Mark Garside

Review

Burn Rate

Obviously, Burn Rate is a book about the Internet, but to me it was much more. I found the compelling story of Burn Rate to be the quest to capitalize on the potential of the Internet, before that potential could ever be realized. We’ve all heard the stories of the Internet billionaires who experienced successful IPOs, but you rarely hear about the entrepreneurs who started a Net company and struggled or did not succeed at all. Wolff gives us a glimpse of that story.

The two parallel issues that were particularly interesting centered on (1) the issue of what would actually succeed as a profitable enterprise on the Internet and (2) how to finance the idea. In the early days of the Internet (and even today), it was completely unknown what business models would succeed on the Internet. When Wolff was launching his business, it was revolutionary to propose that content be a driver of profits on the Internet. Like in other businesses, once Wolff’s friend succeeded with Wired, people searched to marry content to ISPs, and that search provided real drama. I found the cat and mouse game between Magellan and Wolff New Media captivating as Wolff tried to pitch the idea, and Magellan searched for the missing element to compete with Yahoo! and Excite. It seemed to me that both parties were grasping at straws, hoping that they could create something with promise, but not knowing for sure if such a venture would have a chance. In the end, I found it telling that Wolff realized that while content might be “king” only the right content would work, since “people don’t read on the Internet”. The Internet, still in its infancy, provided a constant learning experience for those seeking riches and business sustainability.

The second compelling storyline concerned the endless search for financing for the Internet start-ups. What I found particularly interesting was the contrast of the atmosphere 3 years ago to what I saw this past summer, when I worked for Lehman Brothers as an investment banking summer associate in their Technology Group. In the book, Wolff described a financial community, including Lehman, that would do almost anything and promise almost any valuation to a company in order to secure the mandate to lead manage their IPO. My experience this summer was much different. The market correction of the early Spring had forced banks (and VCs) to reassess the valuations of Internet and other technology companies. Lehman became very selective. During the summer, Lehman launched and priced several technology IPOs, but only one was truly an Internet company, and that company had experienced the worst post-IPO performance of any of their lead managed IPOs. That was similar to other banks on the Street. The market correction seems to have changed the madness that was prevalent during Wolff’s financing search. It will interesting to see if the newly discovered caution persists.