Moral of the story: When you get a phone call from someone you don't know, working for a company you've never heard of, saying they want to buy your company, be very very careful.
Insisting on an all-cash deal doesn't avoid the fact that you've wasted a lot of time if the deal falls through -- and I'm guessing that swindlers like this have an even higher than normal deal-falling-through rate.
You phoned 20 companies and said that you wanted to buy them. You promised them ten million dollars which you didn't have. You promised them ten million dollars worth of stock which you knew was worthless (while telling them that it would be worth a hundred million dollars).
You lied, many times over. Maybe to you that's just "being a good salesman"; but to me, that's simply unacceptable.
Not a lie. He actually did buy the company which responded.
True, but he didn't want to buy 20 companies. Do you think it's reasonable for a man to ask 20 women to marry him, based on the premise of "19 of them will probably say no"?
For more than it received from the former bidder.
Only if you accept his completely fictitious stock valuation.
Most of the purchases are made without the hard cash in the bank.
Sure, but I'd hope there's usually a fairly clear path to obtaining the cash -- clearer than turning around and selling (part of) the company you just bought.
> True, but he didn't want to buy 20 companies. Do you think it's reasonable for a man to ask 20 women to marry him, based on the premise of "19 of them will probably say no"?
Oh, come on. Do you think its reasonable to try to buy a car at 20 different dealers, even if you only want one of them?
If I wanted to buy a car, I might go to 20 different dealers and say "I want to buy a car and I'm considering car X", but I wouldn't phone up 20 dealers and say "I want to buy car X" for 20 different values of X.
>> Sure, but I'd hope there's usually a fairly clear path to obtaining the cash -- clearer than turning around and selling (part of) the company you just bought.
Mezzanine financing? Interest rates suck for that stuff though. In the world of M&As, I don't think stuff like this is uncommon, given what I hear from my finance friends.
In Canada it's commonplace for people to go to a bank and get pre-approved for a mortgage before they go house-hunting, so that they know how much they can afford to spend.
Well, in hindsight Arafat got screwed but clearly it wasn't the author's intent to do so; he wanted to get rich by taking funding and later selling the company, not by stealing money from the investors.
Interesting that Aether gets mentioned in this article. They raised about $2B in a stock offering at the height of the late 90's bubble and by buying and selling companies they parlayed that into about $100M a few years later. If it were in a movie you would think it was un-believable but in 2004 the still CEO decided to invest the money he had left in leveraged mortgaged backed securities:
> traveling for business almost never generates more revenues
This is not true at all. If you are selling expensive software to enterprises (or organizations of any kind), the only effective way to do it is to travel to their office and give an in person demo.
At least the author acknowledges he didn't deserve to make any money. If he had deployed his deal making skills for a company that actually created value, he would have ended up making a ton of money. This assumes it wasn't just the dot com euphoria driving the deals of course.
There were companies going public then with zero dollars in revenues that were now worth over a hundred trillion dollars.
and
Jerry Levin might very well have been at the table next to us buying AOL right in front of our eyes.
Make me cringe.
Am I being an idiot to assume that anyone with this kind of success (sure, this story didn't end well for him, but still extremely successful in his attempts to bring in money) ought to be able to write it up in such a way that it doesn't read like a schoolboy's work of fiction?
I should mention two things:
A) every ounce of the story is true. If you read through my blog you'll see there is no fiction. Many people sometimes question the stories but, for better or for worse, I tend to throw myself into various situations.
B) if you have any questions on my bio, feel free to ask me. Or, I would also advise, checking out the rest of jamesaltucher.com for the answers.
There was no exaggeration at all. If anything, I left a lot out (the trip to CMGI's conference is worth an article all by itself). Plus I left out that RIMM invested and several other well-known funds.
Unless there were companies I was unaware of that were worth more than 200 times today's most valuable companies (for example the #1 publicly traded company, Exxon Mobil, which is worth ~$370b or 270 times less that your "hundred trillion dollars", then that was definitively exaggeration.
Yes, that wasn't a key fact in the story, but it does mean you can't claim that "there was no exaggeration at all."
The fact that it was written for humour not to mislead doesn't change the fact that it was exaggeration, and for sure I don't think anyone reading it thought you were genuinely trying to mislead people into thinking that companies were actually worth that much. But... it still invalidates the idea of there being no exaggeration ;)
"...if you have to raise thirty million to start your business, its probably not a good business (at least for me)."
I've lost count of the number of articles I've read saying "Startup XYZ Inc just raised $X million!" and a dearth of the "Startup ABC Inc made $X million profit on revenues of $Y million" kind.
It's refreshing to see an article on HN that points out the obvious: if you have such a good business, why doesn't it make any money?
Articles do not get written unless the company pushes for it. They need the publicity when they raise the money, not when they are making money. Its quite simple, really.
Thats totally it. "raising money" is a marketing event for many companies. And then the list of investors put you on a status hierarchy so that you become first in line when Google goes shopping. Or so the CEOs think. I'm almost embarassed when any company I invest in announces their funding. Thats not the real world. The real world is buying something low and sell high. I learned this many times over, some times the hard way.
As I was reading this I kept trying to think of why I knew the name Vaultus, it was so familiar. And then it hit me. They made the first iphone app for one of our clients, they use some sort of proprietary java system that compiles to iphone blackberry and android and it's TERRIBLE, which is why we came in to build the second version natively. So reading how thrown together their company is explains a lot about how thrown together their software is.
Is it just me or does this article have a pretentious tone to it? Also if you follow the line of thinking in the last paragraph to it's logical conclusion then a lot of people were "screwed" out of their millions of dollars.
I felt the same way, but I interpreted it as the writer's subtle mockery of his earlier "hotshot" self. Towards the end he notes that he made no money off the deal, and that he deserved to make none.
Holy shit, thanks to cturner who posted this. This is going to be the best new blog I find in 2011. This guy is not only a very talented writer and storyteller, he also has a shit ton of stories to tell. Dynamite combination.
I think any industry that can show the kind of returns this industry does - "Two Guys in a Garage" Become "$200Bn Market Cap" in about a decade - is going to inspire mania. It's not necessarily a broken model - all farmville jokes aside, I'd wager the overall value of the enormous amount of social well-being that's been spawned by even the few companies that have made it out of the valley far exceeds the money lost to the busts - but the whole place is leverage incarnate.
Yeah, I'm not saying it as judgmentally, just that it is what it is. It's similar to Hollywood, in a sense - an industry where a product can earn you a lot of money or nothing at all, and it's hard to predict which is which.
In general-audience journalism, $2M or $2m is a lot more common, I believe, though $2mm / $2MM is also used, but less frequently. In finance-industry news it seems to be the opposite.
If you are ordering a manufactured good, however, 2M definitely means 2000. There was some hilarity in ordering the first round of MakerBeam parts arising from this; we thought we were going to be getting 2 meter long beams, for a panicked minute.
It might be interesting to you - I played with the representation of that when I posted, but couldn't find anything that was both brief and which looked satisfying so I settled on the same as the original article.
American Psycho but with lighter humor. There's definitely some similarities. I'd love to read a book lightly based on the author and his adventures during the bubble.
