In the mid-1990s, San Jose, Seattle, Cambridge, and Dallas were the main technology centers in the country. Growth in the information technology sector of the economy had largely driven the record highs seen on Wall Street on both the Dow Jones and the NASDAQ. This honeymoon period between financial markets and innovators, although short-lived at five years, was marked by unprecedented growth and returns for investors. There was a Wild West mentality, the gold rush behind much of the impromptu and haphazard combination of venture capitalists, angel investors, and product developers. The rush to queue for the newly discovered VC bounty resulted in a reckless reduction of the typically comprehensive checks and balances to bring new hardware or software to market. Often times, outside engineers were not asked to audit the work. Accountants and transactional attorneys were not as extensively involved in writing and reviewing business plans, if a business plan existed.
This resulted in the coined syndrome, “the napkin to boardroom mentality”, whereby a loosely developed widget concept on pints in the corner bar was signed into a boardroom takers meeting. decision-making the following week, forgoing the research process to evaluate the product. , demand or viability of the market plan. The absence of traditional checks and balances attracted all kinds of henchmen to the New Economy. Ponzi schemes and opportunists had free rein. It was the 21st century equivalent of the snake oil peddler, but here charlatans permeated every facet of the industry, from product development to IPOs to the infamous penny stocks that landed amoral financial genius Michael Milken in prison. .
If the scammer was someone who had the unique soft skills to speak both the developer’s language and the financier’s language, he was positioned to cause an inordinate amount of damage. Most engineers try to distance themselves from the “suits” and business side of the company, just as most venture capitalists rely on consultants for product analysis and intellectual property valuation. VCs are not particularly interested in what goes on in think tanks or in the lab, as long as the finished product resembles the one outlined on that pint.
Greed is a constant in human nature. As long as this is the case, there will always be opportunists to exploit that human condition.