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CNN PRESENTS

Downsizing.com: America After the Dot-Com Crash

Aired May 20, 2001 - 22:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: The revolution just crashed and burned.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: The mood is desperation.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I don't think anybody expected it to be this fast and this hard.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: It's just everyone ran out of money.

(END VIDEO CLIP)

LEON HARRIS, HOST: Two years ago, they were riding high. Now, the party is over. The dot-com bubble, is it really all doom and gloom?

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The revolution is absolutely alive and well. And the players changed, and the armies changed, and maybe the tools and the weapons changed, but the revolution is still going on.

(END VIDEO CLIP)

HARRIS: Good evening, and welcome to CNN PRESENTS. I'm Leon Harris.

It was the new gold rush. Tech was king, and startups couldn't lose. We captured those heady times back in the summer of 1999 through a group of Silicon Valley entrepreneurs, a group of young men and women so optimistic about the future, so certain they were changing the world, that you couldn't help being swept up in their enthusiasm.

But that was nearly two years ago, that was before the bubble burst. So, what have our intrepid entrepreneurs learned since 1999? More to the point, what have they lost?

Filmmaker Fred Golding (ph) revisits Silicon Valley now in "Downsizing.com."

(BEGIN VIDEOTAPE, 1999)

CAROL RODINI, SILICON VALLEY REALTOR: Silicon valley is not a physical place. It's a mindset and a culture. It is a place where people, basically, are allowed to spread their wings and fly, it is a place where you can bring new ideas, where you can put things on the table that are crazy, where you can live outside the box.

ELON MUSK, CEO, X.COM: I expect to receive a car that I just bought, which was (UNINTELLIGIBLE). There are 62 Mustangs in the world, and I will own one of them.

JUSTICE WILSON: It's $1 million for a car. That's -- it's decadent.

E. MUSK: Back in '95, there weren't that many people on the Internet, and certainly nobody was making any money at all. Most people thought the Internet was going to be a fad.

Wow! Pretty wild, man. This is definitely very cool. I like it a lot.

Just three years ago, I was (UNINTELLIGIBLE) and sleeping on the office floor, and now I've got $1 million car and quite a few other comforts.

It's just a moment in my life.

My values may have changed, but I'm not consciously aware my values have changed.

WILSON: My fear is that we become spoiled brats, that we lose a sense of appreciation and perspective.

It's a perfect car for Silicon Valley, it really is.

E. MUSK: There it is, gentlemen, the fastest car in the world!

Receiving cash is cash. I mean, those are just a large number of Ben Franklins.

I could go and buy one of islands in the Bahamas and turn it into my personal (UNINTELLIGIBLE). I'm much more interested in trying to build and create a new company.

So this is an ATM, and what we are going to do is transform the traditional banking industry.

UNIDENTIFIED FEMALE: X.com, this is Julie.

E. MUSK: Raising $50 million is a matter of making a series of phone calls, and the money is there.

I've (AUDIO GAP) the great majority of my net worth into X.com, which is the new banking and mutual funds company on the Internet that I have started.

UNIDENTIFIED MALE: The big X.

E. MUSK: Exactly. X.com.

I think X.com could absolutely be a multi billion dollar bonanza. Because if you look at the industry that X is pursuing, it's the biggest sector of the world economy. It's 16 percent of the world economy.

It's sort of like a series of poker games. And now I have gone on to a more high stakes poker game and just carried those skills with me. I haven't gone and taken my winnings and spent it all, I just really put almost all of it back into the new game.

I think the real payoff is the satisfaction of having created the company that I sold.

UNIDENTIFIED FEMALE: Yes,, but the car is...

E. MUSK: But the car sure is...

UNIDENTIFIED FEMALE: The car -- let's be honest.

E. MUSK: Sure is fun.

UNIDENTIFIED FEMALE: We'll take the car.

SCOTT SANGSTER, CEO, FOUNDER, WISHCLICK.COM: So, what we have got here is a conference room by day and my living room by night.

Startups are I think the basis of creativity. This has become sort of the intellectual heart of the house, which used to be a dining room at one point.

I'm putting my faith, my credibility, my friendships, as well as money I have earned in my career to date.

UNIDENTIFIED MALE: So, what do you do? Well, we are a feature- rich allocation network Web registry. That's what we say to them.

UNIDENTIFIED FEMALE: I work for a company that a does a feature- rich Web development registry -- Web...

(LAUGHTER)

UNIDENTIFIED MALE: It's amazing how many people just aren't surprised to learn that you are in your house and that you are starting a company. SANGSTER: We had a great session yesterday, thanks everybody for coming by on the weekend.

UNIDENTIFIED FEMALE: Are we capturing our key benefits with this thing?

SANGSTER: It's a new definition of how you live your life. The idea of removing a distinction between personal life and work life is taking some getting used to.

UNIDENTIFIED FEMALE: And here are our benefits over here.

SANGSTER: Part of the phenomena in Silicon Valley right now is that you don't have time to stumble, you don't have time to pause.

I don't think that this lifestyle is sustainable.

UNIDENTIFIED FEMALE: Focused on I, right? It's focused on the consumer.

SANGSTER: It's like being an emotional white water river. You know, and you just swing from these great highs, you know, terrific victories to just terror.

And there a lot of fortunes and a lot of (UNINTELLIGIBLE) these days, and these are people who are enjoying their money. These are guys who lucked out and got their golden ring and got there first. But it's, you know, (UNINTELLIGIBLE).

UNIDENTIFIED FEMALE: Doesn't seem like toy money, like it seems like -- no pun intended, it just seems like this is all not real. It's not real.

We know this route well.

VARSHA RAO, CO-FOUNDER, EVE.COM: It's not normal. I mean, you go to sleep thinking about the business, you dream about the business, and you wake up thinking about the business. There's nothing normal about that.

UNIDENTIFIED FEMALE: A little bit late here.

RAO: They should (UNINTELLIGIBLE) already.

UNIDENTIFIED FEMALE: Yeah.

UNIDENTIFIED MALE: Hi, good to see you.

UNIDENTIFIED FEMALE: Good to see you.

We thought we would just jump into the Web site right now, because I know you have limited time.

OK, finally here we are. We have been let in.

RAO: It's about results and it's about performing and nothing else. If you perform, then you are a star, and if you don't, you're not.

UNIDENTIFIED FEMALE: Here you can already see some of the brands we have exclusively online.

RAO: Because they put money into people they believe in, you know, without regard to the 15 years of experience.

UNIDENTIFIED MALE: Obviously, we're very interested. I mean, I think that the idea is quite big. We have done a lot of work in this segment. Our goal would be to try to figure a way to get involved in this and to invest a significant amount of money, you know, something around $10 million, which for us is real money.

MARIAM NAFICY, CO-FOUNDER, EVE.COM: Our business is now valued at over $50 million.

UNIDENTIFIED FEMALE: Hi, Mariam.

NAFICY: Hi, mom. I just wanted to let you know that we're launching this site in about 15 minutes.

UNIDENTIFIED FEMALE: I'm so excited for you.

NAFICY: I do think that starting an online business is like stepping through the door without knowing what at all is on the other side, waiting for you.

UNIDENTIFIED FEMALE: We're going to be flipping the switch in a few moments.

(APPLAUSE)

NAFICY: (UNINTELLIGIBLE), or you could be stepping on your way down a green (UNINTELLIGIBLE) rainbow with a pot of gold underneath it.

It's our baby that we worked on.

UNIDENTIFIED MALE: This is our old Web site, and suddenly we turn it on, and here is our Web site.

(CHEERING AND APPLAUSE)

(END VIDEOTAPE)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: It's remarkably hard to meet somebody in Silicon Valley because everybody works all the time.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE, 1999) RODINI: I think this is the new version of the Wild West. I think this is the next evolution. You know, we have had a revolution in the economy, we had a revolution in our society and in our culture, and I think this is the next Wild West. This is the next place.

SABEER BHATIA, CEO, ARZOO: What has happened to me in the last three years is what people aspire to have happen to them in a lifetime.

It is very true that this sort of success is possible. First, only in America; two, only in Silicon Valley; and three, in this short time span, only on the Internet.

UNIDENTIFIED MALE: June 16 was a Wednesday, and we -- we are going to have a big event this year (UNINTELLIGIBLE).

STEVE JURVETSON, VENTURE CAPITALIST: I remember the day when I first heard that Hotmail deal went through, that Microsoft paid $400 million for Hotmail. Today, that's worth $1.2 billion. I had a sense that being one of the biggest payoffs that I witnessed, this was going to forever change our business.

BHATIA: Hotmail clearly required me to put on a suit, go and speak at different events. Public relations was the way we grew. So, it seemed inevitable that I'd become, like, a sort of a mini-media hero.

UNIDENTIFIED MALE: So, when you come back to India, what is it like?

BHATIA: It's actually -- people in India, those who know me, obviously, realized that I have done something which is tremendously revolutionary, but most of the others, the young generation, look at me like as the Bill Gates of India.

Had you asked me three years ago what would you do at 30 if you made a lot of money, I would have told you I would retire, go to an island, go to the mountains, and yet I'm not doing all of those things, even though I can afford to do all of them. It's because I have realized that what excites me and what drives me is challenge. To change the world yet again, to have a meaningful impact on people's lives. I'm a big star, given my past success. But now that that is behind me, I once again have to start off from being a little guy.

They can buy anything on our mall. This new venture is funded completely by me, at least in the initial phases. If it fails, I will have the joy of at least having tried.

This company could be valued more than some of the media companies that we have today, NBC or -- Disney is rather big, I don't think we would be valued as much as Disney, because Disney is worth at least 100 billion. But in five years' time, it is very conceivable that we could be bigger than Disney.

RODINI: It may be a piece of grass, but it's a piece of grass in Palo Alto, and that's worth a hell of a lot more than if it was a piece of grass in Fargo, North Dakota.

JUSTIN KITCH, CEO, FOUNDER, HOMESTEAD TECHNOLOGIES: This is downtown Palo Alto, and as you can see there is a lot of happenings going on here.

RODINI: For $1 million, you probably get a very nice house, but it certainly doesn't buy you the high end in any of these areas anymore.

KITCH: Every once in a while, you will see some guy who is 25, 30 years old, driving a Lamborghini down the street. And that to me is like an ostentatious a show of wealth that turns my stomach. There is obviously no point to be made there except that that guy is worth a lot of money.

RODINI: The magic is the people. It's not environment or the buildings, it's the mindset and the culture, and who's got the bucks and who is doing the deals. (UNINTELLIGIBLE). Simple.

UNIDENTIFIED MALE: So, every dollar that comes through a sponsorship, through a click-through of an object (UNINTELLIGIBLE).

UNIDENTIFIED MALE: So, 50/50, like (UNINTELLIGIBLE).

UNIDENTIFIED MALE: 50/50 is sort of like the nice starting point.

UNIDENTIFIED MALE: We want to either buy it, or at least make sure someone else doesn't buy it.

UNIDENTIFIED MALE: I mean, if there's an interest, we should set up a meeting in the next week or two.

UNIDENTIFIED MALE: No, I think they wanted us to check it out.

UNIDENTIFIED MALE: Oh, of course.

KITCH: The fact that people who are my age can be worth millions of dollars after only few years work and people of my parents' generation worked for 30, 40 years, so they can retire with a $1 million if they are lucky, or retire with $500,000, it's absurd.

You guys want to know, what's your valuation, what's your valuation? It was around 100 or so, 100 million or so.

What we're trying to do is change the world and emancipate, liberate people, empower them with technology; but yet in our own little world, we're sort of screwing -- we are -- the rich are getting richer, and the poor are getting poorer and having to -- you know, literally cannot buy a house next to the office that they work in.

RODINI: The American dream today is that these kids are 25 to 35, and they've all made it. I guess if you haven't made it by 35, you are probably out of the ballpark and you're not in the game, and they are buying the $4 million, the $3 million, the $2 million dollars homes. As you can see, everything is very green, very lush, very beautiful, very manicured. And, as they say in Silicon Valley, very "gorgi."

UNIDENTIFIED FEMALE: A couple of other couples were talking about how many single friends we have, and how hard it is for people to meet people, and we said, let's just put them all together and throw a party.

UNIDENTIFIED FEMALE: I have no idea why I'm here.

UNIDENTIFIED MALE: Well, I'm here because, like most people here, I work too hard and don't meet enough people.

UNIDENTIFIED FEMALE: It's remarkably hard to meet somebody in Silicon Valley, because everybody works all the time.

UNIDENTIFIED FEMALE: The world in Silicon Valley is kind of the American dream. The American dream on steroids, is what I would call it.

UNIDENTIFIED MALE: When somebody goes from $50,000 net worth to $30 million net worth, they have a problem.

UNIDENTIFIED FEMALE: The opportunity to make a big hit is so extraordinary that it really kind of blows through any kind of singles scene, so I think there are people here for a singles party, but you know, who is that person, and what can they do for me, and what can they do for them.

UNIDENTIFIED MALE: We have some people having some fun here, and we also have some people, like a couple of startup people, running around trying to show off their new product, like software. This is a book. This is not a computer, it looks like a laptop computer, but it's not a laptop computer, this is a book.

UNIDENTIFIED FEMALE: I wish I had some rich Internet husband, you know, take care of me, so that I don't have to work anymore. I can just be a wife.

UNIDENTIFIED FEMALE: This is a classic Silicon Valley situation: "I hear you have a hard time getting a date." "Oh, no, no," because no one wants to look like a there is any kind of failure.

KITCH: It's a major hype right now. Everybody has dollar signs in their eyes, everybody is trying to get a little bit of press, you know, a little attention. They all need to be seen, they all want to go public at a right time, and it's -- there's so much hype surrounding the Valley and the companies that I think it's really tempting to forget to focus on what you should be focusing on, which is the substance of what you are building.

(END VIDEOTAPE)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: A year ago, I thought that I could basically do whatever I wanted, that people would be calling me up and say: "Hey, we want to offer you $100,000 a year to come and work for a company," but now it's like -- just call me! Like, anyone call me! I will wash -- like, I will scrub your toilets!

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE, 2001)

RODINI: You know, there were nine gazillion technology companies, and everybody that had a dot-com was burning cash like it was, you know, going through -- going through the fan belts here like it was going out of style, and there was never any end to it. Hey, somebody just said we have a technology industry. It's part of the industries in America, and guess what? You are not a drooling baby anymore. Now you are toddler and you need to grow up.

UNIDENTIFIED FEMALE: Revolution just crashed and burned.

UNIDENTIFIED FEMALE: The mood is desperation.

UNIDENTIFIED FEMALE: I just don't think anybody expected it to be this fast and this hard.

UNIDENTIFIED FEMALE: Everyone ran out of money. The ride is over.

UNIDENTIFIED FEMALE: I just got laid off about a month ago, and I heard about this pink slip party, so I thought, well, I might as well try it and see if I can network a little bit and find a new job.

UNIDENTIFIED FEMALE: When I first started at the job market, it was exciting. You thought you had jobs at your fingertips, and now it's like everyone is scrambling.

RODINI: In the context of what's happened here in the real estate market, you walked in, there was no inventory. Too many people chasing the same pie able to write the check, because it was funny money. So, it has change from a funny money, everybody has got it, write the check, 10-day close, as is, it doesn't matter, because you know what? I will have another $4 million three months from now, anyway -- to a much more realistic, real money, I'm looking at this long-term kind of perspective.

UNIDENTIFIED FEMALE: Well, I had a beer, and then I'd go out and I just sort of talk to people with the green dots on their shirts.

UNIDENTIFIED FEMALE: We are here today because we are hiring and outlooking for a long time, and with the -- all the layoffs that are happening, we thought that we might find some good people here.

UNIDENTIFIED MALE: It was extremely difficult to hire people one year ago. Now, it's totally reversed. Being an employer is a very, very good thing to be right now.

UNIDENTIFIED FEMALE: This guy is handing out papers on unemployment and you had to collect it. Nice, helpful. UNIDENTIFIED MALE: Within one year, I was going to be in a Porsche or a Ferrari, and right now, you know, the Ferrari isn't that easy anymore.

UNIDENTIFIED MALE: If you are unemployed, you can file for unemployment and get $1,000. If you're disabled, you can get $2,000. So, 1,000 for unemployment, 2,000 for disabled, so...

UNIDENTIFIED FEMALE: You know, that's your backup too, if the interviews don't work out.

UNIDENTIFIED FEMALE: A year ago, I thought that I could basically do whatever I wanted, that people would be calling me up and say: "Hey, we want to offer you $100,000 a year to come and work for our company," but now it's like -- just call me! Like, anyone call me! I will wash -- like, I'll scrub your toilets!

RODINI: They thought they ruled the world, and they thought they ruled the world because they had this gazillion options, they all had huge bonuses, they were chugging through cash like it was going out of style like the days they drank in college, and all of a sudden, they found out: profit counts.

UNIDENTIFIED FEMALE: I moved to the Valley a year ago from Minnesota to work for a company that my college friend started, and two weeks ago they ran out of cash.

UNIDENTIFIED MALE: When you go out, instead of talking about the next big thing that is going to happen, you talk about who is being laid off and what company is closing down.

UNIDENTIFIED FEMALE: I'm considering leaving the Valley, absolutely. The cost of living is still going up, and people are being laid off, and no one's hiring, so it's hard to stay.

UNIDENTIFIED FEMALE: I think there is still gold out there. You just have to be very particular about where you dig.

RODINI: The culture is to be entrepreneurial, to be a risk- taker, to dream, to build something new. All that will always be here. But what these kids, these young people thought is, they were going to do it and change the world in three years. And you don't move it and change the world in three years. You still have to work hard and earn it.

UNIDENTIFIED MALE: I think it's gone from very (UNINTELLIGIBLE) culture of -- like the back end of the gold rush to sort of this now realization that life actually goes back to normal, and one makes money by making revenue and profit and not by (UNINTELLIGIBLE) on the stock market.

RODINI: Funny money is great, but it doesn't really have any value. The kind of things that have value are real money, family, traditions, long-term perspective, building something, setting roots in the Valley, contributing, that's what counts. Funny money doesn't count. (END VIDEOTAPE)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: On a personal level at this point, I would say I'm a little tired of the Internet.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

RAO: It's not a sprint anymore, it's a marathon.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE, 2001)

RODINI: You know cash is king right now, leverage is not good, and he who has the gold rules, and you know what? That rule never, never changed.

(BEGIN VIDEO CLIP, 1999)

E. MUSK: Our goal is to dominate the banking industry. We are on the cusp of the greatest wealth in the United States.

UNIDENTIFIED FEMALE: Having money is fun. It enables you to do thing, and not worry about things.

E. MUSK: You have to drive around in something.

Pretty insane, man.

And I do drive around.

Some could interpret purchasing this car as behavior characteristic of (UNINTELLIGIBLE) brat.

That's engine.

UNIDENTIFIED MALE: And are you?

E. MUSK: No.

It comes with its own set of luggage, actually.

Or at least, it's not consistent with the rest of my behavior.

(END VIDEO CLIP)

E. MUSK: Real estate is starting to finally to go down in price.

I think almost by definition having a traditional American way of life is antithetical to Silicon Valley, or at least the two cannot coincide.

It's not attracting sources of easy money to the degree it was a year or so ago. You have to spend a tremendous amount of your time at work so there is no such thing as the eight-hour day in Silicon Valley in any field.

Approximately two years ago, I started X.com. We were only about five people in total, and the company now is over 600 people. I would say it's been fairly successful, given that X.com, now called Paypal, is the number one financial site in the world.

It got to the point where I didn't really want to be -- I was neither well-suited to run a company of that size, nor was I particularly interested in running a 600-person-plus company. So I decided to remain as a director of the company, but look for something else to do.

On a personal level at this point, I would say I'm a little tired of the Internet.

The next company that I do, one of the things that I think would be important is that it has some long-term beneficial effect.

I'm interested in doing something that's at a different sphere, going back to why I originally came out to Silicon Valley, which was to study energy physics.

JUSTICE MUSK, ELON'S WIFE: I am glad that Elon is no longer embedded in Silicon bubble. It's been a rollercoaster ride, in terms of watching Elon go through the trials and tribulations of working, and the toll that it takes on a relationship.

E. MUSK: I was in a hospital for two months.

I got malaria when I went to visit South Africa. I came within 36 hours of dying.

J. MUSK: It was unbelievable. I wasn't scared then, because I just couldn't consider the fact that you might die.

E. MUSK: Having gone through that experience really gives me a sense for the other aspects of life and appreciating friends and family and spending time with people that you love.

J. MUSK: The idea of you being felled by this little mosquito was really shocking.

E. MUSK: And as a Silicon Valley entrepreneur, you don't really do that very much.

I just bought a plane. I've always wanted to fly, to learn to be a pilot, and I should get my pilot's license very soon, actually.

It's nice to have a few cool assets, you know, like McLaren (ph) plane, you know, a couple things, but I would have had a lot to regret if I had died in the hospital, having you know, very much neglected a lot of things on the personal side for business.

(BEGIN VIDEO CLIP, 1999)

SANGSTER: Hidden behind this wall is corporate headquarters here.

Any good tour starts at the rose garden. When we get too stressed, we come out here and smell the roses, literally.

This is absolutely the Silicon Valley dream. We've got three companies that have started here, and two of them have gone on to be acquired for millions and millions of dollars.

UNIDENTIFIED MALE: We make gift giving fun and easy, that's what we do.

SANGSTER: This is the creative nexus of the house, which is also doubling as a conference room.

This is home.

UNIDENTIFIED MALE: You can't work, you can't do anything.

(END VIDEO CLIP)

SANGSTER: I think this is morning after, and so a lot of people who came in on the hype or who were caught up in they hype, they are waking up now and they have got a headache. But you don't give up.

This is our first office space that we've been able to move into. You know, the death of the Internet and the media reports that the dot-com boom is over or dying...

So this is sort of the heart of WishClick headquarters.

You know, it's wildly -- the death is wildly exaggerated.

We have dogs in the office and pretty informal dress code, but we are serious about what we do. WishClick has a lot of momentum. We are much bicker than we were two years ago when we saw you last. We are still a relatively small company. We've signed a couple more partners, which has been terrific.

The vision of what WishClick can do and what 10,000 other startups in the Valley is aiming for hasn't changed. The opportunities are still here.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: We had a brutal sell-off at the Nasdaq today, which recently broke into the bear market.

(END VIDEO CLIP)

SANGSTER: Economic cycles come and they go. And the Valley two years ago was not normal. It's not like we have come down and this is a dip from reality. It was a bubble. We were going to build it, we were going to create it, we were going to support it, we were going to sell it.

This is like the Valley five years ago, still very fertile, full of very smart people, very energized about what they doing.

The revolution is absolutely alive and well. And the players changed, and the armies changed, and maybe the tools and the weapons changed, but the revolution is still going on.

(BEGIN VIDEO CLIP, 1999)

RAO: Life out here is completely different. There are no rules.

NAFICY: We need to stay looking good, despite having had three hours of sleep.

RAO: It's all based on results.

NAFICY: I think a lot of people are surprised that makeup online can sell.

RAO: The best way to get something done...

UNIDENTIFIED MALE: We really like your vision and we like, you know, your spirit.

RAO: Is to tell someone that it can't happen.

UNIDENTIFIED FEMALE: (UNINTELLIGIBLE) Eve.com.

(END VIDEO CLIP)

NAFICY: We realized it was becoming harder to raise money. We wanted to keep Eve going and sustain the business. And at the same time, we received two acquisition offers.

RAO: Two years from when we actually started the company to the point at which we sold the company. Six months later, the new owners made the decision to shut Eve down.

NAFICY: This is a difficult situation obviously, but it's part of business.

RAO: When the site actually shut down, it wasn't so much about me, it was really more about all these people, each and everyone of whom should feel really, really good.

NAFICY: You've done amazing jobs.

RAO: Everyone says I look so much more relaxed.

NAFICY: Me too!

It's amazing how fast you regain your health and your perspective. The people who survived this really difficult period are going to emerge as the leaders. The tourists have left, meaning the people who were just here for sort of the gold rush.

RAO: I think the shine is off in Silicon Valley a little bit, and in San Francisco.

To be successful here, it's a long-term perspective. You have to have a long-term view. It's not a sprint any more. It's a marathon.

(END VIDEOTAPE)

(BEGIN VIDEO CLIP)

BHATIA: Well, I lost money like everybody else, no question about it. Probably lost half of my wealth.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

KITCH: People thought that they could create a lot wealth very quickly, and no one wanted to miss that, no one wanted to miss that opportunity. Probably every American has, at one point, thought: "God, how come I'm missing out on this huge Silicon Valley Internet thing?"

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE, 2001)

RODINI: The people I think that came here for the quick buck that sort of took this market down were into a lifestyle that I think replicated the way they built their businesses. They flaunted their wealth, and they basically said: "Look at you, you are still working for a living. Me, I will be out of here in three years on the Riviera on my yacht." And you know what happened? All of a sudden, that didn't work.

(BEGIN VIDEO CLIP, 1999)

BHATIA: Yes, I have contributed my little bit to creating this revolution.

We got a tremendous amount of publicity when Hotmail was acquired by Microsoft. I walked away with about $100 million.

So, let me give you a tour.

I live on excitement. I live on challenge.

(END VIDEO CLIP)

BHATIA: I had to wait 20 minutes to get a BMW. I didn't say that was hardship.

I think Silicon Valley is in a state of shock.

You want to fetch the ball? All right, let's go.

And today, it is also facing the brunt of this overcorrection.

Last year, it was future prospects. We were going to change the world. Profits will come later, they will follow automatically.

All right, good boy.

Ultimately, it's about making money.

I have lost money like everybody else. Probably lost half of my wealth. But I am very confident that it will come back.

SUNI MUNSHANI, VENTURE CAPITALIST: Tell you what I regret in all of this, it's the unsuspecting investor, who has used their mutual fund money, the 401(k) money, and directed it or routed it through those managers, without even recognizing it, into investments which are very hokey, and there's no accountability.

BHATIA: I was starry-eyed, just like any other entrepreneur, because the predictions that we were given to believe were that the Internet had created this marketplace of 300 million new people. People were even predicting that real-world stores would no longer exist, that people would just buy online. So, the company was originally created to facilitate e-commerce on the Internet, but that really has not happened.

A couple of weeks before we were to launch the company, I decided to pull the plug on what we were doing. People around us me and around us have started respecting the core human values a little more. It's not only about money. Money does not define a person. Money does not make a person, because this is a humbling a experience to a lot of people who have seen their net worth shrink from a certain amount to 1 percent of what it was. And now, they become more human.

How about me taking the tennis ball, throwing it, and you run and fetch it?

No, you are closer to Max (ph), why don't you do that?

MUNSHANI: This new wealth was making a lot of people extremely rude and extremely obnoxious, where you'd hear stories of people knocking on other people's homes and saying, you know, how much is your house worth? It's worth five million, I will give you 10 or 12. In Europe, you have the mad cow disease, and in Silicon Valley you have the mad Dow disease. Lots of mad dogs.

BHATIA: It was a wild time.

(BEGIN VIDEO CLIP, 1999)

KITCH: Internet is the most fundamental shift since the industrial revolution.

I think people selling their companies for 100, $200 million, and I know that I could have done that.

My definition of success is something very different.

Silicon Valley is the epitome of capitalism.

The fact that I, as a 22-year-old, can come out of school and start a company and raise millions of dollars, that's amazing, and that can only happen in Silicon valley.

(END VIDEO CLIP)

KITCH: People thought that they could create a lot of wealth, very quickly, and no one wanted to miss that -- no one wanted to miss that opportunity. Probably every American at one point thought: "God, how come I'm missing out on this huge, you know, Silicon Valley- Internet thing?" People were focused on the IPO and going public, and people lost kind of a lot of the sense of what it was -- what it meant to build a successful business, or, in my opinion, what it meant to be successful, period.

Two years ago, we were down the street, just a few blocks in smaller offices, and about maybe 16 months ago, 18 months ago, we moved into this first building right behind me.

And about nine months ago, we also took over the second building right down there.

Capital used to be virtually free. This whole area down here is where the products are designed. You can literally raise 10 or $20 million without any real proof of concept.

That's our CFO. He counts the beans.

UNIDENTIFIED MALE: How are you guys doing?

KITCH: He's the secret to the post-crash Silicon Valley.

Today, you would be lucky to raise 100 or $200,000 for the exact same situation.

Oh, I think everybody was caught up in it. I certainly was as well.

I remember thinking at the time that this is definitely not sustainable, and then we might (UNINTELLIGIBLE) some pads of paper, those big giant pads, and one of the best things about the supposed crash in Silicon Valley is that this myth of Internet time is gone. You had to do everything as quickly as possible, speed was the most critical factor.

UNIDENTIFIED MALE: These are our (UNINTELLIGIBLE).

KITCH: Internet time was I think probably the most damaging thing to the people trying to build real businesses and to the lives of the people who live in the Valley.

UNIDENTIFIED MALE: How much sleep have you guys averaged in the last month?

UNIDENTIFIED FEMALE: Like four hours a night.

KITCH: I think if anything, my values have kind of been reaffirmed by this whole episode.

Preferred transportation sources are the little scooters, what do they call these things, the razor scooters.

People that have gone through the last five-year period and had worked toward something and chased this thing that turned out to be kind of a false hope are now saying: "You know what? I have got change the way I live my life."

These are the two vice presidents in the company responsible for building products, and they're sitting here playing computer games?

UNIDENTIFIED MALE: We are working.

UNIDENTIFIED MALE: Working.

KITCH: Maybe people will stop looking at the Valley as the thing to emulate, and maybe Valley will start looking out a little bit more, looking for other places to emulate.

(END VIDEOTAPE)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: You kind of felt that you were making money off of thin air at the end of the day, and there was something that was not entirely unsatisfying about that. Not only did the dot-coms fall out of the tree, but in the last three or four months, we have seen the rest of the technology sector fall out of the tree.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE, 2001)

RODINI: It's little bit tougher, we have to be more focused. Everybody is working a little bit harder, but you know what? We will all get through it, and the golden glow that is on this valley is not going to go away, because the people that live here aren't going to let that happen.

(BEGIN VIDEO CLIP, 1999)

ROB HUTTER, CEO, TERACENTRAL: Something is happening right now that is so absolutely incredible and so absolutely important, all bets are off with respect to the old second wave economy.

(singing): I'm going build myself a house in Silicon Valley .

(normal voice): The technology, the Internet.

(singing): And I'm going to live with fun job (ph), Internet.

(normal voice): We are rushing from one server to another.

(singing): Entrepreneurs, then we're going to sit around the...

(normal voice): I'm involved in financing Internet companies. And there all these nodes going on, and it's a massively powerful computational activity that you have to do.

(singing): We're going to try to make change for all...

(normal voice): I have got to be here. I have got to be a part of changing this world, because if I don't, I am going to look back when I am 65 years old, and I'm going to say: "Where the hell was I?"

(END VIDEO CLIP)

HUTTER: For one brief moment, the eyes of the world were fixed on Silicon Valley.

Silicon Valley was seen as the epitome of the entrepreneurial spirit. You kind of felt that you were making money off of thin air at the end or the day, and there was something that was not entirely unsatisfying about that. Not only did the dot-coms fall out of the tree, but in the last three or four months, we have seen the rest of the technology sector fall out of the tree. The fact of the matter is, this area is still the single most incredible place of value creation anywhere on the globe.

This is the absolute best time in the world to play.

I am much, much more confident about the startup that I'm creating now than I would have been about a startup that was coming together (UNINTELLIGIBLE) in terms of its longevity, in terms of the degree to which it will be built to last.

This is basically a raw technology startup. This is definitely not an Internet company. For many, many years, people have relied on tapes for the purposes of storing backup and also archiving enormous amounts of information. What Teracentral is focused on is providing a technology that effectively kills tape.

My peers, the people that are part of this company who have stepped off the plate to do a startup right now, I have absolutely zero doubt that we are going to be successful, because if you come out to play in this type of environment when it's rainy and thundery and there's lightning out, I tell you what: you have a great chance of hitting a home-run, because your opponents haven't even shown up.

My hours are a lot saner today than they were during the Internet revolution craze. I'm putting a lot more emphasis on what I want to do personally. There is definitely is a sense of balance returning. All of us are back on the ground, and I'm living my life from the basis of: it's challenging to build a company, and it takes many years. That's where I am today.

So, I guess, it's a little bit of bittersweet emotion. You know, that was fabulous when that was happening, but you know, it couldn't last. And I am happy, and I'm much more satisfied. It's a much more deeper feeling of satisfaction today.

(END VIDEOTAPE)

HARRIS: Just how far has the mighty dot-com fallen? According to a director at Standard & Poor's, the market value of Internet- related companies alone has plunged nearly $1 trillion since March of last year.

That's this edition of CNN PRESENTS. I'm Leon Harris. See you next week.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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