Financial Times Europe - 19.10.2019 - 20.10.2019

Saturday 19 October/ Sunday 20 October 2019

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I

twastwodecadesago,butIremem-

ber exactly where I was when I got

the call. At the time, I was a mid-

level magazine journalist, working

in a dark, low-ceilinged office in

midtown New York, spending hours

upon hours rewriting prose sent in by

correspondents from abroad. It was

there, in my tiny office strewn with

empty coffee cups, that I picked up the

phonetoaheadhunterwhotoldmethat

a group of London investors were keen

to have me join them to build “scale”

and “synergy” in the burgeoning Euro-

peaninternetmarket.

I was breathless with excitement. In

the late 1990s, pretty much anyone

under 40 with loads of ambition wanted

to be in the dotcom “space”. The com-

pany I was being wooed by was a high-

tech incubator called Antfactory, a

start-up venture group comprising

former investment bankers and emerg-

ing market investors, looking to scout —

wait for it — “pan-European b-to-c

media deals”. In English, that meant

internet media businesses that would

produce content for consumers across

thecontinent.

In retrospect, the fact that a bunch of

rich guys with very little operational

experience were willing to hire a jour-

nalist who had never worked in either

technology or finance as a partner in

their firm, and give her a six-figure sal-

ary and thousands of stock options, was

clearly the sign of a market top. It didn’t

feel like it then, though. This was my

opportunity to jump on the first dotcom

bandwagon.Andreader—Idid.

I’ve thought about this period in my

life a lot in recent years, as the technol-

ogy sector has risen to ever frothier

heights. A record amount of money has

been poured into the sector over the

pastdecade.Theadventofhugeventure

funds such as Japan’s SoftBankhas

added fuel to themarket.(SoftBank

helped push up the value of WeWork,

which ultimately pulled its IPO.) Shares

in once-touted unicorns such as Uber

and Lyft have been falling. And yet,

the money keeps flowing. One of the

Valley’s oldest and most respected

funds, Bessemer, recently announced a

new bucket of money to invest in later-

stage start-ups that want to stay private

longer,presumably to avoid the fate of

WeWork. All this sounds very familiar

tome.

Attheturnofthemillennium,thetech

frenzy was still new. Internet usage asw

becoming the norm as connectivity

improved. eopleP were actually excited

to use a Yahoo mail address. Amazon

wasn’t scary but cool, so much so that

Jeff Bezos was named Time’s 1999 “Per-

son of the Year”. It was the same year

that Americans’ online Christmas shop-

pingdoubled.

The tech market was different back

then — frothy, yes, but also fresh. In ret-

rospect, though, it also had much of the

hype that I have felt in the technology

sector over the past couple of years.

Then, as now, all asset classes had

boomed in sync,fuelled byderegula-

tion, loosemonetary policyand too

much debt. Tax relief had thrown kero-

sene on a hot market — one of the trig-

gers forthe dotcom bubble 1.0 was the

Taxpayer Relief Act of 1997, which low-

ered the top marginal capital gains tax

rate in the US from 28 per cent to 20 per

cent, and in turn made more people

more interested in becoming specula-

tive investors. Just like the 2017 Trump

tax cuts, which mainly benefited large

corporations,theyaidedanassetbubble

butnotmuchelse;andthelion’sshareof

the benefits went to a handful of firms

andpeople.

Then, as now, too few people were

thinking about experience, or long-

term value, or even profits. They were

looking for highly mobile young tech

enthusiasts who could, as Uber co-

founderTravisKalanickwouldlaterput

it, “always be hustling”. Antfactory’s

Panglossian goal was to become the

Idealab of Europe; a place where start-

ups would be not only funded but also

created and shaped.In those very far-

away-seeming days of “Cool Britannia”,

it somehow managed to persuade a

range of companiesincluding Citigroup

to give them $120mto invest in Euro-

peandotcomstart-ups.

They found me because I had just

written a cover story for Newsweek on

Europe’s internet boom. “Europe’s Got

NetFever,”screamedtheheadline.“The

Symptoms Are Clear — Hot New Com-

panies, Job Offers Featuring Ferraris

and a Certain Swagger as Bright Young

Businessfolk Stake Their Claims in

Cyberspace.” Yes, it’s abit embarrassing

to write these words now. If I had

thought much about it, I’dhave realised

I was coming in as the roller-coaster was

shifting into freefall. The covers of

American news magazines have been

proven to be a reliable counter-indica-

torofwhat’shappeninginthemarkets.

The slide began a little over a year

after that cover. But there was still

plenty of time to spin a story of building

“scale” and “synergy” in the as-yet frag-

mented European internet market.

Unlike the US, which already had a base

of 121m users who spoke the same lan-

guage and wanted to buy more and

more of the same stuff online, Europe

wasacollectionofcountries,eachwitha

unique culture and individual internet

markets; the euro had only just been

introduced.But optimism was the com-

monlanguage.

Antfactory, its founders touted, as

they collected cheques from established

investors in the City, would sit in the

centre of it, leveraging these wonderful

new economies of scale. It would find

the best European dotcoms — in travel,

in music, in finance, in health — and

mash them together, boosting their glo-

bal presence and stock valuations.

Exchanges from London to Frankfurt to

Paris would compete to take these new

companies public. Riches would be had

by all. After all, why have six different

travel-booking sites (serving France,

Italy, Spain, and so on) when you could

haveone?

From where I sat, in my dingy Man-

hattan office, this was an appealing

proposition. In the US, he migrationt

from print publications to online was

under way. At Newsweek, we were

partner and scout deals at the height of

the dotcom boom was exciting. The

stock options might actually be worth

something. In a worst-case scenario, I

told myself, I would go back tojournal-

ism knowing a lot more about the tech

industrythanIdidbeforeIworkedinit.

I moved to London in December 1998

and plunged into the dotcom scene,

where I soon encountered the European

equivalent of Laurel’s brainchild — a

networking salon–cum–headhunting

site called First Tuesday. It had been

founded in part by Nick Denton, a

former Financial Times journalist who

would eventually go on to start Gawker,

and a Silicon Valley transplant named

Julie Meyer. Both of them were more

businesspeople than technologists.The

DNA of the London start-up scene

reflectedtheDNAofthecityitself:itwas

aboutmoneyanddealmaking.

Of that, there was plenty. New jobs —

andnewcompanies—werebeingposted

on First Tuesday’s website every few

minutes. At networking events, Denton

and Meyer made it easy to see where the

money was — potential investors wore

red dots on their lapels; the “talent”

wore green. The reds, who were rarer

and inevitably more popular, would

often emerge exhausted afterfighting

off eager greens over cheap wine and

snacks. The group claimed that $100m

worth of deals had been cut in this man-

ner. I didn’t really believe them, but I

didn’tentirelynotbelievethem.

Either way, one thing was clear: there

was money to be made. It was the roar-

ing ’90s after all, in London as well as in

Silicon Valley. If the 1980s began the age

of greed, then the late 1990s cemented

it. It was the era of Bill Clinton and Tony

Blair,who continued much of the mar-

ket deregulation that had started under

Reagan and Thatcher. It was a period

whenthe notion of retiring comfortably

with a gold watch and a pension began

to slip away, replaced bysoccer moms

reading Money magazine and hoping to

become stockpicking millionaires over-

night. (My own mother, a first grade

teacher, was — incredibly — dabbling in

biotech stocks, an experiment which

shaved30percentoffherretirement.)

Antfactory was, essentially, doing the

same — dabbling in things nobody knew

enough about. But it wasclear to me

Continued on page 2

beginningtosuspectourworldwouldn’t

be the same for much longer. Free din-

ner was still served to editorial staff in

the wood-panelled penthouse that had

once been a conference room for Gen-

eral Motors. But the company had, to

the dismay of the old-timers, finally

started cutting back on the expense-

able (and often excessive) drinking on

the nights that we’d go to press. That,

too,wasthesignofamarketshift.

So were the fortunes of people like

Laurel Touby, one of the freelance writ-

ers for the last magazine I’d worked for,

Working Woman. Laurel had left jour-

nalism to start up a networking group

for creative typesin online media.I

remember once saying to her, “Laurel,

you should really give up journalism

and start a business.” She did,growing

her informal networking groupinto

mediabistro.com,which cornered the

market for media and PR job listings

and was later sold for $23m. She

promptly bought an apartment so stun-

ning it was featured in the New York

Times,andbecameastart-upinvestor.

The idea of trading in the punishing

demandsof reporting to partake of the

riches of the internet was certainlyon

my mind as I considered Antfactory’s

offer. I lovedbeing a journalist, but it

offered a predictable trajectory: write

more features, maybe become a senior

editor or a columnist, watch my salary

inchupbyapaltry2percenteveryyear.

Antfactory, on the other hand, offered

something new and inherently appeal-

ing to a business journalist: the chance

to get into the game, rather than just

write about it. I told the Ants that I’d

cometoLondontodiscusstheoffer.

The partners, as it turned out, didn’t

know much more about technology

than me. One had worked mostly in

entertainment and luxury brands. Two

others were London finance guys,

including one whose family was big in

Greek shipping.I was a good enough

reporter to appreciate the shortcomings

of the team.Still, the idea of being able

to waltz into a high-tech incubator as a

I joined a

tech start-up

in 1998.

What could

possibly go

wrong?

Rana Foroohar jumped on the first dotcom

bandwagon just as the wheels fell off. Two decades

on, she is beginning to have a feeling of déjà vu

From main:

Rana Foroohar

photographed

for the FT by

Amy Lombard;

investors and

entrepreneurs

meet at a 2000

First Tuesday

event in Paris;

Yahoo staff at a

meeting in

1998 —Getty Images;

Zuma/Avalon

The partners, as it

turned out, didn’t know

much more about

technology than me

TheBookerbrouhaha lus interview with co-winner Bernardine EvaristoP — PAGES 2 & 11

OCTOBER 19 2019 Section:Weekend Time: 10/201918/ - 13:20 User: andrew.higton Page Name:WIN1 , Part,Page,Edition:WIN , 1, 1