FEBRUARY 2001

Andreas is, like me, a European internet entrepreneur who set up on the West Coast. He usually came to Eurotrash, a tongue-in-cheek event I help organise. Then he disappeared. The last I heard, he was hiking in Nepal: as he said in his

e-mail, one of the side benefits of going out of business. And I was just a little bit jealous.

The technology zone between San Francisco and San Jose has been through so many downturns that its inhabitants know nothing is as bad as it seems. For people like Andreas, a downturn means the first holiday in years. Every cloud has a silicon lining.

True, the Nasdaq fell more in 2000 than ever before. True, the market collapse has hit internet ventures with the force of what palaeontologists call an extinction-level event. But, unlike its emulators, Silicon Valley has been through the boom and bust (and boom) of several industries. The region has enough experience to know that creativity is often followed by destruction.

Sometimes the collective Silicon Valley spin on the technology recession goes too far. I laugh now when I hear yet another executive redefine his dot.com as a technology company, then proceed to laud the destruction of the dot.coms as a healthy catharsis. But there are some real positive effects of the technology correction that go beyond the industry’s spin campaign.

Less pressure. In 1999, success in the technology business meant beating your competitors to an initial public offering. This put a huge premium on speed. I remember being so impressed that Warren Adams, PlanetAll founder, had not taken a day off or watched a movie in the two years of the company’s existence. Now success again depends on winning customers and building revenues over several years. And executives are increasingly realising the need to pace themselves – saner hours and the odd holiday.

Real estate prices are returning to earth. San Francisco’s vacancy rate is finally starting to rise again. This is bad news for companies committed to high rents. But a faltering rental market is great for new start-ups looking for space. My company recently moved to new offices opposite San Francisco’s Pacific Stock Exchange. I wish we’d waited.

Better candidates. We are seeing a marked improvement in the quality of job applicants. Sure, there is a new hesitation about moving from established companies. But the internet stars of 1999 are closing or cutting back. And the talented people they had hired are coming back onto the market.

Attitude. I’ve written before about the reverse interview, in which the chief executive is grilled by a potential hire or vendor. Now some candidates deign to ask for the job, which seems curiously old-fashioned, but rather endearing too.

Networking. I should not say this, because I am a co-founder of First Tuesday and still a shareholder in the company that bought out the event. But I am all networked out, and so is much of the internet industry. Leading executives and venture capitalists rarely go to mass events any more. Networking is no longer a substitute for a social life. Most professionals, when talking shop, are boring. Internet people thought they were so fascinating as to be exempt from that rule. Now that they must engage with the rest of the world on more equal terms, there is a chance that they will make more rounded conversationalists.

Back to the roots. Mike Moritz is another Brit who headed out to Silicon Valley, but in the 1980s, when there was plenty of time to make billions. He rejoices that the tourists – the investment bankers and consultants who saw a quick buck in the internet – are scurrying back to their original professions. And the secondary technology centres, such as New York and Los Angeles, are fading away. That leaves Silicon Valley pre-eminent again.

Success counts for something. It was too easy in ’98 and ’99. A friend of mine set up a web-calendaring application, and sold it to Yahoo!. Bruce almost certainly cleared eight figures in cash. As clear a case of internet success as there is.

Except he never really built a business. Bruce’s programmers built a great product that made him rich. But he never won significant customers, or showed revenues, or built up a sales force. I respect his achievements less than I did. Bruce understood the potential of the web early on and he moved quickly. But he did not learn as much as those entrepreneurs sticking out the harsher environment of technology downturn. I am glad I am getting this experience.

So this may sound like a variant of Silicon Valley’s optimistic spin, but I’m enjoying myself more now than at any time since I founded First Tuesday and Moreover. Aside from lower real estate prices and other practical benefits of the downturn, there is another unexpected boon: success feels like it counts for more, less a matter of luck and timing, and more about skill.