Comment by DigitalSea | Hacker News Reader

Comment by DigitalSea | Hacker News Reader

People are often wrong when they speculate what caused the dot-com bubble bust of the 90's. For some it was a matter of being too ahead of their time, but for many, it was a case of irresponsible management and use of funds. The whole lean startup concept was basically nonexistent.

I might have been relatively young back then, but seemed to me startups in the 90's went a little too overboard on advertising. Expensive Superbowl advertisements, TV ads, radio and outlandish publicity stunts. Not to mention, the ridiculous parties CEO's would throw. Look around, you can find countless stories of 90's startups throwing lavish and expensive over the top parties courtesy of VC money and high valuations.

A few of the commerce based ideas were ahead of their time. Sadly, the Internet was still this unknown and unsafe looking entity to many consumers in the 90s and early 00's. Not every startup failed though, some did make it through to the other side, but quite a few failed.

I am concerned we are starting to see a repeat of the dot-com boom taking place again. As history has shown, it tends to repeat itself.

I worked at an ISP in the late 90's which was bought up, together with several other small ISPs. Before the acquisition it was a bunch of techies working their asses off. After, dozens of non-technical staff came on board who all got huge paychecks and a BMW, bossed the techies around in clueless Outlook 98 fullquote e-mails but contributed zero to the bottom line.

The money, in our case, came from a large north-european telco with deep pockets. They turned a blind eye to the burn rate for almost 2 years before pulling the plug.

I've heard of a German tech company hiring a philosopher, you know, just for fun. On a superficial level, this might seem comparable to Google hiring Ken Thompson, Guido van Rossum and tytso. In reality however these folks not only boost Google's reputation among developers, they innovate and make a technical contribution to the company. That precisely is the difference between 90's dotcoms' thrift-spending habits and how companies work today. The article misses that completely.

> I've heard of a German tech company hiring a philosopher, you know, just for fun.

Oh, there are American companies that do that too: http://www.newyorker.com/magazine/2014/11/17/crystal-ball-3

> ... seemed to me startups in the 90's went a little too overboard on advertising. Expensive Superbowl advertisements, TV ads, radio and outlandish publicity stunts.

They did because they could. I'm sure you remember the ungodly amounts of money that were being thrown at everyone with a two-bit idea back then.

>> but seemed to me startups in the 90's went a little too overboard on advertising. Expensive Superbowl advertisements, TV ads, radio and outlandish publicity stunts. Not to mention, the ridiculous parties CEO's would throw.

This.

Saw this first hand with several companies. I was with a telecom CLEC and we were in a building jammed with startups in the late 90's.

I would agree with all your points and also add most of the companies I saw guys who had been toiling in middle management their whole careers, suddenly got a shot at running their own show. They got drunk on the money and power and ran most of the companies into the ground by burning through their money and making asinine decisions.

The CLEC I was working for was a perfect example.

When I was brought on as a sales person, this was the pitch in the interview:

"We want our sales people to be the highest paid sales people in the industry. We're going to offer more salary and more commission then any other CLEC in town," This was a CLEC who had 15 employees, and were trying to hire three sales people.

Their commission structure would be outrageous for a fortune 500 company, but this was a CLEC startup in a middle tier market. Your quota every month was 60 lines. You got a bonus for hitting your goal, then each tier above that was additional commission.

Here's their tiered structure:

60 lines - $5,000

70 lines - $3,000

80 lines - $4,000

100 lines - $5,000

Let's say I land a nice commercial building with several tenets and the first month I land three companies all three of their contracts equal 70 lines. It would mean I get my $5K for hitting my quota and another $3K bonus for hitting the 70 line tier.

I thought this was awesome. Then after two months I suddenly realized something. I asked around to see what the margins were on the lines we were reselling.

On each line the company was making a pretty nice margin, around $20/per line. Now, you compare that with the commissions they were paying us. You do a little math and realize it's going to take them over 6 months just to break even on the commission they were paying versus what revenue they had coming in from our sales. More lines? More commission and longer wait times to realize a profit. Even though I was still in college, it was obvious to me this was not a smart business decision.

EDIT: CLEC stands for Competitive Local Exchange Carrier

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