Where did the digital chickenfeed go?

In December 1999 I had lunch with a friend of mine at his New York club.  Very posh.  My friend was an older gentleman who many years ago (“after The War”) had taken a division of a public data company private with other members of the senior management team in a leveraged buyout.  Paid off the debt, ran it as a private company for a while, then took that company public and ran that for 15 years or so.  He grew the company by acquisitions and pretty much always hit his numbers.  That company was acquired by a public company and then that company was acquired.   He kept his gig all the way through and also his personal Goldman Sachs account.  Then he retired.  A man who earned all of the many nickels he ever made.

He asked me, what is going on out there?  “Out there” meant Silicon Valley.  You know, the Center of the Universe.  How was it all these Internet companies are going public.  Are they really public companies?

Being a public company meant something to him, you see.  It wasn’t just another way to raise money or cash out.  It was a responsibility to stockholders and ultimately to the public.

I told him that if these Internet companies had the right VCs, all they needed was to get big fast and have a minimum of four quarters of top line revenue.

He stopped eating his lobster salad for an almost imperceptible moment during which his eyes burned into me.

Long pause.

“Four quarters.”

“Yes.”

Another long pause.

“Of top line revenue.”

“Yes. But at a minimum.”

Longer pause.  Puts down his silverware and takes a sip of his ice tea.

Looks at me again.

“You’re sure.”

“Yes.”

Sits back in his chair.  Taps his fingers on the table for a moment.

“Sell it.”

“Why?”

“Sell all of it.”

And that was the end of the discussion.

And I did.  And four months later, boy was I glad I did.  Except for the Amazon, I wish I’d held onto that one.

Just remember—it’s digital chickenfeed.  That’s not a public company.

Repeat after me:  They are not geniuses.  Digital chickenfeed turns into digital chicken poop.