the audience: q&a with tom
Q: Good morning, Tom. You
are a captivating storyteller, so I want to thank you.
I think it did a lot for a lot of us.
I got the impression from you that it might almost be too late,
that maybe the window is closed and the gold rush is over.
I'd like to hear some of your thoughts on that.
That's a great question, very timely.
We are at a very sobering moment, but, to me, that's a good
thing. We have clearly
been through a mania, and the market was the best barometer of that,
but a mania doesn't mean that there wasn't, and isn't, a tremendous
revolution going on underneath the storm and the perhaps inflated
If you are looking at a “me-too” opportunity, forget about
it. I just don't think
there is anything left there, at least not if someone else in your
sector has a good running start on you with a good management team.
If they don't, go after them, because there are plenty of
Internet companies out there now that are putting up a brave face.
Behind it, however, the squirrel cage and gum wrappers and
bailing wire are pretty ugly.
I think we have really just begun to see how the Web is going
to ripple through the entire economy.
I continue to believe that there are enormous opportunities for
people who have the imagination and the conceptual vision to see how
this universal networking of the world can turn things upside down.
I do not think that it's too late by any means to be dreaming
and finding those new degrees of frontier, whether it's on the Net or
in many other areas of the economy.
The Net has gotten the entrepreneurial story going, but, of
course, it's not the only place to look.
I think there is a lot more to come in this wave, so, no, I
wouldn't be afraid of diving in at this time, although it will be a
little less forgiving. Is
that a good thing or a bad thing?
I think it's a good thing.
In the last couple or three years, some people have invested
real time and real hours on very flaky ideas which they could have
spent with their children or in the garden. Maybe it's better for that to be weeded out up front.
So, be aggressive. Be
strongly visionary and conceptual.
Look beyond the hot thing of today and look beyond the fad.
As an entrepreneur, I am so happy for some of the mania to be
taken out of this bubble so that the fad thing goes away. It used to kill us. Some
VCs were so hot in pursuit of that IPO.
They saw how people would latch onto the latest fad, ride that
fad for three months, make the IPO and the devil take the hindmost.
Who cared what happened later?
Nobody with VC money in a company could be completely immune to
that, and it would lead them away from the fundamentals.
It would lead boards of directors to push companies to do
things that didn't really make sense in hopes that they could ride a
mania wave, surf it into shore, get the IPO and hey, see you, guys.
There will be less of that now.
You will be in a more sober environment.
You will have more sensible conversations.
So be visionary, be brave and be sure that you have a new idea¾at
least as sure as you can be since we never really know.
I think there is still plenty of opportunity.
Q: We may be lucky enough to have spouses who accept what we're
doing, but children are a different matter.
Children have this foisted on them.
How did your children take this period of hardship and how has
it changed now that you are more successful?
With kids, in my case at least, you get this wonderful lag
time. I'm sure you have a
brilliant wife, we all do. She
will see right away the vulnerability and risk you are headed into.
Your kids won't. They won't have any idea.
Even if they are pretty old, they won't, so you have, I don't
know what the period is, but, say, six months or a year or sometime
during which your spouse may be freaking out, but your kids won't be
Later on, it got trickier when there was no movie money to give
them, when I would go into a rage, the real reason being that I
couldn't afford the soccer tournament fee, but it gets vented some
other way because you can't admit that.
It's just too ugly and too bad.
Your kids are asking, “What's going on?
Why is money such a big deal all of a sudden?”
The tension between husband and wife can be pretty thick.
I thought we were protecting them from most of it. When we would have our real knock-down, drag-outs, they'd be
at two in the morning. I
thought the kids would be in bed, but, of course, ultimately kids know
everything. I remember
very vividly the day I went to walk the dog with my then 12-year-old
with whom we hadn't really discussed any of the financial ghastliness
of our situation. Down
the block from our house there is an old junior high school that had
been converted into senior housing and had a few units of low-income
housing. He said, “Dad,
if we have to sell the house I hope we at least move into that place,
the low-income units there, because I would like to stay in the
neighborhood.” I said,
“Okay, son. Who said
anything about selling the house?”
The funny thing is that part of my motivation for doing this
was to be the right kind of model for them.
I don't know about “New Economy” and “Old Economy.”
I think the wall is disintegrating between the two.
It's one economy now, but it's a much more fluid and
risk-oriented economy than it was.
I really believe that the winners in this new century will be
people who are willing to envision and take risks, and I wanted to be
a model for my children in that way.
I didn't want to be someone who clung to that desk as the
industry eroded underneath it just for that weekly paycheck, gulping
it down. I didn't want to
be a sucker. I wanted to
show them the way. I felt
good about that, but then I started to be horrified, thinking, “My
gosh, I'm going to fail and the model I'm going to be for them is
going to scare them away from the very path I think they should go
on.” More than anything in this experience, that terrified me.
I could rebuild a career.
I could get back on my feet.
In my own life, as I point out in some detail in the book, I
had been through the experience of my father failing in plastics in
the '60s. I didn't want
to pass that on. Happily,
that didn't happen.
Now it's cool, you know. “My
dad is an Internet entrepreneur!”
It's very au courant. Their friends think it's very cool. “He has a book out.”
Now I'm the hip dude. My
legs have reappeared like that photograph in Back To The Future.
Q: Did it get easier after you got that first customer or did
you still have the problems that “tweener” businesses suffer, such
as making payroll, etc.?
Tweener, huh? Cool. It's still not easy.
It's still not at all easy.
During that tweener time you are still definitely on a proving
ground. You are always on a proving ground. This
is the education of Tom Ashbrook and probably all of you.
I had this sense that once your finger touches a million
dollars something magical happens. You have an aura and see all.
It ain't so; it continued.
We fought like sons of guns over that next year to build the
company. You have to find
all the right people. You
have to build out the architecture.
You have clients now and they have to be satisfied even as you
Ironically, the long period that we spent in the desert turned
out to be a very advantageous thing for us.
If we had not done that, in our case, this opportunity would
never have been ours. It let us fly under the radar for more than two
years building the deep tech architecture of the site, building our
understanding of the industry, building all of our contacts in the
industry. By the time we
stopped starving and got funded and showed up, we were not crushable.
We were not ignorable and we could not be flicked out of the
way by some big, old media player or big retailer who might find this
an interesting opportunity. We had to be dealt with. That was a big advantage.
In no way did it become easy.
The thing that did go away was that sense of tremendous
personal guilt and fear that you were crushing your family life, the
very people you were working for, while you were working your brains
out. At least they were
eating and the fridge was full. The
dining room ceiling was fixed. There
was a new bed. That
feeling you have in the night¾the
terrible tradeoff, the dark before the dawn that you are really
hurting people around you, not just yourself¾that
passed and it made it personally easier, but, in business terms, it
stays hard as far as I can tell.
Is it easy for somebody out here?
I don't know.
Q: Can you warn us about one landmine that you stepped on so we
don't repeat the mistake?
Sure. This gets
back to my observations about the fad sickness that the Internet
industry has had over recent years that was so strong and so powerful.
We always hated this B2C/B2B stuff.
Our view from the beginning was that for whatever industry you
are approaching, you have to look at it in a holistic way.
What do you mean B2C or B2B?
Many of these things are a combination and the market stories
that were built around them were ugly examples of fad-driven value.
Make a company, spot an industry.
You don't know if it's going to work or not, but maybe it will.
First it was B2C and there was this big stampede toward it.
We are riding the market, so off we go.
Then it’s B2B. Pretty soon all the lemmings are off the cliff.
I think the lesson of it is to understand the industry you are
going into in a whole way. Build
a strategy that's integrated and full, that's not in any way built on
a speculative market play about the fad in the Web space for the
moment. A case in point
with us was that, from the very beginning, we saw that home design, a
$250 billion industry, was very, very fragmented.
If you have ever built a new home or renovated or just done
some redecorating, you see that it's such a pain in the neck.
Something like 70% of remodeling projects are dropped before
they're done because it's too time consuming.
People say, “I'll live with the old thing.
Forget it.” It's
too hard. Decisions are ultimately made by women, in many cases, but so
much of the industry is built for guys with tool belts and a little
crack showing. It just
doesn't work for women. It
was never our view that all this commerce that goes on was going to
suddenly be done completely on the Web.
We always saw our play as a pure navigator or a marketplace
play where we aggregated this product space for the first time.
Unlike Amazon.com, which had an electronic database of books to
suck down the first day they opened business, or CD Now where all the
CDs were already in an electronic database, home design products¾everything you choose visually in a home, exterior
and interior, windows, wallpaper, fixtures, flooring, furnishings, you
had never been pulled together. We
did that for the first time and, under that, we built a very
sophisticated universal attribute language for those products so that,
even as we go to millions of SKUs, consumers can navigate to the
things they are personally interested in and not be overwhelmed.
We never thought that everyone was going to start buying
thousands of hot tubs on the Web.
The idea was always to create the marketplace, help people get
the information they need, make them informed, empowered, prequalified
shoppers. Be very happy
to send them out and make your money from selling online technology,
online marketing services and eCommerce enablement.
Don't be the merchant of record because nobody knows where
that's going to go. If
you are the merchant of record, you are going to compete with the
distribution channel in an industry where the distribution channel is
absolutely fundamental. We
believe and understand the physicality of these products¾you
want to touch that tile.
Last summer, the din for eCommerce and eTailing was so loud
that our board could not resist it, and we finally thought that maybe
we shouldn't resist it. They
were fads, but they were real. People
were going public, a lot of money was being made and maybe everything
was going to go on. We didn't believe that, but it was so loud that we did it.
In December or January, we started selling online in a tiny
way, at the margin, in the most grudging, nudgey,
we-don't-want-to-but-okay sort of way, a tiny percentage of the
products that we show online. We
satisfied and we responded to that fad, but we all know what happened
with eTailing. We know
what the story is, just devastation everywhere.
It's really ugly. Happily,
our base stayed in our original strategy, so it's been easy to migrate
back to it.
In going to that fad, however, we sent a signal which was
confusing to the manufacturers and physical channels which had
understood our story. Suddenly,
there was this contradictory element in our story because we were
selling online and we were the merchant of record.
How could it be an open marketplace and doing that?
It didn't add up. Worse
than that was the six months of engineering and person-hours that went
into this effort that could have gone into many other things that I
wish we had been doing. We
have recovered from it very well, and we learned a lot in the process.
We never got very far down that road.
We stayed basically on our core path all the way through, and
that's one example of a mine that I suggest you avoid.
Know the industry you are going into and don't be driven by fad
labels of any kind. Resist
those labels when they are thrust on you, even by investors, to the
best of your ability. Go with what really works, not with the fad of the day.
I thought that your partner made a good point when you hit
bottom and he said that you were getting the hearings but something
was separating you from clinching the deal with investors.
What were the one or two things that were standing in your way?
I guess there were a number of things.
The first and maybe the most fundamental was that, at the
beginning, our vision was so ecstatically enormous that we sounded a
little crazy. The cool
thing about the Internet, actually the thing that drew me to it, was
that it inspired this colossal-scale dreaming.
I really dug that. It
was cool. When you look
at the vision we had in ‘94, '95 and '96 for how we wanted to change
the home design industry, even after all these years and this amount
of money, we've maybe realized 1% of it.
That keeps the job interesting because the 99% remains,
although I don't know whether the 1% is growing or shrinking some
days, because the vision keeps growing.
When you walk into a VC and you have no bona fides, when you
have never done it before, you're not a B-school guy, you have no tech
background and none of the credentials that they’re looking for, but
you have this dream as big as Texas, that's scary to them.
You sound drunk. The
more worried they would look, the more we would rev up.
We would get into our preaching mode and then they would really
freak out. We had to go through a progressive process of self-awareness
and disciplining our dream and vision down to a practical, workable
plan and disciplining our articulation of that vision so that we
didn't scare investors. Instead,
we spoke to their real interests: “Here's what we are going to do. Here is step one, two and three.
Here is how we are going to make money.
Here is the little cash register at the heart of this business
that's going to go and go and go.
Yes, we have big dreams, but let's talk about the practical
steps.” That was the
most important thing.
Then there is the timing issue. We didn't know it, but when we
got our seed round in the summer of '96, we were at the last minute of
the first Internet investment euphoria.
It was crashing all around us.
We promised our angel investors that we would have another
million in a month. Well,
it took us a year and a half. Nobody
wanted to invest in startups like ours that were consumer-oriented and
content-oriented at that time. So, timing is the other thing that's very important.
I'm a 22-year-old
with nothing to lose, emphasis on nothing.
If you hadn't had so much at stake, so much that you were
putting at risk and so much pushing you to succeed, do you think you
would have succeeded? Do
you think that was a hindrance or maybe an aid in pushing to you
Ooh, that's an interesting question.
Well, I don't know. I'll
tell you one thing, when I was 22 there is no way I would have gone
through all this hell; I wanted to party.
You are right in that I had more at stake when I dragged this
bundle of humanity out on the playing field with me.
Maybe I had a bigger reason to win and not to walk away. I did have more at stake, and maybe it made me more serious.
On the other hand, lots of people would have sensibly said,
“It's not right or reasonable to take this many people into this
much risk. You should run
back to the farm and let this go.”
It's an interesting question. but, if you are 22, what gives
you the gumption to keep going? You
would have to be one driven son of a gun to keep driving through this
storm. Good luck, man.
Your bio mentions a lot of experience in Asia.
I just got back from Bombay a couple of weeks ago and saw that
it's brimming over with entrepreneurial spirit, from the street
corners right up to the towers. How
has your experience in Asia informed or influenced you during this
Maybe in two ways. One, I was first in Asia in 1975; then, over
the next 15 years, I spent about 10 years there.
I saw Asia come from its first peeping little sprouts of
affluence into this amazing economic golden era.
One thing it made me know was that things could happen very
quickly on a vast scale. The
other thing it informs us of, however, is that there can be flaws in
the fundamentals of booms, like what lead them to come down.
Maybe the speed at which I had seen a whole continent go wild
economically made me believe it could happen.
I was in Tokyo when the Ferraris were purring around every
block in the Ginza. Where
are they now?
Q: As I listened to you describe both your mental anguish and
the real decision problems, I wondered if you had a board of advisors
and, if so, where were they?
We did, and we had a good one.
Len Schlesinger at the Harvard Business School was on our board
early on. Art Bardige, a
real educational software pioneer, was with us early, as well as Jeff
Rayport at the Harvard Business School and many others.
In fact, we actively encouraged the best minds and toughest
criticism that we could at every point.
One thing that we found, especially in this early period of the
Web when we had such an ambitious vision in an industry that was so
technologically backward and when so little was firm or clear, is that
we had brilliant advisors and, on any given day, we would find them
giving absolutely contradictory advice at every moment. We learned that the only way to proceed was to have your own
pole star. Without it,
you would be so dizzy, you would fall down.
I'm sure that some people get lucky and line up with advisors
whose opinions also line up, where everything is a go and you roll
along more smoothly.
Don't get me wrong. It
was hard, but am I happy to have done it?
Very happy to have done it.
Would I do it again? I
don't know. I can't say because my wife might hear. We had great advisors, really great, really brilliant, but it
was a time of such flux that there were not clear answers and
brilliant advisors were giving absolutely opposite advice.
Good morning. I'm
in a small startup called Microsoft.
Getting smaller, I hear.
Q: Actually, not smaller. We
are multiplying, thanks to the government.
I am taking the leap on July 17th.
My wife thinks I'm crazy.
Every morning I look in the mirror and ask, “Are you crazy? Are you not crazy?” You
have that conversation with yourself.
Given all that you went through, would you do it again?
Somebody always asks that.
Well, I would not do it again the way I did it.
If I did that, I don't deserve to live.
That would be idiotic. I
hope that I have learned a lot. I
came in as a complete novice. It
was like throwing yourself off a cliff and building your wings on the
way down. I hope that I
now have wings. I hope,
if I did it again, I would be a little smarter.
If you are really creating something new, it's inevitable that
you are going to wonder sometimes if you are crazy.
The Web helped on that front.
We marched on the Web like crusaders behind the Cross.
It was our holy symbol. It
was magical. Still, I
remember sitting there at midnight with those credit cards covering
the bed, side to side like a quilt, my wife watching Jay Leno and
wondering if we were going bankrupt.
Sitting there flipping them over, one by one, looking for a
little more credit to squeeze out and realizing that not only had you
spent everything you ever had, you have mortgaged your future forever,
too. You are flipping
them and it's like the old “she loves me, she loves me not.” It’s exactly as I say in the book: “I'm crazy, I'm
brilliant, I'm crazy. We'll
make it. I'm crazy.”
There are moments when you really don't know. Maybe that's a sign that you are doing something new¾I
hope it's a sign you are doing something new, anyway.
I would do it again, but I would do it a heck of a lot smarter.
I hope I would do it a heck of a lot faster, and I wish us all
luck every time we try. Thank
you very much.
It's now my great pleasure to bring up Mario Morino, a person
who needs no introduction. We
always say that, but then we always do the introduction anyway.
An entrepreneur, philanthropist, Cleveland fan¾whatever
the team is, it doesn't matter¾and
of course our spiritual leader, Mario Morino.