BURN RATE: How I Survived the Gold Rush Years on the Internet

Review by Molly Hill

Burn Rate, written by Michael Wolff in 1998, gives an insightful and very witty account

of Mr. Wolff’s adventure as an Internet entrepreneur. Mr. Wolff started Wolff New Media LLC in 1990, with three employees. Originally designed to develop ideas for books, magazines, and television, in 1994 the company extended its business to incorporate the Internet. As Mr. Wolff writes, immediately upon the company’s entree onto the Internet, “revenues and personnel expanded almost twenty fold.” Investors’ obsession with the Internet gold rush made this possible.

During the summer of 1999, I worked for an internet start-up in the music e-tailing

industry, EZCD.com, as a project consultant. EZCD.com sold custom compilations of new, unsigned artists over the web. My job that summer was to develop financial projections and prepare a business plan for new opportunities in the music e-tailing industry (largely digital downloads and web casting). In addition, I was responsible for writing and producing EZCD’s marketing presentation to potential investors, with the primary focus on their current business—custom compilations.

Reading Mr. Wolff’s account of his experience – scrambling to pitch investors –

reminded me of my experience with EZCD. EZCD’s burn rate meant we needed a significant influx of cash, fast. Like Mr. Wolff, we faced two competitors: time and other industry players. That summer of 1999, five companies involved in the very recently defined “music e-tailing” industry went public. We couldn’t get to investors fast enough. And in our haste and need for cash, the focus became reaching those investors, not building the business. Ultimately, substance counted for nothing. Appearance – and timing – accounted for everything. And I thought this was the case just for EZCD.

As Mr. Wolff wrote in his book, “they [investors] wanted to see something…

I knew that I was going to get rich. I was not sure, though, what I was going to get rich for… would I get rich for being a charlatan?” When CMP wanted to buy “the relevant assets,” Wolff New Media was hard pressed to define what exactly those assets were. Yet despite a lack of real assets, CMP invested, the first time.

By the time EZCD was prepared for a second round, all of the major players had

invested in at least one music company, and the hunger for music “plays” had vanished. Someone had decided – music was no longer hot. Whether or not EZCD had a sound business model, or relevant assets, no longer mattered. Just as when Mr. Wolff returned to CMP for additional funds, whether or not his company had relevant assets no longer mattered. As Mr. Wolff writes in the conclusion of his book, “a strangely level playing field. The Wild West.”

This summer, after several months of no cash salaries, EZCD closed shop.