Be careful what you accept

It was January of 2000, and I was the CEO of an Internet start-up company struggling to raise money in Huntsville, Alabama. We were part of a high-tech business incubator in the community, with access to angel investors and lots of free advice.

This day, we watched live coverage of the merger of AOL with Time Warner, in what was to become the poster child of the bursting bubble that, of course, we hoped would just keep on going. I remember a few things about that day. As a guy running a Web business back then, I was always stunned when businesses that were losing money were rewarded. I just couldn’t do the math, and that included incredible valuations for companies, including AOL. Here was Time Warner, a prosperous film and entertainment empire with a valuation of $120 billion merging with AOL with a valuation north of $160 billion. How could AOL, in just a few short years, be worth more than Time-Warner, I wondered.

I also remember very clearly this statement by then Time Warner CEO Gerald Levin: “The market valuations in the Internet space I accept, because I think something profound is going on in this century.”

Later that week, we had a guy from a venture capital company come to the incubator to answer questions of the various tenants. I asked if he’d seen the press conference announcing the merger. When he said yes, I repeated that statement by Levin and asked him to explain what it meant. The guy said something about the old world giving way to the new, and I just drifted off. One week prior to our first offering, the bubble burst and with it went our hopes of ever getting an outrageous valuation.

I would think that of all the things Mr. Levin ever regretted in his life, it was that one statement of acceptance. Blue smoke and mirrors; that’s what it was. Levin wasn’t alone, however. Greed has a way of blinding even the sharpest of eyes.

The rest, as they say, is history, and I wish the new AOL well. I only hope they don’t destroy the anti-portal strategy of their MediaGlow unit has built in attempts to resuscitate the AOL brand, which in the opinion of this observer, is f‑a-i‑l spelled sideways.

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