101 is up, as are the lunch lines at Palo Alto and Menlo Park eateries. The pace of start-up creation is accelerating--venture-capital investment increased 15 percent from 2003 to 2004, according to Bay Area research firm Joint Venture: Silicon Valley Network. "At lunchtime, I see people writing on napkins again," says the firm's director, Russell Hancock.
While their scribbling may evoke old ideas from the boom, entrepreneurs say that starting a business today is a different experience than a few years ago. Open-source software, inexpensive Dell computer servers and low office rents make it cheap and easy to take the first few steps.
Because of the availability of cheap contractors at home and abroad, start-up payrolls are also staying lean. Entrepreneurs are finding less expensive ways to promote their companies, such as letting communities of bloggers find their technology and evangelize it for them. The new economics of starting a Web business may even be changing the entrepreneur's celebrated goal: striking it rich with an IPO. With the market for new stocks still flat, many just want to get scooped up by one of the few Internet giants like Yahoo, Google or media mogul Barry Diller's AIC/InterActiveCorp. In this respect and many others, the Vancouver-based Flickr is typical of the dot-com revival. It's yet another photo-sharing site, but with a few nifty innovations: users can tag their photos with keywords, adding them to groups of similar shots from other users, and can append comments to any picture. A year after start-up, Flickr has drawn more than a million users--without promotional expenses.
Earlier this year, the firm was close to raising money from top venture-capital firm Accel, which would have put it on a traditional IPO track. Instead, this month they sold to Yahoo for a rumored $35 million. "We'll be taken care of and can concentrate on what we like doing best, which is building the product," says Flickr co-founder Stewart Butterfield. And if there's another tech swoon, Flickr will have Yahoo's might to protect itself.
That suggests a final change in today's tech leaders. They understand that a volatile economy can scuttle future plans and are wary of the greed of the past. At least, that's what they say. If high-tech again goes from hot to overheated, let's hope that this time cooler heads prevail.
Submit Correction
View Editorial & AI Guidelines