boo hoo

boo hoo

boo hoo
by Ernst Malmsten, Erik Portanger, Charles Drazin
Published by Arrow in the U.K. in 2002
406 pages

ISBN 0099418371

The subtitle for this book is “$135 million, 18 months… a dot.com story from concept to catastrophe”. And the book delivers exactly what it promises: a captivating recount of the company boo during the first Internet bubble in 2000.

The facts are quickly summarized: Ernst Malmsten, a Swede in his Twenties, discovers the Internet and recognizes its full commercial potential immediately. He creates a startup company (boo.com) in 1998, planning to sell fashion globally over the Internet using a sophisticated web site and lean processes. The startup team is right on time with their ideas, and soon they collect investors’ money from around the globe. The whole team is having a jolly good time, a neverending party where money does not matter. The party ends when problems begin to show: suppliers and logistics are not as easily implemented as expected, the launch of localized web sites turns out to be very difficult, and the web site is in general too slow for modem users (this is 1999!). And then, in March 2000, boo.com becomes the type example for the dotcom crash, generating news headlines across the world for having lost $135 million of venture captial in just 18 months.

Supported by co-authors Erik Portanger of the Wall Street Journal, and film writer and editor Charles Drazin, Malmsten re-lives the short life of boo.com for us, from the first idea and concept to its ultimately bad ending. In the preface to the book, Malmsten explains that “as a sort of therapy, I would work out what had gone wrong and what mistakes I had made”. And so he does create a personal account of all the decisions and events, big and small. Just one example – in April 1999, the team is still planning the start of the company and for the first time in their lives hires a private jet for a flight from Hamburg to London:

It was 13 April 1999 and the two of us [Ernst Malmsten and boo co-founder Kajsa Leander, Ed.] had just spent a day with Christoph Vilanek, head of our German office, meeting magazine editors in Hamburg. We’d arranged the trip weeks earlier and couldn’t cancel, even though more pressing commitments had since emerged. Germans tend to attach great importance to meeting times and do not like to see them altered. As we were anxious to create a good impression in a country with a huge market of 80 million people, we had to think of some other way of solving our timekeeping problems.

It was now 4 p.m., and that evening we had to be in Chicago for the beginning of a three-day fund-raising tour of the US. But as there were no direct flights from Hamburg, the only way we could make the schedule was to get back to London in time to catch Concorde to New York, where we could pick up a flight to Chicago. Hence, the private jet.

In a little under three months we had managed to spend something like $4 million, and, as we strove to build the business as rapidly as possible, costs were continuing to rise by the day. Our staff costs were a large part of this – by the end of March, we had spent $436,000 on salaries and another $586,000 on headhunters’ fees (for the staff we had then and for new staff who had been recruited but had yet to start work at boo). The time had come to think about the next funding round. To take us through to our launch, we estimated that we would need another $12 million. But it could be no more than an estimate, because the costs of bullding such a complex business defied precise analysis, particularly in this period of hypergrowth.

The story goes on and on and on, like a roller coaster. The costs mount, mostly caused by unnecessary purchases or outright stupid business decisions, the launch is being delayed further and further, they look for more money on the market (and get it!) while revenue still does not come in as projected, until in the inevitable end – the bubble bursts. To the reader, the end certainly does not come as a surprise, as the Prologue opens with a quote from the Financial Times on the dramatic situation at boo, dated 17 May 2000, on the day before the crash. In this way, boo hoo pretty much resembles the story of the maiden trip of the Titanic. You know exactly how it will end, but an exciting story carries you through the pages to this bitter end.

Boo Hamburg Team (1999)
Boo.com Munich Team, photographed by Armin Brosch
Source: Online Today 12/1999

You know, I have been part of the dotcom area as well (I was working for AOL at that time), so I pretty much know how the times were “back then”. But even as I read the book today, with a healthy distance of seven years, all I can do is shake my head about the stupidness shown by the unexperienced boo team. Despite being well-written, its topic does not make it a joy to read, but definitely a must-read. Especially for those who have experienced that period and want to capture the spirit of the times, and for those who are currently running a startup company, maybe based on some shady Web 2.0 idea. Todays market is already starting to feel very much like 1999/2000, with bizarrely expensive acquisitions or investments ignoring the real value of a company (e.g. the YouTube acquisition at $1.6 Billion).

A fantastic book. Go read it!

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