Shannon Henry's The Download Live
Discussion about the Washington Region's Technology Industry
Thursday, May 3, 2001; Noon to 1 p.m. EDT
Hello, and welcome to the Download Live with Shannon Henry, the "On Sabbatical" version. I'm on book leave now writing about Washington's technology culture. If I meet all my deadlines, the book will be published somewhere around 2002 by Simon & Schuster/Free Press. But I'm taking a lunch break live every first Thursday of the month to chat about technology in the region.
Check out the Download Live every month to talk about what's up on the local technology scene. Anybody getting funded? What new technologies are you seeing? Feel free to gripe and/or gush about whatever you're thinking at this very moment!
Shannon Henry has been covering the local technology scene since 1995,
documenting the success and failures of local tech companies, and the
culture and ideas of local business personalities. She began as the telecommunications and Internet reporter for Washington
Technology, which was later acquired by The Washington Post Co. Under
the Posts umbrella, Henry became founding editor of TechCapital
magazine, which focused on tech business and finance. Two years ago, Henry shifted gears to write the weekly Download column and other stories about the region. Her work is featured regularly at Washtech.com, The Washington Post site dedicated to covering the region's burgeoning technology sector.
The edited transcript follows.
Editor's Note: Washingtonpost.com moderators retain editorial control
over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.
Hi everyone. Thanks for joining me today. I've been talking to many people these days about the "shakeout" and what it means to the region. I think we've seen the end of a chapter in Washington's economical history and it remains to be seen how the region will recover. One of the things I think could really harm the area is that those companies that were most successful in the tech boom have been sold-AOL, Proxicom, Network Solutions, et al.- and now have headquarters outside Washington. On a postive note, there is a more entrepreneurial culture here that encourages young people to think creatively about business, and I don't think that will entirely slip away. So....what's on your minds?
As many of the once heavily funded metro area dot-coms are now closing their doors, how have the smaller consulting firms been affected?
Is there light at the end of the tunnel for local David's who are starting to see their respective Goliaths' fall?
Shannon Henry: There's a stunning ripple effect going on that we have only just begun to see. I just talked with a small company who put its faith in a tech partner to run a huge project for them. When the tech company went bust, it almost put the little company out of business. I am seeing some of the little guys be smart and realistic about not even trying to get venture capital, but just trying to get customers and revenues. Sounds boring, but it works.
VC is down, tech firms are dying (PSINet) or leaving town (AOL)... is this the end of an era for the Washington tech world?
Shannon Henry: I really do see it this way, as I mentioned in my opening, not particularly in a "it's all gone to hell let's get out of town" way but as the end of a period of time in Washington. It was one economic cycle, it was a great ride for many people, and I think it has changed the area forever. Now on to the next stage...what will that be like? Would love to hear your thoughts.
We locals like to proclaim Washington as the 2nd biggest technology sector in the country. But a recent PPI study says we rank 6th. What gives?
Shannon Henry: Some of these studies can be misleading. As reporters, we have to explain how the study was done, methodology, etc. If you're reading reports, look at the fine print. One explanation for divergent regional studies is that different researchers define our area differently. Washington the city, or Washington, along with N. Va. and Suburban Md.? Boston or Boston plus suburbs?
Silver Spring, MD:
I miss reading your column! How is your book coming along?
Shannon Henry: Hey, thanks. There are lots of good stories these days I miss covering, too! Book is coming along, but it's a huge challenge....
Shannon, you wrote a few months back about a big venture philanthropy initiative. My question is: With the downturn in techs, is there a flight from philanthropy by the tech types?
Shannon Henry: Good point. With the downturn in tech, look at everything the tech rich was spending money on, from charity to ski homes, and you'll see money is being spent at different levels. The project I wrote about, Venture Philanthropy Partners, may have similar problems as VC firms themselves in getting investments. There's just less money to go around. When you promise stock to a philanthropic organization, and your stock goes from 50 to 3, the cause is clearly getting less than it expected.
Is this an end of an era? Maybe so, but get the sense that there is so much vibrancy out in the Maryland biotech hub and the N.Va. tech scene that the next economic cycle will look much like the first. It's not hard to imagine some of the small tech firms in our area growing massively big into the new AOLs...
Shannon Henry: There's the entrepreneurial spirit....It's possible certainly that the next cycle will continue the first. There are more experienced, serial entrepreneurs. There is VC money out there, and VCs are still looking for deals. Would be great for the region's economy. This stuff is hard to predict, like the dominance of AOL. We should be looking for clues...
Falls Church, VA:
Every day I hear of new layoffs, and the companies cutting workers are almost never doing it the right way. Why do tech companies seem to be incapable of treating employees with a basic amount of respect when booting them out the door?
Shannon Henry: I wonder that too. From a reporter's perspective, I've been surprised at how many nasty whistleblowing e-mails from former or soon-to-be-former employees I've been getting over the past few months. These are great for us because they give insight into the company....but some are on corporate e-mail. And the sheer vitriol expressed really shows how the atmosphere in the region has shifted. One explanation, though it doesn't make it better, is that many of these execs have never done this (run a company, run out of money, had to do layoffs, the whole gamut ) before. They have no idea how to fire people humanely. I would think there'd be a good market for consultants on the subject these days.
Venture capital investments have returned to 1999 levels, with most of that money now going to fund existing operations. Any hope for start-ups or tips on where to look for funding?
Shannon Henry: First, ask why you need venture funding. Many companies, especially those with capital-intensive plans, certainly do. And they could use some of the VC advice along the way. But...can you make a product or develop a service and find customers? And make revenues? Maybe you don't need to sell a chunk of your company to a VC right now. Look for advisers you trust. The start-ups getting funded these days mostly have an experienced managment team, a patented or patentable technology and customers.
Do you think PSINet going under and Teligent at risk of being delisted affected the general morale of the local tech industry?
Shannon Henry: Yes, certainly. Especially PSINet. It shows that the Internet age adages of being first and growing fast aren't the only factors to consider. PSINet singelhandedly shows how the rules changed in tech. That freaks people out.
Shannon, to answer your question, I think the next wave holds a lot of promise and peril for the region. If big companies keep merging and moving out, the talented labor pool will move elsewhere. Meanwhile, the '90s created a lot of great ideas, but consolidation is needed to clean up the field and make sense of it. What if that consolidation punishes our region.
The gov't IT contractors will always be an anchor to our region, but I'm concerned that the ongoing downturn will send the private-sector techs elsewhere and the energy and dynamism that we saw in the 90s will taper away.
Just some ramblings. Thanks for indulging them.
Shannon Henry: Sure, interesting thoughts.
We still keep seeing layoff stories, and help wanted sections are shrinking. Is anyone hiring?
Shannon Henry: Companies are still hiring, but slower. It used to be that execs would hire every good person they could find and figure out a job for them later. That's not happening anymore and there are just less jobs. It's better out there for techies than sales people from what I'm seeing.
The demises of Saylor, Shrader, Mandl, etc. make me think: It seems our once-famous businesses that have bellied-up were good only as long the personalities driving them fooled Wall Street. Is Washington's tech sector just a celebrity-driven economy?
Shannon Henry: The higher the profile, the harder the fall. These are particularly colorful people, but their companies are also interesting. It's often easier (for the media, for Wall Street, for investors) to associate a company with a person. Sometimes, that backfires. But personality at the top also has great influence throughout the company.
What do you think about the big Proxicom-Compaq deal?
Shannon Henry: I was surprised it was Compaq, not surprised about the deal. Proxicom is a great example of a company that hit it big at the right moment and sold at well, not exactly the right moment, but probably just in time.
I have been reading positive things about the biotech industry lately. However, I have not noticed a major increase in funding of these companies in the area. Are you finding the same thing, or am I totally off base?
Shannon Henry: I'm hearing that many of the VCs are starting to look at biotech more closely. From a regional perspective, this is good for Washington. It may also spur the growth of bioinformatics, a combination of bio and computer tech that's a nascent industry in Washington. It's different than Internet--slower to get returns--but hey, VCs are looking for the next thing....
Shannon, you're busy writing this book about the guys who planted the tech seeds in the Washington area. How did they do it then, and what have we inherited from them that will make this region continue to succeed as a tech capital?
Shannon Henry: This is exactly what I spend my days thinking about! It's a combination of personal luck, unusual ambition, and this particular period in time. They leave spirit and money, in quantities and style that may never be seen again.
First, good luck with the book, although we'll miss your regular pieces in the Post. You've covered the local "tech scene" for a while; in your opinion, who are the three most enduringly influential individuals in the DC-area high-tech sector?
Shannon Henry: Hey, thanks. I'll be back soon. I only get to pick three? Well....Mario Morino, Steve Case, Mark Warner. But that's today.....
I disagree with the earlier chatter who thinks that tech companies will move away from DC. The metro D.C. area has an awful lot of Internet infrastructure, which makes it a great place to headquarter tech companies. D.C. is still really affordable when you compare it to other infrastructure-heavy areas like the Bay area.
Shannon Henry: Yes, the infrastructure is here, and I believe here to stay. But you have to look at how things are shifting and not remain complancent.
Ok! I'm off to have lunch with the Washtech team to hear about their time in the trenches these days. Thanks, keep the ideas coming, and maybe we'll all be able to make sense of what's coming next. Bye...
Shannon Henry: I'll be back the first Thursday of next month. See you then...
That was our last question today. Thanks to everyone who joined the
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