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Risking it all for dot-com gold in
California Was it worth it? By KEVIN CROWLEY - Kitchener-Waterloo Record |
| In the cramped basement of an old home in Pittsburgh the war room is on
full alert. In one corner, a bleary-eyed programmer types steadily at a computer while another guy sketches software ideas on a whiteboard with the speed of a courtroom artist. Pizza boxes and coffee mugs crowd keyboards and laser printers. There's barely room for a desk and the ceiling's so low John Kominek and his pals keep bumping their heads. This is the office of Quack.com. It's not much, but it's all they can afford. The company is a classic high-tech startup, more cult than corporation. Employees work around the clock and crash upstairs when the need to sleep grows stronger than the coffee. It's been this way for weeks now, ever since Kominek received an offer he couldn't refuse. Two colleagues from his days at the University of Waterloo were recruiting the best programmers they could find to create cutting-edge voice technology for the Internet. When they approached Kominek in April 1999, the Waterloo native was leading the quiet life of a grad student at a Pittsburgh university. Now, a month later, he's leasing his home to Quack and helping to breathe life into an Internet pipedream. If it takes off, they'll be millionaires. If it crashes, they'll be broke and years behind in their research careers. To get out of Kominek's basement, they have to think big. Quack just got $2.5 million in financing and the pressure is on to move to California's Silicon Valley, the Hollywood of high technology. So Kominek has a decision to make. At 34, he's already explored more career paths than a guidance counsellor. Buying this house in Pittsburgh was supposed to be a way of committing himself to a PhD. Now he's being urged to leave it all behind. Is it worth it? There's only one way to find out. Kominek is going to California. *** This is Silicon Valley, the ultimate revenge of the nerds and the new home of Quack.com. It's a land of sunshine and startups, a giant computer lab growing amid palm trees and redwoods. It's also the red-hot centre of the high-tech boom, a crucible where the best engineers and programmers come to prove themselves and stake a claim in the gold fields of the new economy. This is where Kominek and the Quack crew have come to make their fortunes -- or lose their life savings. Nestled between the blue waters of San Francisco Bay and the arid heights of the Santa Cruz Mountains, Silicon Valley is a 50-kilometre stretch of sun-drenched suburbia that runs from San Francisco to San Jose. There was a time when it was called the Valley of Heart's Delight and the gentle hills were lush with plum, apricot and olive orchards. But the fruit trees gave way to semiconductor labs in the 1950s and '60s. By 1971, silicon -- the substance at the heart of the computer chip -- was synonymous with the region. Today, Silicon Valley is a land of opportunity where all comers are welcome but only the most driven succeed. It's a surreal but exciting place where secretaries drive Porsches and co-op students have six-figure stock portfolios. There are nudists on the nightshift, scooters in the office and camp cots in the cafeteria. Everything moves at Internet speed, with business plans hatched at breakfast, funded over lunch and killed by dinner. The demand for high-tech help is insatiable. A young programmer can earn $90,000 US to start and the average employee is lured to a new job every 18 months. A talented computer whiz can hold out for a BMW signing bonus and no self-respecting high-tech worker pays his or her own health-care premiums. But if the opportunities are huge, so are the problems. The highways are clogged with traffic, work is a 24-hour lifestyle and an average home costs more than $600,000 US. Few workers outside the high-tech bubble, from cops to teachers, can afford to live here any more. Despite this crisis of success, Silicon Valley is still the place to be for ambitious young techno-wizards from around the world. Kominek and his friends are in their element. *** Mountain View is one of a dozen communities forming the long, suburban strip that is Silicon Valley. The Quack caravan rolls into town late in the summer of 1999, a rag-tag parade of several cars, a pickup truck and a U-haul trailer. Like most newcomers, Kominek and his colleagues stare in awe at the high-tech legends that line the streets -- names like Intel, Apple, Cisco Systems and Silicon Graphics. The big outfits occupy sprawling campuses of identical buildings that go on for blocks. Quack settles for a few cubicles in a startup centre, sharing an address and washrooms with dozens of other fledgling businesses. The weather is glorious in northern California. But the gentle climate and stunning landscape are lost on the Quack team. They're back working 16-hour days, seven days a week. It will be more than a year before Kominek dips his toes in the Pacific Ocean. He and the team hunker down to refine their product, a voice portal that lets users access the Internet by speaking over the telephone. They also get a crash course in how business is done in the Valley: Landlords demand stock options; banks deal only with the most promising startups; and newcomers need a friendly insider to get the attention of big-name investors. Above all, they learn time is money. The startup's tiny pool of seed capital shrinks by the day. Competitors surface and the company is in a flat-out race to perfect its technology. While Kominek and the programmers chain themselves to their terminals, Quack's founders pound the streets to rustle up more cash. They get help from two of their initial investors, who quit their jobs and join Quack full time. They also open a small research office back in Waterloo to attract talented UW students and to keep up the momentum. Still, the team lives in a pressure cooker. "It's like being thrown into an arena and being told to survive," Kominek says. The Quack crew slaves away, hoping to strike it rich in this modern California gold rush. They know other Canadians have made it, guys like Jim Mitchell. Once, Mitchell rode a startup rollercoaster like Kominek and the others. Now, he's a Lion of Silicon Valley and one of the success stories they hope to become. *** The Bay Area traffic is bumper-to-bumper and the chief of the research labs at Sun Microsystems is running late. Jim Mitchell races into the Hayward Executive Airport at the wheel of his silver BMW, squealing the tires and slamming to a halt like a teenager with his first car. He pulls on a leather flight jacket, adjusts his sunglasses and strides across the runway to his latest toy -- a $4-million Pilatus turbo-prop. The nine-seat, Swiss-built aircraft is the larger of Mitchell's two planes, a gift to himself for the pile of stock he's earned as a superstar at Sun. The 57-year-old computer guru uses the Pilatus to fly his family to their second home in Lake Tahoe and to a third one they're building in Colorado. A couple times a year he even makes the seven-and-half-hour trip back to his hometown of Cambridge, Ont. Flying is a passion for Mitchell. When he wants a real thrill, he takes the controls of a rented MiG fighter jet, paying $1,200 for the chance to soar above the stress of the high-tech rat race. Life is good. But it hasn't always been easy. The eldest of seven kids born to a Cambridge mechanic and his wife, Mitchell paid his own way through St. Jerome's high school in Kitchener. Like Kominek, he attended the University of Waterloo before going on to Pittsburgh for a PhD at Carnegie Mellon University. And like Kominek, he took a big risk coming to Silicon Valley. Back in 1970, Mitchell was a young research scientist with a student debt and a pregnant wife. He could have taken a secure job at a university, but he chose to join a group of bright young computer scientists at a promising startup. The day he arrived he learned the company was nearly broke. His colleagues suggested he look for another job. Six months later Mitchell joined Xerox's Palo Alto Research Centre, a freewheeling experiment in high-tech research that would go on to earn legendary status in the computer world. Since then, he hasn't looked back. Over the past 30 years, Mitchell has had a hand in such landmark technology as the personal computer, the Ethernet networking system and the Java programming language. Now people call him a "Lion of Silicon Valley." The head of NASA invites him to space-shuttle launches; admirals seek his company at San Francisco's elite Bohemian Club; and universities honour him with fellowships and awards. Mitchell set out to change the world but he never expected the riches and pop-cult status he and his colleagues enjoy. "Some guys are treated like rock stars," he says. "You just don't expect that in our industry because we're nerds, right?" *** Matt Armstrong, who works with Kominek at Quack, has a thing or two to say about nerds. As a math whiz, he's been among them all his life. But as a jock who played varsity football for the UW Warriors, he'd rather hang out at a sports bar than an online-gaming convention. Which poses a problem in Silicon Valley. Despite its reputation for red-hot technology, the nightlife is lukewarm at best. "I call it Death Valley," says the 27-year-old Armstrong, who hits the gym or the nightclubs whenever he can manage a few hours away from Quack. He's already swapped his valley hotel room for a renovated loft in the trendy SoMa district of San Francisco. So what if he and a roommate pay $3,000 US a month in rent? They live in one of the most beautiful and vibrant cities in the world. Besides, San Francisco has a lot more women than Silicon Valley, where the guy-to-girl ratio is six-to-one. That might sound good for single women, but observers of the local dating scene have another view. "The odds are good, but the goods are odd," quips Sandy Ward, a colourful Cape Bretoner who would rather play hockey than debate Star Trek trivia after a long day of programming. In fact, Silicon Valley is famous for its eccentrics -- even in a state known for its free spirits. There's the guy who delivers pizza to the Quack office and throws in a savvy critique of the company's 1-800 test portal. Or the programmers who live in a communal retreat they call Geekhaus and spend their free time squirrel hunting and flying home-built aircraft. The Valley's also a place where a guy like Rob Chaplinsky can roll the dice and hit the high-tech jackpot. Ten years ago, armed with an engineering degree from the University of Waterloo, Chaplinsky came to the Valley to make his fortune. He worked at Intel Corp. for a few years, travelled east to earn an MBA from Harvard University, then returned to Silicon Valley. Now, at 34, Chaplinsky is a venture capitalist with a 6,500-square-foot home in wine country, a second house in Lake Tahoe, three BMWs in his garage and two more on order. "The opportunities here are a thousand fold what they are in Canada," says Chaplinsky. "Where else can you ski in the morning and shoot nine holes of golf in the afternoon?" If it's exhilarating, Silicon Valley is also demanding. Todd Wagner's head has been spinning ever since he arrived for a co-op term at Quack. But he's adapting fast. At 21, the Kitchener native no longer marvels at tales of high-tech stars like Yahoo's David Filo, who slept in his computer cubicle even when he was worth $500 million. "I read that and thought, 'Like, get a life,' " says Wagner, who speaks with the laid-back air of a California surfer. "But there I was a few months later sleeping in my cube." He wasn't the only one. *** By Christmas 1999, John Kominek has picked up a nickname. His pals are calling him Crazy John, or CJ for short. It's a playful poke at Kominek's habit of working through the night. The hothouse environment suits him. The camaraderie, the high stakes and the thrill of trying to make it in Silicon Valley are intoxicating. But the pressure is intense. Quack raises more money, hires more people and moves into its own office. New investors and growing momentum breed higher expectations. The team redoubles its efforts. Rumours spread of a big deal brewing with Internet titan Lycos Inc. But at this point, Kominek and his colleagues can only dream of the wealth that might bring. When Wagner dreams, it's of the vintage Lamborghini sports car he's been telling his folks about since he was 10. Is this his chance to buy it? He's been playing the stock market for three years. Now, half way through his work term, he begs Quack's founders to let him invest his life savings in the company. They balk. Quack has lots of potential but it's still a huge gamble. They don't want to see a student lose all his money. But Wagner insists. He's a talented programmer who's mature for his age and just as committed as the full-timers. The Quack board relents. Wagner has become one of them. If they go broke, they'll go broke together. Trouble is, things change at warp speed in Silicon Valley. The dot-com juggernaut begins to lose steam. A stock-market correction spooks investors and weaker startups are more vulnerable than a duck on the first day of hunting season. But Quack hangs in. In May 2000, it signs its first big deal -- an agreement to create a voice portal for Lycos. By July, the deal is dead. Rumours fly. Quack's technology is solid, so what went wrong? There's no time for post mortems. As fast as the Lycos deal vanishes, a new one appears. America Online Inc., the giant Internet service provider, wants Quack to develop its voice portal. For the first time, however, Quack's founders can't tell their employees the whole story. AOL wants more than a portal -- it wants to buy Quack. The Quack board does some serious soul-searching. Selling the company would make them all rich. But it would also mean giving up control of the very thing they've lived and breathed for 16 months. The decision comes down to this: Money and the chance to see their technology used by millions of people. AOL has a deal. On Aug. 31, a year to the day they arrived in Silicon Valley, Kominek and his friends become millionaires -- at least on paper. Market observers peg the deal at about $265 million Cdn. The payoff is delayed by a government review of AOL's merger with Time Warner but no one at Quack is worried. The lion's share of the selling price goes to the venture capitalists and founders. But everyone does well. At 21, Todd Wagner has enough to buy his $90,000 vintage Lamborghini. John Kominek, now 35, expects to reap between $2 million and $3 million. That's enough, he jokes, to retire his aging bicycle and buy an automobile. Yet he can't help feeling a sense of loss. Kominek plans to stay on at Quack. But like a soldier home from war, he'll miss the adrenaline rush and camaraderie of the startup life, if only for a while. "This is an experience I would never have wanted to miss," he says. "But I wouldn't want to go through it again." CANADIANS IN CALIFORNIA There are about 300,000 Canadians in the San Francisco Bay area of California, according to the Canadian consulate in San Jose. The University of Waterloo has addresses for 500 math, computer science and engineering grads living in California. But UW's alumni office believes there are at least twice that number in Silicon Valley alone. A social club called the Digital Moose Lounge was launched a year ago for Canadians in Silicon Valley. Membership has soared to 800 from 40 in the last 12 months. |