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Venture Capitalism in the Dot Com Boom Years


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#1 Jason M. Kays

Jason M. Kays

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Posted 23 July 2009 - 02:16 PM

Virtual Vice is set, in part, during the Dot Com boom and bust years.  During the mid-1990's, San Jose, Seattle, Cambridge and Dallas comprised the nation's top tech centers.  Growth in the economy's Information Technology sector had largely driven the record numbers seen on Wall Street -- both on the Dow Jones and NASDAQ.  This honeymoon period between the financial markets and innovators, while short lived at five years, was marked with unprecedented growth and investor returns.  There was a Wild West, gold rush mentality behind much of the haphazard, impromptu pairing of venture capitalists, angel investors and product developers.  The rush to queue up for the newfound VC largess resulted in a temerarious abridgment of the checks and balances typically integral to bringing new hardware or software to market.  Often times outside engineers were not called upon to audit work.  Accountants and transactional attorneys were not involved as extensively in the drafting and review of business plans -- if there was a business plan.

This resulted in the syndrome coined, "cocktail napkin to boardroom mentality", whereby a widget concept loosely fleshed out over pints at the corner bar was signed off on in a boardroom meeting of decision makers the following week, foregoing the vetting process to assess product, demand or market plan viability.  The absence of traditional checks and balances attracted every manner of confidence man to the New Economy.  Ponzi schemes and opportunists had free reign.  It was the 21rst Century equivalent of the traveling snake oil salesman, but here charlatans permeated every facet of the industry, from product development to IPO's and the infamous penny stocks that landed the amoral financial genius Michael Milken in prison.

If the con man was one who had the unique social skills to speak both the language of the developer and the financier, he was positioned to do an inordinate amount of damage.  Most engineers attempt to distance themselves from the "suits" and business end of the enterprise, just as most VC's rely on consultants for product analysis and IP valuation.  VC's aren't particularly interested in what transpires in think tanks or the lab, so long as the finished product bears resemblance to the one sketched out over that pint.

It was within this climate of arrogance, recklessness, amoral antics, profiteering and outright thievery that the real life counterpart of Virtual Vice's protagonist and Metropoleis III Multimedia CEO, Scott White, amassed a money and power base.  Just as portrayed in the book, the real life figure came from a prominent East Coast publishing family.  A sociopath, his birthright's path to prominence involved more time and effort than he was willing to dedicate, so he turned to the lucrative trafficking of uncut cocaine procured directly from Colombia.  When the DEA moved in, he evaded apprehension and laundered the drug money through his Seattle IT startup, Millennium III Multimedia Corp.  Surrounding himself with a talented and legitimate team of technologists, the CEO built up a successful business.  Old habits took hold, though, and soon he was embezzling from his own shareholders.  When he was caught and pursued by victimized investors, he fled Washington for Arizona where he mounted a similar Ponzi scheme.  In the novel a measure of justice is served up, but in real life this same individual continues to defraud investors to this day, presently operating in Huntington Beach, California.  Greed is one constant in human  nature.  So long as that is the case, there will always be opportunists like Scott White to exploit that human condition.




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