Tuesday October 10 10:28 AM EDT

Silicon Valley: Let Him Without Sin Cast the First Stone

There's plenty of blame to go around as the Web economy melts like an ice-cream cone in the sun.

By Adam Lashinsky

Silicon Valley Columnist

Nothing -- and no one -- is sacred anymore.

That's not to suggest that it's time for finger-pointing, although that delightful pastime is already in full swing. Instead, it's a sober reminder. Even as companies, sectors and whole business philosophies collapse around us, few are blameless and it can only get worse.

Consider the dialogue Friday morning in RealMoney.com's Columnist Conversation with two (apparently former) card-carrying Internet true believers, Herb Greenberg and James J. Cramer , talking about how nothing works on the Web. It's understandable why my two friends feel that way. They've invested real time and money in this medium.

And they're peeved.

Or take the fate of Kibu.com , a Web site in Silicon Valley devoted to providing content for teenage girls. Kibu had some of the best names in the Valley on its side, including Dave Roux of buyout firm Silver Lake Partners , Tom Jermoluk, one-time CEO of AtHome and now a partner at Kleiner Perkins Caufield & Byers , Netscape founder Jim Clark and Allen & Co. , known as the savviest of media banking advisers. The teenage demographic worked so well for Kibu that it has decided to shut down and give back what is left of the $22 million Kleiner and others invested in late February.

Guy Kawasaki, the CEO of Garage.com -- which most definitely is not going public any time soon, despite having filed IPO documents with the Securities and Exchange Commission in February -- shakes his head over such a young start-up giving up without a fight.

"You'd think entrepreneurs would want to tweak the business plan, find a way to redeploy the capital," Kawasaki says over breakfast at the downmarket diner where he and I meet from time to time on the outskirts of Silicon Valley.

Ah, but that's the difference between entrepreneurs and investors. Investors decide when enough is enough, and they don't care in October that, as Kibu bragged in a February press release, according to Teen Research Unlimited , the "teen consumer products market" would be $153 billion in 2000.

Kawasaki, by the way, notes that attendance is slackening at his firm's popular start-up "boot camp" seminars. That's not surprising, but it is germane. According to Garage.com's latest securities filing in June, the conferences accounted for about the same amount of revenue -- $1.1 million -- in the first quarter as the firm's putative business, placement fees for arranging financing for new companies.

Too much ink (and bytes) already have been spilled on priceline.com's (PCLN:) WebHouse Club name-your-price groceries and gasoline business (I never got excited about priceline because I never used it, so that saved me from ever writing exuberantly about it). But the most telling comment on the subject came from priceline founder Jay Walker, who told The Wall Street Journal, "the capital markets just aren't going to let us finish what we started."

That is so true. Jim Cramer wants to know who knew what when. Guess what? Here's what Jay Walker knew last year: Until he heard otherwise, venture capitalists would give him and other entrepreneurs as much money as they wanted for as long as they wanted as long as they all told a good yarn. Well, Jay, you just heard otherwise.

Next is word in Friday's VentureWire that a San Francisco site called Great Entertaining , an "online marketplace for entertaining trends and ideas, quality products, services and party supplies," is booting 40 of its 60 employees. Why do we care? Several reasons. First, as the company's own breathless press material boasts, its backers are "prominent Silicon Valley venture capital firms," including Benchmark Capital and Technology Crossover Ventures . Reading further, I see that its board of advisers includes two of my pals, personal advisers and all-around great guys, Intuit Chairman Bill Campbell and Randy Komisar, who used to work for Campbell at Apple Computer and Go and now invests with him.

These guys are true business visionaries. Komisar literally wrote the book on start-ups, The Monk and the Riddle: The Education of a Silicon Valley Entrepreneur, a highly readable and entertaining yarn about a fictional would-be mogul. And having them around is about as good it gets for entrepreneurs who need advice. But their sage counsel didn't matter.

Oh, one more item of note about Great Entertaining, which otherwise will be yet another company nobody remembers by the middle of next year at the latest. According to VentureWire, it "severed [its] $10 million three-year partnership agreement with America Online (NYSE: AOL - news) for online and offline promotional cooperation, which was announced in September, 1999."

Remember a quarter or so ago when AOL, Yahoo! (Nasdaq: YHOO - news) and consultants like Scient (Nasdaq: SCNT - news) were bragging how the demise of the dot-coms would have only a marginal impact on their business?

Don't count on it. These little blow-ups are everywhere. Varsity Group (Nasdaq: VSTY - news) , which I pledged to myself never to mention again, quietly and tersely announced Sept. 29 that it has mutually agreed to close out its marketing relationship with AOL's ICQ unit. Varsity, which once wanted to be the Amazon.com of college textbooks, didn't remind investors of the size of that deal. It was for ! $9 million over three years, according to its securities filings.

To paraphrase a fellow Illinoisan, Everett McKinley Dirksen, $10 million here and $9 million there, and soon you're talking real money, even to AOL.

And so to repeat, nothing is sacred. And no one's touch is so golden to keep from being involved with debacles. Wish it weren't so. But it is.

Ending on an amusing note

Thanks to Don Snow , who picked up on my reminiscence about the days when we used to talk about the Red Hot stocks. "Yes, the days of Red Hots seem far, far away," writes Snow. "These days we are more in the galaxy of turkey dogs."

Ouch!

http://dailynews.yahoo.com/h/street/20001010/bs/let_him_without_sin_cast_the_first_stone_1.html

-- Carl Jenkins (Somewherepress@aol.com), October 10, 2000