March 9th, 2005 Zach Dundas, John Graham, Chris Lydgate, Ww Editorial Staff | Special Section Stories
 

1999

     
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FoolsGold.com

BY ZACH DUNDAS

The stars of Portland's dot-com boom thought the world was about to change. Sadly, they were right.

It was a fantastic era.

College dropouts land venture-capital millions. Crave Skittles and a copy of Die Harder? Punch a few keys, and a dude in a bright orange vest will bring them to your door in an hour-at no extra charge.

Hot idea? Talk to an angel investor. No revenue stream? No problem. Get big-fast-to capture market share and snatch Internet territory. Cash flow? Figure that out later.

Between roughly 1998 and 2001, the dot-com boom upended business convention. Companies that didn't exist in Clinton's first term beat General Motors' stock price. The old-fashioned way was out; getting your "concept" online as quickly as possible was in.

Portland was no Silicon Valley. But at the boom's fin de siècle height, a clever young company seemed to bloom in a Pearl District loft every week.

"Portland benefited on a different scale than San Francisco, certainly," says Gerry Langeler of OVP Venture Partners, a premier high-tech investment firm. "But compared to what existed in Portland for technology business before, it was just as dramatic."

The city's biggest dot-com, the online electronics retailer 800.com, lured $100 million in seed money. Hotshot investors took over Django's Records, a musty vinyl-hound haven on Southwest Stark Street, and made it the flagship of a scheme to buy up used-record stores nationwide and put all their stock online. (The website survives; Django's downtown storefront stands vacant.)

HomeGrocer.com's peach-tan vans and Kozmo.com's orange-clad delivery boys roamed Portland streets, delivering vittles and videos at prices defying actuarial logic. Kozmo, founded in New York, lost money on every sale. It dispatched orders from its inner Southeast Portland warehouse with no minimum and no delivery charge.

"Our targets were college students and professional women," says John Friess, who devised Kozmo's promo campaign in Portland. "When I started working for them, they said they'd be in 30 cities by the end of 2000. The attitude was, you need extreme growth. That was the way of the dot-com era."

Some start-ups were on the scrappy side. WhereNext.com, for example, an online travel guide aimed at backpackers, set up shop in an airy loft on Northwest Irving Street. The office looked like a dorm lounge furnished by Ikea, complete with laundry facilities (no time to go home, you know).

I came to know the place well: In the spring of 2000 my girlfriend left her editor's job at WW to work for WhereNext. I spent much of the next few months wondering if I was an idiot for not doing likewise. After all, though she pulled a bus-boyish salary, stock options-the era's great lottery ticket to instant millions-beckoned. WhereNext, like every other dot-com, planned to go public any minute. The crew went out for sushi all the time.

What was I thinking, toiling over grubby newsprint?

"Everyone had a moment when they asked themselves, 'Am I a dinosaur?'" Langeler says. "'Am I looking around saying, 'Ooh, asteroids are falling-how interesting'?'"

In March 2000, the NASDAQ tech-stock index reached its all-time high of 5,048-double what it had been a year before. The e-tailer 800.com planned its initial public offering. Portland was the latest of Kozmo's 12 cities.

And suddenly, the wave began to crash.

Economists are still debating the reasons why. Federal Reserve Chairman Alan Greenspan hiked interest rates to cool the overheating economy. The exponential growth of the Internet began to level off. The Y2K crisis, which spurred businesses to invest millions in new technology, was history.

Ultimately, the boom was built on a pack mentality-and it didn't take much for the pack to turn on itself. "It was essentially the greater-fool game," says Langeler. "All it takes is one person to stop being the fool, and it all slides back on itself."

At WhereNext, one key investor decided not to come through with one check-and a baby company that hadn't quite figured out how to make money unraveled overnight. Kozmo never made its lucky 13th city and shut down in April 2001. (Sometimes you still spy an orange motor scooter on the streets-likely snagged on eBay.com, a survivor.) It took the intersection of larger geopolitical forces and the U.S. economy to undo 800.com, but the would-be Portland giant didn't last much longer.

"Some startups spent money like drunken sailors, but we never did," says Greg Drew, 800's former CEO. "We had a proper company. Our business plan called for us to be a $100-million-plus company, and we were on our way. We were making money on sales. We were within a couple quarters of making it. And then Sept. 11 happened.

"That was the final heart attack.... Between Sept. 11 and Dec. 5, sales were 30 percent of projections." That spring, 800.com sold its assets to Circuit City.

The aftermath? At least one Web entrepreneur is now delivering pizza for Domino's. The bold twentysomethings of WhereNext went on to better, if less path-breaking, jobs.

Meanwhile, the dot-bust was hardly the end of Internet commerce. In fact, most think it was just the end of the beginning.

"Kozmo didn't make it, HomeGrocer didn't make it," says Friess. "But at the end, Kozmo was profitable in New York. There's a company called FetchDog still around, doing the same thing on a smaller scale. Now you see Albertsons.com and Safeway.com-some of those old brands everyone thought were doomed-succeeding in exactly the same field."

"The downdraft at the end of the boom just caught a lot of companies at the wrong time," says Drew.

OVER THE MOON

BY JOHN GRAHAM

In the '70s, it was called the Ninth Street Exit. Then it was the Pine Street Theater. Then-just as the Pacific Northwest was spearheading the so-called "alternative music" revolution-it was LaLuna. No club better represented Portland's shift from small-town underdog to big-time contender. The venue's 1,000-capacity helped propel bands like the Sweaty Nipples, Dharma Bums, Pond, Hitting Birth, Hazel and Heatmiser to the national stage. In 1999, however, owners Chris Monlux and Mike Quinn finally tired of squabbling with OLCC liquor licensers and passed the torch. The building mutated into a short-lived rave club called the Womb, then was resuscitated as the Pine Street, and is now an all-ages venue known as Solid State.

SHIP HITS THE SAND

BY CHRIS LYDGATE

The star-crossed 639-foot cargo ship New Carissa runs aground just north of Coos Bay. In an effort to burn the oil on board, Navy crews detonate the freighter's fuel tanks; the explosions split the bow from the stern, but the oil won't ignite. Next, crews try to pump the oil ashore through 700 feet of hose, but they suck mostly water. Then a tugboat hauls the bow out to sea for ignoble burial; 40 miles out, in the fiercest storm of the winter, the tow line snaps and the wreck drifts back to shore near Waldport. A week later, the tugboat drags the wreck back to face a Navy destroyer, which hammers it with artillery shells. No good. A Navy submarine's torpedoes finally sink the thing. Five years and 70,000 gallons of oil later, the state, the feds, and the insurance company will still be haggling over the $10 million cleanup cost, and the 1,500-ton stern will still be stuck in the sand near Coos Bay.

The Fatal Pinprick

BY WW EDITORIAL STAFF

For the chart that accompanies this story see www.wweek.com/photos/3118/heroinchart.gif.

The local economy is roaring like never before. There's a cell phone in every pocket and an SUV in every garage. Why, then, is Portland in the middle of a heroin epidemic? Fatal overdoses spike in 1999, as treatment providers are inundated with ever-younger addicts hooked on smack. Fortunately, the death toll later subsides, thanks in part to the Recovery Association Project, a hard-bitten crew of recovering addicts who start a mentoring program to help ex-junkies stay clean.


* A Portland jury orders anti-abortion activists to pay a stunning $109 million to local abortion providers for publishing the Nuremburg Files-a website that lists abortion doctors amid gruesome imagery. Pro-choice folks said the site amounted to an assassination plot. The verdict is overturned two years later.

* The city is rocked by a series of grisly discoveries: the bodies of three women, each assaulted and strangled, in Forest Park. Police set a trap for the killer, baited with a decoy streetwalker who resembles the victims. They nab Todd A. Reed, 32, a psychopathic produce worker with a history of sexual violence. Reed later pleads guilty and will live out his days behind bars.

* After a long and bitter campaign, the overeducated, underpaid bookworms at Powell's Books vote by a narrow margin to form a union at the Burnside store. Workers soon discover that a union is no panacea-five years later, they're still overeducated and still underpaid.

* Multnomah County Chair Bev Stein proposes a 5 percent tax on pet food to pay for animal-control services, provoking howls of outrage from the easily excited dog and cat lobby. The Alpo Alliance savages the idea (with tactical support from the Birdseed Brigade) and Stein rolls over.

* Police unmask the prolific graffiti artist Maul. Far from the deprived inner-city youth they were expecting, Maul turns out to be a senior at Reed College. Thanks to one of Portland's spendiest lawyers, she avoids jail by working 400 hours on cleanup crew, forking out thousands in restitution and making an awkward public apology.

* Hordes of fans gather on the streets, soaked and freezing-"It's like Christmas," says P.J. Gilmour, who organizes a 55-person rotating squad to spend nearly two weeks outside the Eastgate Theatre-all for the thrill of being the first to see The Phantom Menace.

* Jammin 95.5 FM becomes the first commercial Portland station to switch to a low-octane mix of hip-hop and R&B. "I've got my cargo pants on and my baseball hat turned backward," says 47-year-old general manager Tim McNamara.

* Miller heiress Elise John, 28, who suffers from depression and schizophrenia, talks her way out of the psych ward at Good Samaritan Hospital and hangs herself from the Morrison Bridge.

* Hopheads cry in their beer as the Blitz-Weinhard Brewery brews its final batch of Henry's. For 143 years, the aroma of the old brick brewery was one of Portland's most distinctive features. Now the smell, reminiscent of sweaty feet, is gone forever-as is the ghostly echo of empty bottles passing overhead on the conveyor belt. A few years later, the property will be turned into the Brewery Blocks shopping-entertainment-condo complex.

* Droves of dwarves descend on Portland for the annual convention of the Little People of America.

* Millennium fever! Portland spends almost $4 million to make sure its computers don't choke on the Y2K bug and throw municipal billing systems into chaos. The Internet is awash with dire jeremiads about the imminent collapse of civilization. Turns out the whole thing was a hype-like most of the '90s.


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