Outside on the pretty tile plaza of The Anderson School, the wind is blowing furiously. Tablecloths are flying, umbrellas are tipping and a light but insistent rain is starting to fall. It’s the second day of the 18th annual Graduate Business Conference, and some 200 of the nation’s best business students are about to partake of a Mexican buffet after a stimulating morning of panels about the Internet.
This year’s April conference is aptly titled “The Net Effect.” And Anderson students have spent months corralling speakers and lining up sponsors such as Sun Microsystems and industry stars such as Chris Alden, the 30-year-old wunderkind of Red Herring. After today’s panels, there’s a dinner at the famed beachfront seafood dive Gladstone’s and, for the truly ambitious, a gathering later at the hip Santa Monica night club Lush, with ’80s freak icon Boy George serving as DJ. Tomorrow night there’s an awards dinner on the lot at Sony. Indeed, Anderson’s can-do M.B.A.s seem to have anticipated every detail except the weather. “I was wearing shorts yesterday!” shouts one Anderson student above the wind.
The squall out on the patio isn’t the only storm that’s brewing. Even as the dot-com wannabes and budding venture capitalists load up on tacos and enchiladas, the Nasdaq and Dow are falling like a truckload of PCs. When the numbers are tallied, it will be the single worst drop in recent history, with much of the blame placed squarely on the overvalued Internet sector.
Yet inside the Anderson building, the mood couldn’t be sunnier. Armed with cell phones and laptops, the crowd of clean-cut mid-20-somethings exhibits a kind of irrepressible optimism. Superlatives abound, as in, “We have a FANTASTIC weekend lined up for you!”
Unless you’ve been locked in a bank vault the last three years, it’s hardly news that the Internet has utterly transformed the business landscape. And nowhere is that transformation more evident than at Anderson, one of the top entrepreneurial business schools in the nation. Lured by relative freedom and abundant wealth, Anderson graduates are flocking to dot-coms — the seesawing Nasdaq notwithstanding — reversing a trend of logging years in blue chip firms before acquiring executive privileges and perks.
“Since I started, there’s a total change in what’s going on,” says Diane Henry, a June graduate. “Consulting is down, investment banking is down. Now the question is whether you’re going to take a stake in companies. There’s so many choices now.”
“I think a third to a half of the class has changed jobs and gone dot-com,” says Elaine Hagan, associate director of the Harold Price Center for Entrepreneurial Studies. “There are some people from last year’s class who are on their third job.”
Asked to explain the phenomenon, Al Osborne, director of the Price Center, offers this sweeping view: “Today’s students are less comfortable with tradition and hierarchy and the acceptable order in terms of when you can be responsible and accountable. Students today don’t just want a job. They want their work to have a far bigger meaning than 8-to-5, a gold wristwatch and a nice pension when they retire. They want economic success today, but they also want a better world today.”
The e-commerce trend began surfacing at Anderson about three years ago. “The whole dot-com explosion happened in the first nine months of my first year,” recalls Seth Baum ’99, the 28-year-old marketing director of Petstore.com, the Emeryville, CA-based pet portal that doesn’t have the sock-puppet mascot. “There were a frenzy of companies springing up and people becoming multimillionaires. Disney was forming Go.com; Ebay had triumphed.”
Faculty have been scrambling to keep up with the dot-com phenomenon ever since. This February, for instance, Dean Bruce Willison announced the creation of a new research effort, called the Center for Management in the Information Economy, to deal with the galloping digital-technology sector.
Asked how the e-business craze has affected the curriculum, senior lecturer Alan Carsrud lets out a desperate laugh. “It’s called ‘mad-dash-rush,’” says Carsrud, who teaches several courses, including one on entrepreneurship and venture initiation. “I’ve always said business plans were never written in granite. Well, you’d better keep the damn computer on and the word processor moving because it’s a constant game.” Part of the problem is the rapid pace of high technology, some of which is so new that business literature on it doesn’t even exist. Carsrud, for instance, recently returned from Helsinki, where Anderson has a relationship with the Finnish National Technology Center. While there, he ran into a new digital phenomenon called m-commerce or “wapping,” where people surf the ’Net and buy products using their mobile phones. “Everybody in Helsinki ‘waps.’ We have a tendency around here to think we’re leading the charge. We ain’t leading the charge. I was in front of a group of my faculty talking about m-commerce. They said, ‘What’s that?’”
Business trends on the Internet are also changing so quickly that it’s almost impossible to keep pace. Only a year ago, business-to-consumer — or b-to-c companies were in vogue. After profits proved too shallow and investors became disgruntled, b-to-b (business-to-business) commerce took off. “That’s got six more months at best,” predicts Carsrud. “We’re now moving into really being crammed into wireless and wireless portals, and I give that, oh, maybe 18 months. If you are keeping tabs on this industry, it’s crazy.”
Dot-com fever has created another thorny dilemma for Anderson. Many students are not only working part-time for Internet firms in order to gain experience and make connections but, tempted by extraordinary opportunities, some are leaving school to launch or join Internet start-ups. This year’s graduating class, for instance, will be shy five M.B.A.s. “A batch of our graduates start these companies in their first and second years,” says Carsrud. “I had a student come to me a few days ago and say, ‘Alan, I am distraught. My board is demanding I quit school to concentrate on the business.’ He said, ‘Alan, if I don’t get this degree, what’s my back up? I’m taking classes that are helping this company. Help me convince the board.’ I had to walk them through things.”
While many faculty don’t especially like this development, they also aren’t sure what can be done about it. And some see nothing wrong in the trend. Osborne says that a student’s decision to leave school to pursue a promising business deal is no different than Tiger Woods leaving Stanford to launch his pro-golfing career. “If this whole world is opening up, and you have an opportunity, you ought to try it. I think people can be responsible for their choices. We admit bright people into higher education. Our challenge is to not screw them up.”
One of those bright people is David Williams. The 27-year-old reflects perfectly the new style of entrepreneurs being hatched by Anderson: Self-assured, outgoing, goal-driven — not to mention extremely savvy about high tech. “Business school is the greatest institution ever,” he says. “I’ve so enjoyed my business-school experience. It’s further solidified who I am. I’ve achieved every single goal I’ve set.”
On this cool spring afternoon in early May, Williams arrives for an interview at Anderson’s in-house café starved, having been too busy to eat. He orders a green salad and a baked potato, then apologizes for eating so fast. In addition to his studies, Williams is president of the Entrepreneur Association, the school’s largest student organization and, as such, he’s been consumed with last-minute details for “Digital Mania,” a conference the group is sponsoring this weekend featuring Razorfish head Richard Titus, among other heavyweights in digital media.
A hefty guy with a shaved head and a warm smile, Williams was raised in a Detroit suburb by middle-class parents, who were civil rights activists. “They always said, ‘Never let race be an excuse for not getting what you want.’ My parents have been my inspiration from the beginning.”
Williams knew by age 15 that he wanted to be his own boss. By the time he was 23, the Wharton School graduate had founded two successful companies — including one with his mother called Revisions Grants Services, which helps nonprofits obtain funding. More recently, Williams and two M.B.A./M.D. candidates put together a business plan for an Internet health-care venture called EasyDiabetes.com. The idea came from one of his partners, who is a diabetic, and the plan won this year’s Haas School of Business Social Venture competition, a $10,000 prize. They’re now looking for seed funding and hope to raise between $200,000 to $1 million. “We have 17 million Americans with diabetes,” says Williams, when asked why he thinks the company will be a success. “We know how much money they spend per year. We have to bring the audience online. The key difference in health care is we have a captive audience.”
Before coming to Anderson, Williams logged two years with Deloitte Consulting in Detroit. Although the firm offered him a $105,000 annual salary plus a $35,000 signing bonus, he turned them down to be CEO of EasyDiabetes.com — a firm that doesn’t yet exist. Given the recent plunge of the Nasdaq and the shaky performance of other online health-care sites like drkoop.com, isn’t that risky?
“What is more risky for me?” he asks. “Is it to go out and depend on myself, to use the talents and skills I have? Or is it a bigger risk to work for someone who is not as competent as I am? I’m still young. There’s always a job out there. I realized a while back this is what I wanted to do, so I’m not going to let the outside world tell me I can’t succeed.”
Yet Seth Baum, who’s witnessing the financial woes of several dot-coms firsthand, has a far more pessimistic view. “Almost anyone who’s joined a dot-com that’s gone public, their stock options are probably underwater right now,” he asserts. “It’s a whole different ball game than it was three to five months ago. If you’re in it for the money, you’re probably not making any, and you’re probably not a happy camper.”
When told that many Anderson graduates seem optimistic about Internet companies, the Nasdaq drop aside, Baum snaps, “If the second-year M.B.A. class is as smart as they should be, they’re not evaluating whether they should go to a dot-com. When they’re thinking about it, they’re factoring into the equation whether their stock options may turn out to be worthless, and that a good funding source coupled with what seems to be a decent management team isn’t a guarantee of success.”
Petstore.com is doing just fine, however, though Baum admits they did postpone their initial public offering when the market tumbled in April. Unlike its more famous but dogged rival, Pets.com, he claims the privately run pet portal has plenty of capital.
Baum joined Petstore.com 10 weeks before he graduated, when they gave him $75,000 in salary and 50,000 stock options, taking the offer higher than the $140,000 tendered by a consulting firm. “I loved pets,” he says. “There were dogs running around the office. It seemed like a cool thing. I was going to be director of marketing and do great commercials and advertising. It seemed fun and interesting, so why not?”
Diane Henry isn’t getting ready to do her own start-up, but she’s no slouch either. Earlier this year she ran the L.A. Marathon — in the rain — and in 1997 completed the New York Marathon. She just did a stint as editor of The Exchange, the school’s weekly newspaper, putting in 15 to 20 hours a week. In July, she’s planning to climb Mt. Kilimanjaro with some Anderson friends. She’s a pro at networking. For instance, one of her online buddies is Jimmy Carter (yes, that Jimmy Carter), whose books she helped promote during the four years she was a publicist at Random House.
The 28-year-old Harvard history grad is also working two days a week for one of the hottest Internet media companies to be launched since Oxygen.com — Spy magazine founder Kurt Andersen’s new site, Inside.com. Talk about enterprising! She didn’t know a single soul at the company. “This was total ‘right place, right time,’” grins Henry.
All along, Henry knew she wanted to work in entertainment. Last summer, she interned in business development at Paramount, but found the experience disappointing. “Not that I thought I was going to work with Al Pacino,” she offers. “But I had the problem that I came from an industry I loved.”
By December, Henry was getting anxious. Then, one day, the self-described media junkie was reading The New York Times when a story caught her eye. Kurt Andersen was starting a new online venture combining journalism, entertainment and publishing. “I love Kurt Andersen! I couldn’t believe that was all coming together,” she recalls. Henry blindly sent her résumé to CEO Deanna Brown. Three weeks later, Brown called, saying she was coming to L.A. and asking to meet her. Brown also needed someone to open Inside.com’s L.A. office. Would Henry be interested? Henry’s thought to herself: “This is a joke.” It wasn’t, of course. Inside.com debuted to major hoopla in early May, and Henry will work for them when she graduates. “I’m just finishing my agreement to work full-time. This is my ideal job.”
Although the dot-com craze has generated criticism for creating a class of self-centered young millionaires, the Anderson M.B.A.s entering the Internet world appear to be motivated less by crass materialism. Henry will make about $80,000 a year, plus stock options. While that’s hardly poverty wages, it also is well below the obscene amounts of cash some dot-com types are raking in.
“There’s definitely an emphasis on what makes you happy,” Henry says of her classmates. “I live with two Anderson students. Neither one of them have jobs. If you accept a job with these dot-coms, they want you to hit the ground running. Because of the economy and the amount of work that goes into the degree, it’s a great time to be graduating.”
Dot-com entrepreneurs may be running the world, but the world also is running them. Take Judy MacDonald M.B.A. ’88, the CEO of Kibu.com, the new digital hangout for teen girls that launched May 1 with $22 million in funding from venture capitalists like Netscape co-founder Jim Clark.
She is talking on her cell phone as she commutes from her San Francisco home to Kibu’s Redwood City headquarters. “Can you call me back in five to seven minutes?” asks the preternaturally calm 38-year-old executive. “I need to get gas.”
Back on the cell phone, MacDonald’s gotten gas and had the car washed. She’s also fielded another call, with an Anderson professor, as it turns out. “It’s a good thing I answered the phone,” she laughs. “That was Bill Cockrum. He always scared me because he was so intimidating. I just called him yesterday. We’re looking for a director of finance, so he was calling me about candidates.”
Now, still talking on her cell phone, MacDonald calls her assistant on her car phone. “Cynthia, it’s Judy. I’m trying to send a fax. Can you call me?” A few minutes later, the assistant has called, the fax has been sent. MacDonald, sounding somewhat mortified by all this high-tech activity, apologizes. “This is the first time I’ve ever used both at once,” she explains of the phones. “One came with the car.”
MacDonald reflects an alternate face of the Internet generation. Seasoned, more well-rounded. She’s worked for a large company but also has run her own business. For seven years, she was marketing manager for Hewlett-Packard’s multi-billion-dollar Deskjet Printer Division. After growing disenchanted with HP’s rigid corporate structure, she left to co-found, with another Anderson grad, PrintPaks, a company that produced multimedia craft kits for families. In January 1998, they sold the company to Mattel. Although the products were great, “We should have raised more money in the second round. We didn’t have enough money for marketing, so people hadn’t heard of us.”
Older and more experienced, she is notably more mellow and less calculating than her younger counterparts. And she’s openly critical of the lack of social consciousness the dot-com culture has bred. Her parents were both public school teachers, and her first job out of college was on the sales floor at Macy’s in downtown San Francisco.
Asked if she ever imagined being a CEO of a dot-com, she laughs and says no. The irony of where she is now doesn’t escape her in the least. “I’m not really an e-commerce person,” she says.
MacDonald applied to Anderson after her roommate brought an application home for her. When she started, in fall of 1986, it was a primitive world. “It was the ugly old building,” she says of the business school, “and the big things were investment banking and consulting. Obviously, nobody was doing any dot-coms.” Although the school did have a computer lab, “I don’t think people really used it.”
While current M.B.A.s seem to be as savvy about raising money as Donald Trump, MacDonald was admittedly green when she started PrintPaks. Thinking it was enough, she and her partner, an investment banker, launched the company with $100,000 of their own money. A month later, realizing they needed more, MacDonald called a member of HP’s board, who had offered to help and introduced her to his friend David Marquardt. “I hadn’t heard of David Marquardt,” says MacDonald with a laugh of the man who put together the financing for Microsoft. “We met with him, and he was so excited about it. Then, as soon as the word hit the street, I started getting all these calls from venture capitalists.”
By comparison, obtaining funding for Kibu.com was a cakewalk. It took MacDonald and her partners, Molly Lynch, a former executive at Excite@home.com, and Dave Roux, chairman of Silver Lake Partners, just four months to raise $22 million. Kleiner Perkins Caulfield & Byers, perhaps the top venture capital firm in Silicon Valley, kicked in a substantial amount, while Jim Clark and Tom Jermoluk, Lynch’s former boss at Excite, contributed more than 50 percent of the funding through their investment arm, the Helix Fund. They also had in their favor a powerhouse board, including ICM chairman Jeffrey Berg.
Although venture capitalists have grown stingier in the wake of this spring’s high-tech industry shakeout, MacDonald and her partners weren’t affected. “It was easy for a number of reasons,” she explains. “Last year was a good year to raise money — the fact that we had management with a track record, we had a very big market that clearly nobody had gotten attached to and the kind of people who were already behind it.”
Anderson M.B.A.s have actually done remarkably well in the volatile Internet sector. Stamps.com, the successful online stamp business, has become a school legend. Its three co-founders were Anderson students, one of whom got the idea for the company when he needed a stamp in the middle of the night and couldn’t find one.
Even though it was barely three years ago, “I don’t think people were really aware of what the Internet could do,” says Jeffrey Green M.B.A. ’97, one of the Stamps.com founders.
Green and his partners began working on Stamps.com early in their second year. Their professors were supportive, but they also doubted the students could pull it off. First off, they needed a government license, which wouldn’t be easy to obtain. Second, they were facing daunting competition from postal-meter giant Pitney Bowles. There was also the matter of their age. When Green and his friends began banging on the doors of venture capitalists, they were, well, kids.
“People were mostly respectful. Although they thought the idea was solid, a lot of people came back with different reasons they would pass. No one said, ‘You guys are too young,’ but I got the feeling that was probably the case a lot of the time. The worst thing would be investors saying, ‘That will never happen, this meeting is over,’ without really talking to us.”
It took them only nine months to raise $6 million from three Southern California venture-capital firms. Last June, the $600-million company went public, but Green and his partners left in December to launch another Internet start-up called Archive.com. This time, it took them just two months to get their first round of funding. “When you say you’re the founder of Stamps.com, they take your call, they lose their skepticism,” Green says.
As for where the Internet frenzy will take future Anderson M.B.A.s, you may as well glean the answer by reading Tarot cards. Al Osborne, who has run four public companies, seems to have the clearest view.
“When I talk about the Internet, I say, ‘This is a little like Columbus setting out to find the riches of the Orient and instead discovering the New World.’ The Internet is not just another challenge to sell stuff. It’s going to change how we live and work. We are stumbling across gold every time we click and go on cyberspace.
“We ain’t seen nothing yet,” he grins.
