A Mile Down (19 page)
I clung to this opportunity. This was before tech stocks crashed, and the opportunity looked very good, especially compared with anything else in my life. I put the plan together by the end of January, after about three weeks of working around the clock, and it was a good first stab. Rand's brother-in-law Tom was impressed. The total market was over $50 billion, the magic number, and the industry was fragmented, with tens of thousands of small businesses and great inefficiencies. It was a perfect example of a market in which a portal could gain dominance, both on the business-to-consumer and business-to-business sides. My plan was for an infomediary, a business that would consolidate information and facilitate transactions, trying to capture only a tiny percentage of a huge volume.
I worked long hours polishing this plan for presentation to investors. Timing was everything. If we were too late, we'd get nothing. And then, on February 8, 2000, the new issue of Boating Industry International featured an article on Internet portals for the boating industry. They had surveyed the field, doing exactly the research I had done, and much of my business plan was in that article. They confirmed that all of the current companies approaching the opportunity were falling short. But the article also listed some new sites that were about to go up, and one of these presented a problem. When I went to their site, which hadn't been up two weeks earlier, I read about their management team and funding. They were six months ahead of us, and that meant we were sunk.
I asked Tom about other options, about where I could go next, and he suggested approaching them for a partnership. Since the Internet game was a race, in which companies could not develop quickly enough no matter how fast they moved, we might take care of some aspect of the portal in cooperation with them.
So I called the CEO of this dot-com, and he was interested, but he was going to be out of the country for a few weeks. We would meet when he returned. This delay was not good, because Rand was going to throw in the towel, on my recommendation, and things were moving so fast in the industry that even three weeks later, our position was no longer quite as strong. So I kept the appointment but turned it into a job interview.
I was hired, and Nancy took a job at carclub.com, just a few blocks away along the waterfront in San Francisco. We were both happy defectors from teaching, working crazy hours but feeling like it was going to amount to something.
The bankruptcy went well, also. I filed, had my hearing, then needed to wait three months to find out if any of the creditors would file objections to the discharge. It didn't look like anyone was going to do that. My private lenders were remarkably gracious about the whole thing, telling me they had made the investment with their eyes open, knowing it was a risky business. Only Amber was nasty about it, which was ironic, since she was the only person other than me who could be considered responsible for the failure. She and Heather were trying to sue me through the Employment Development Department, and Nancy and I received a lot of e-mails and phone calls from Amber, but none of this had any effect.
At the bankruptcy hearing, I was questioned for about forty-five minutes, compared to the usual five, because my case was unusual and a bit complicated. But I had nothing to hide, and I even unintentionally entertained the crowd.
Oohs
and
aahs
as they heard about each new disaster in the business. The captain who had dumped
Grendel
near Guatemala, the rudder incident off Casablanca. It was certainly a story no one had heard before, and obviously I had done everything in my power to prevent the eventual failure. It still felt awful, though, to be in court skipping out on my debts. Bankruptcy may be legal, but it doesn't feel right. I was just hoping the dot-com would succeed and I'd be able to pay everyone back.
The dot-com did well at first. We received a much larger round of funding, and no one believed that the stock crash that began in April 2000 would continue for very long. Everyone expected recovery within a year or less, including the venture capitalists. In hindsight, this was silly, but it was what people in the dot-com world, including me, believed.
Our dot-com was more traditional than most, since our industryâboatingâwas conservative. We had older managers and dressed at least business-casual, and we didn't have a foosball table or any other games or wild parties. We just worked eighty-hour weeks and then hundred-hour weeks for five months straight to launch the site. And I found my way to advance within the company.
Though I was hired in business development, I became the “contract guy,” and everyone had me review legal agreements before negotiation or signing. I was interested in contracts because they revealed that business is based, finally, on nothing more than trust and hope, despite what we otherwise believe. What holds the business world together is a house of cards. We didn't have an in-house legal department, and I was one of only a few people in the sixty-five-person company who could read carefully. So I began reporting directly to every member of our executive management.
Near the end of the summer, I was promoted to work directly under the CFO. I would be responsible for all legal agreements for the company and its subsidiaries. I would call our several law firms when I had questions, but I would do as much of the work myself as possible, to minimize our legal fees, since by this time the company was trying to reduce expenses in a difficult market. My change in position was announced at a company-wide meeting after my work was praised, and I was happy until I found out they wanted me to take on these greater responsibilities without giving me anything in return. They weren't promoting me to director level, just changing my title to manager of contracts and business development, and they weren't offering more pay or more stock options.
The CFO was condescending to me. He was a good boss, generally, but now he told me I needed to walk before I learned to run. I hated the clichés of business. Thinking in business is extremely lazy. If I hadn't needed the job to repay my mother and Rand and all my other creditors, I would have given him an ultimatum, but instead I settled for additional stock options, which I knew would be worthless, and the promise that I would advance in rank and salary soon, most likely in a couple of months, after my formal review.
So I went to work even more determined to show I deserved to be raised up. I tackled a company we had acquired. Within three weeks, and after one visit up to their offices in Seattle, I showed they had more than five hundred clients not under contract, legal notices on their website that were meaningless since they had never incorporated and weren't a legal entity, and no protocols for who would review or execute contracts. They were also breaking the law every day by copying material from other websites and encouraging their clients to do the same. It was an intellectual property nightmare, and an extreme example of mismanagement and lack of due diligence. The general manager did not understand even the basics of business law. As I pointed out the problems to him, he had difficulty understanding, and he took no responsibility.
I reported back to the CFO and he said go get 'em. With help from our law firm, I rewrote all of the company's contracts and legal notices and instituted due diligence. I reviewed the original acquisition of the company and followed up on licensing and stock issues. By the time I was through, I had greatly reduced our liability and put through an enormous volume of legal work while at the same time reducing our monthly legal bills from $45,000 to $8,000. In my final report, though, our president asked that I soften my exposure of the general manager's culpability. I was basically forced to do this. Instead of telling me by e-mail, which was our usual way of operating in the company, he came down and sat with me personally. He made it clear that if I didn't soften my exposure of negligence, I might lose my job. I gathered that some of the lack of due diligence in the original acquisition of the company might have been his own fault.
So I had to change my report, and I moved on. In addition to my work with our subsidiary, I wrote every new contract the dot-com needed for various vendors, contractors, and employees. I reviewed, revised, and negotiated contracts that came in from our largest partners, from development contracts to eBay. I substituted for in-house legal, negotiating directly even with the infamous AOL. I also wrote, reviewed, and negotiated European contracts for our new European office.
At my review, I argued again that I should be promoted to the director level and given a raise. But the CFO kept putting me off. He did this by never getting around to finishing my review. These were hard times in the dot-com world, with stock prices falling ever lower, and he needed to bring in another round of funding. He was failing at this, and all of his other duties were being put on the back burner. The truth, though, is that he didn't stick up for me. I had a lot of inside information in that company, so I knew that a few other people were getting raises because their executives were putting in a pitch for them. At these same meetings, my boss was not putting in a pitch for me. Instead, he was just relying on me to cover more and more of his work as he focused on getting new investment.
In December, we had massive layoffs and I couldn't help but think that many good people were losing their jobs because of mismanagement by our executives. They had paid a ludicrous amount for our subsidiary, our chief strategy officer was a nincompoop who had spent hundreds of thousands on content we weren't even using, the general manager who should have been fired was promoted instead, and the company building our website was using kids straight out of college who billed us at more than $200 per hour. These were the excesses that brought dot-coms down. The CEO of Scient, the company building our website, was reportedly making $100 million a year. I hated seeing good people lose their jobs because of these excesses.
I kept my job because I was saving the company almost $40,000 a month in legal fees, plus doing much of the executive management team's work and running the Product Store, and I was being paid only a little more than $5,000 per month. Our CEO pretended he was in a similar situation, since he wasn't being paid a salary, but at the same time he was scooping up entire percentage points of stock in the company, two percent here, two percent there, striking deals influenced by his position as chairman of the board and by the fact that his wife was a partner in one of the two large venture capital firms that were funding us.
I grew to truly dislike our CEO. Usually, when things are going wrong for a large group, you can't point the finger at just a few people, but with our CEO, president, general manager, and chief strategy officer, it was not rocket science to figure out what went wrong.
The bankruptcy court had listed the boat in Spain for seven or eight months now, but it hadn't sold. This wasn't a surprise, really. I had told my lenders the boat would sell only if it was fixed up, with a fresh coat of varnish and a thorough cleaning, inside and out. No one buys a boat that hasn't been maintained. I had offered to do this work for free if they paid for flights and materials, but the lenders didn't want to spend more money. By now, the varnish would be gone, the wood warping, the galvanized rigging rusted, and there might even be corrosion inside the hull.
In mid-November, the bankruptcy trustee made a final offer to the secured creditors, an offer which was not at all in their best interests, since the role of any bankruptcy trustee is to protect unsecured creditors (those whose loans haven't been registered as liens against the vessel). The trustee also indicated that if the secured creditors did not agree to this plan, he might just close the case and abandon the asset back to me, the debtor. So my secured creditors asked the trustee to close the case as soon as possible. Once the boat was abandoned back to me, they would still have their liens, and the unsecured creditors would be gone.
I began work right away on a new deal with my secured creditors. In return for a much lower interest rate (the minimum federal applicable rate instead of fifteen percent) and much longer term (six years instead of three, with the first two years deferred), I would repay the full principle plus interest calculated at the new rate, and give charter time, and invest all of the money needed to put the boat back into service.
I tried not to rush into this. I tried to stop and think about what I was doing. I didn't have to go back into business, after all. I didn't want to wreck Nancy's life, either. But even when I would pause and try to think, it seemed that the decision had already been made. My mind would just stop, unable to go any farther. Perhaps this was the unconscious control my father's death still had over me. Or perhaps I would have been tied to the sea even without his death. But I also couldn't let my private lenders take a loss. And I wanted the boat and that life back again. That life, unlike this one at the dot-com, had been self-determined. It had meant something.
My plan was to charter in the Virgin Islands and nowhere else. Once I fixed up the boat and sailed across the Atlantic I would simplify and streamline the business. No more complicated licenses and permits in various countries, no office in California, no permanent employees, and no educational charters. I would charter only through brokers, who sell the boat for a week and do all of the sales and follow-up with their clients. For the first two years I would make no payments on the loans, and for the next four years I would be paying on only $185,000 in loans at the lowest legal interest rate, since Rand and Lee had agreed, in their characteristic generosity, to have their $250,000 loan paid after the other loans, beginning in six years and ending at ten years. It was a very attractive plan, a rare second chance.
The difficult part was coming up with $100,000 to put the boat back into service. I owed $20,000 to the marina in Spain and would need to pay for legal fees, a new insurance policy, a new paint job, new standing rigging, new varnish, equipment overhauls, a new dinghy and outboard, etc. It was a solid hull, made of the highest-grade steel and only two years old, but all the cosmetics would have to be redone. The dot-com had promised a bonus, and I needed to make sure I received it. I also needed to sell
Grendel
. Nancy and I began working on
Grendel
immediately, at the end of November, to have it ready for sale when the bankruptcy trustee officially closed my case. Nancy would also take out credit cards to help fund the new business.