The Launching Fad

A next-generation start-up plays the fortune game

 PLANT LIFE I

It's under the whiteboard and the 'To Do' list thumbtacked to the wall ('Find Attorney,' 'Create a Record of Action'). From the corner where it sits, it doesn't get any light, save the stray radiance of monitors. Who knows if it gets watered—it seems to be growing out of stones and desiccated sponge, anyway. It's ignored, except when it needs to be moved out of the way, to make room for the next sawhorse, the next pine door laid flat.

And yet, this tall potted plant—one of several in the office—is the deepest, healthiest green you've ever seen. The foliage seems to be springing off the stem. If you take a moment to really look at it, it's startling just how alive it is, given the circumstances—like it's hydrating from hope itself and feeding off an interior sun.

photo: Michael Sofronski

THE WEB YOU WANT

Back in early September, William O'Shea sent out an e-mail to friends. The 23-year-old assistant editor was looking for a slogan for a new company. At that moment, from his desk at a small e-zine in Soho, O'Shea was chief executive of an idea. In 1985, 26-year-old Steve Case was the executive of an idea called America Online, and last week his idea absorbed a giant chunk of American media for $165 billion.

O'Shea's idea is RedFilter.com, a "personalization and randomization service for 18-to-26-year-olds" (along the way, it will broaden to 16-to-30 and then scale back to 17-to-29). "Personalization" is one of those ideas that is, as they say, very 1998. "Randomization" goes back all the way to 1995. In Internet years, these are concepts so old that they almost hearken back to that era of "bank tellers." But that's not a problem. eTour.com, a similar company, raised $10 million last year. (Put into perspective, $10 million is just about 395 times more than O'Shea was making.)

RedFilter is founded on the premise that people get bored online. There's just too much out there for search engines to do any good. Plus, if you're in that 18-to-26-year-old window, you're kinda into randomness anyway. So you go to RedFilter and fill out a questionnaire about your interests—say, sports and movies. Then, every time you get online, RedFilter brings you a new site as your home page, selected by a team of editors. "It's like turning on the TV and getting a new channel brought to you, based on what we already know that you'll like," O'Shea says.

Before he had financing, an office, or employees—but long after he had interns—O'Shea needed a catchphrase for the company. He provided some options: "undercover surf junkies," "the web you want," "express your web," "illuminating the net," "where you didn't know you wanted to go." Hours later, he sent out another e-mail with eight more to choose from. And a week later, he sent out the invite to the launch party. In three more weeks he sent his resignation e-mail—O'Shea 1.0 was quitting his job so that O'Shea 2.0 could run a company.

DATE: FRIDAY
JAN 07 2000 13:37:14

O'Shea 2.0 oversees a boxy, two-room office in the financial district with a staff of six people, a handful of contractors, and about $200,000 of seed money from private investors. But after three months, RedFilter.com still doesn't quite exist. They need to hire programmers to create the technology they're promising—assuming they can find programmers in this insanely tight market. They've got to convince other sites to drive their audiences to RedFilter.com. They've got to expand their database of sites so that whole "personalization" angle will really be personal when they launch in March—just about the time their first round of financing will run out.

As start-ups go, RedFilter isn't a surefire juggernaut. These aren't Stanford MBAs or Microsoft alums. But if you wanted a picture of the dotcom industry at the turn of 2000, RedFilter is a paradigmatic case. The first generation of start-ups, the Netscapes and Yahoo!s, were born from the intersection of engineers and capital. The second generation, like digital advertising companies, rose from the juncture of marketers, media people, and capital. The third generation, the ones that will be born this year and beyond, are the protozoa of a pre-cambrian explosion of capital. The barriers to entry online have gotten so low they're practically a ditch. The start-up mojo may have reached saturation point, but William O'Shea and his three RedFilter partners—all 25 and under and not an MBA among them—feel that the fever pitch has never been hotter. (New York City itself announced a venture capital fund of $25 million in September, earmarked predominantly for start-ups.)

The prestige venture capital firms—like the one Steve Case's brother Daniel Case runs, Hambrecht & Quist—fund only a few of every hundred business plans they see. These venture capitalists are the benchmarks of good companies. But only a fraction of those companies go public. That means that you will never hear of most of the Internet start-ups out there. The vast majority will linger on the fringes of a new media made mostly of fringes, living off wealthy, small investors, hoping to stay afloat until they can be acquired—the so-called "exit strategy." RedFilter's ambition is to eventually sell for $50 million.

"Starting a company was the farthest thing from my mind when I came to New York," says O'Shea 2.0 over coffee at a nearby Starbucks (which serves as the company conference room). RedFilter was, in the parlance of RedFilter, where O'Shea didn't know he wanted to go. But now, he says, "There is no other place I think I'd rather be."

SYMBOLIC TIME

O'Shea sidles up to Stephen Weiss, RedFilter's "editorial director" ever since he handed out all of his first business cards, which said "managing editor." Weiss is a great employee in that he's constantly stoked to be working. He schemes business partnerships, works on the map of the site, writes press releases. "I eat three meals a day at my desk," he says. "It's awesome."

"Okay. Do we want to start this meeting now?" O'Shea asks.

This is the inquisitive management style in action. As a style of authority, it works quite well for him and for the scores of other Internet execs who use it as their dominant mode. This really hasn't changed since 1995: Management rules are as remote as day care to a 23-year-old Net CEO. And, since nobody really knows what they're doing, it's best to listen first, and let consensus rule. The hierarchy is so flat at RedFilter it looks concave.

O'Shea announces that he has called a staff meeting because, he says, "I feel like we're spending huge amounts of time here and its becoming too much like home." O'Shea has been working 10 a.m. to midnight. "I want to find out if you guys feel that way or are you all pretty content?" Only in an Internet start-up would you encounter a boss asking his employees if they want to work less.

"Are you saying we should cut back the hours?" asks Debbie Zambetti, the managing editor and, at 27, the eldest employee.

O'Shea pauses. "Well . . . yes. I think if we're working fewer hours, we'd get a lot more done." This will later be called his "Get-A-Life Dictate."

Michael Keating pipes up. An ex-intern, NOLS alum, and the spunky "director of business development," Keating is that rare being at RedFilter in that he somehow manages to have a girlfriend. "I feel like a lot of our time is symbolic time," he says. "I think we need to get over the cliché that the more hours that you're here, the more you're doing for the company."

The problem is that to restrict symbolic time is to exile members from a belief system, the mythology of how a Net start-up is. In the minds of those knee-deep in milk crates and makeshift workstations, working anywhere else—or at least in any traditional career—isn't attractive because it's not devotional. This is why the atmosphere at places like RedFilter is almost cultish, where three meals a day can be eaten at the same desk and that can be considered "awesome." Where proselytizing is part of your job description. Where Weiss can actually feel "uncomfortable" that his boss is asking him to work less. "I can't tell you how nice it's been for me to have my own schedule," Weiss says. "At my old job, if you came in at 9:40 instead of 9:30, everybody was a dick to you. That was your punishment."

O'Shea closes the meeting by asking that every employee take lunch and dinner out of the office, and that they regularize their schedules to 10 a.m. to 9 p.m.

The following day, at 10 p.m., O'Shea, Keating, Weiss, and Zambetti are still at the office. Why get a life when your future is right there in front of you?

NETWORKING

Spy Bar is crowded. It's an open-bar party for UBO.net, the yet-to-launch Urban Box Office Network. Though O'Shea would rather spend his Friday night "lying in bed in a dark room listening to Enya," he and the RedFilter office have dropped by—their first party of the evening.

Because RedFilter doesn't plan on spending any money on advertising, networking is an essential part of the business. Weiss loves it. "I think for the first time in my life I'm learning how to be friendly and meet people," he says. "Suddenly, I'm passionate."

O'Shea encounters a woman at the bar, who refuses to talk about her own company. It's not clear whether it's top secret or whether she doesn't quite understand what the company does. O'Shea takes his drink back to the dance floor, where the other RedFilter folks are waiting. They dance in a tight circle in the crush; they stick close to each other.

PETOCTOPUS.COM

The first generation of start-ups had the luxury of choosing strange names back when there were only a handful you had to remember. The second generation effectively registered the dictionary. The third gen realize they're screwed when it comes to a name. So you make one up, like flooz or Abuzz. Or you start compounding.

"Instead of going out for lunch, I would be at Register.com," says O'Shea. He and 24-year-old Nitin Kumar, RedFilter's VP of business strategy, came up with a list: bigtarget.com, petocto-pus.com, ideogram.com. Filter was a good word, they decided, but already taken. They tried fruits and vegetables, then colors. The word Rhino seemed promising—whiterhino, electricrhino, petrhino, redrhino, robotrhino—but then Keating came up with "RedFilter." "Eventually you give up," says O'Shea. "You just say, 'Pick something and get on with it.' "

INVESTOR RELATIONS

In the bathroom, a lawyer from a nearby office approached O'Shea. "I see all the computer boxes. It seems like you're doing well," he said. "Do you need a patent lawyer?" Another offered to write the business plan.

One friend of RedFilter—and these days friends seem to be coming out of the urinals—brought around a seventysomething financier we'll call Oscar. Oscar had experience taking companies public—in fact, he had one poised to IPO any day—and was interested in having RedFilter in his offices for a longer conversation.

O'Shea decided to take him up on the offer, accompanied by Weiss and RedFilter's 24-year-old Russian CFO, Ilya Gertsberg. Gertsberg, who works full-time at a major investment bank in mergers and acquisitions, drew up the company's seven-page executive summary. "Ilya is sick with finance," Weiss says.

Gertsberg would later describe this meeting with Oscar as "their first take-over offer." Oscar didn't want to sign the nondisclosure agreement about RedFilter's technology, so they spoke in broad strokes. Oscar also didn't want to speak in broad strokes, so he cut to the chase. He told them not to talk to any more investors; he'd give them $500,000 right then. Oscar proposed that RedFilter go public immediately—without even knowing just what the company did.

RedFilter walked. "We have $500,000 available to us whenever we need it" from one of the company's first "angel" investors, says O'Shea. Angels are wealthy entrepreneurs, some having gone the start-up route themselves, who can take a company from five-or six-digit financing to seven or eight digits. RedFilter's big supporter is a dentist who got in on 1-800-DENTIST, and now he wants to "get an eye on a start-up company," says O'Shea. "He doesn't really care whether we succeed or fail. He's interested in the dynamic."

PLANT LIFE II

"I think that they are trying to start a business and they are interested in making some money. Listen, I spent a lot of time on the Web over Christmas and I didn't do very well. I tried to buy something and I couldn't check out. It was pretty frustrating. I tell William and he just chuckles." —Gwen O'Shea, William's mother, on what RedFilter does

"He was always very tenacious. I think that was his teacher's description of him in kindergarten. In high school, he was the editor of the opinion journal. There was a lot of responsibility there." —Bill O'Shea, his father, on William's previous management experience

"We started out at 24 years old with our own business, a retail floral shop, and it's something that we've always done. It's lasted us 30 years and been very good to us. Bill is only 23, so he has a jump on us there." —Gwen

"I love the office. I love seeing young people striving and looking for something good to come out of it. We brought in a big snake plant and a Draceana—we wanted some plants for the low light, ones that were capable of withstanding office situations where you have a dry, central heating situation. We tried to pick the hardy plants." —Bill

"I hope the plants are still alive." —Gwen

"You know, by the way, we have our own Web site, flowers-gifts.com." —Bill

RECORD OF ACTION

The RedFilter team hops the J train and heads up to Tonic, where they're meeting with Gary Hustwit, who runs Incommunicado, the bookstore in the front of the club. Hustwit has a new Internet venture, a site for spoken word readings and "books on tape" in the MP3 format, called MP3Lit.com. RedFilter is looking for a site "partner," which is basically their way of getting in the door.

Weiss set up the meeting with a cold call. "The real reason behind the visit is so that when we go in to pitch VCs, we can show a record of action: that we've written 5000 site reviews, developed this technology, and got the following partners," he says. As it stands, they have about 3000 sites in the database, no technology yet, and two partners. Just what exactly the partners are for is not yet clear.

Hustwit takes them downstairs. The meeting begins inside a giant wine cask bathed in red light, like a fashionably retrofitted Disneyland teacup. What becomes immediately apparent is that this is less of a business meeting than the consultation of an oracle. Hustwit has a fully functional site. Hustwit turned a wine cask into a little cave of style. Hustwit is talking about bringing in an outside CEO because VCs are looking for a CEO "who is not just the founder." O'Shea nods along. At some point, the words "30 percent of a 30 billion dollar company" are spoken. The two companies decide not to decide anything, but to "let the conversation continue."

As they leave, Hustwit tells them, "I think RedFilter is a great idea. You guys are not going to have any trouble getting a lot of money." This is coming from a guy who is a maestro of hip—he launched an alternative press, a bookstore, and now a new company—and he's telling them they have a great idea? Can he possibly know how much that means to this company, the consequences of a compliment?

EXIT STRATEGY

Weiss is a poet. When he gets home at midnight, he writes. He's been working on a project about the Internet industry. He quotes some lines: "Our best men in incubators / curled beside their computers / sleeping / going into meetings / shaking the bony hands of strangers. . . . "

Recently, he's been reading a lot of F. Scott Fitzgerald. "It's sick how similar it is to now," Weiss says. "There's this incredibly sad story called 'My Lost City.' Fitzgerald comes back in 1932 from being an expat. He left at the height of the boom. He comes back and there are breadlines. So he climbs to the top of the Empire State Building and looks at the whole city. And realizes that once you look at the city from above like that, you realize it's not a world of endless, expanding possibilities. It's all actually very limited and trapped on this one tiny island."

Weiss knows he probably won't be in the industry forever. He says "money makes people unhappy." But then again, he wants to "make a lot of money so that I can buy a cabin and write." To work in new media is to embrace that cognitive dissonance: The Internet is a cramped, irrelevant island of speculation, the Internet will make even a cabin in the woods possible. His plan is to stay with RedFilter until it "gets huge." Maybe start a party scene for CEOs and VCs to "wheel and deal inside wine casks."

Then what? You can feel the rays of his secret sun, ascending. "I'll probably start my own company and sell that in two years," he says. "It would be a $500 million dollar company." A dream 10 times the dream of RedFilter. Today it's this idea—but relaunch your browser, and tomorrow it's another. How long will it be before we all have one?

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