ENTHUSIAST'S CORNER November 2000



Confessions of a Dot-Com Junkie

My dream to join the dot.com frenzy almost became a nightmare of tragic proportions.

Normally I use this page to share personal wine experiences, to talk about trends, and to discuss what I see as an editor and publisher. But this time I want to tell a story involving the larger Wine Enthusiast Companies.

I must confess that I briefly became a dot-com junkie. My addiction began about two years ago, after a longtime friend started a dot-com business based on the premise that people could log onto an Internet site and name their own price for airline tickets.

Within the first 11 months of its launch, this business posted $35 million in sales while losing $125 million. Back in "those days," losing $125 million in sales while losing $125 million on a dot-com start up was like a badge of honor, an invitation to conduct an initial publilc stock offering. Following the crowd, my friend did take his company public, and boom, the market cap of this nascent business was something like $18 billion—wiith a capital B.

It was at this time that I determined that we should dip our toes into the dot-com waters. I had begun to notice how peers of mine, owners of so-called "bricks and mortar" companies, were becoming increasingly scared about a potential dot-com avalanche, one in which newly formed Internet rangers would overrun traditional companies. I'm not saying we weren't web-savvy, as we'd been operating a successful website called Wineenthusiast.com since 1995, but like my friends, I was concerned.

I started speaking with more than one dot-com wine company about a merger, and if I told you the absurd valuations these companies were asserting for themselves and the sales projections they were making, your jaw would drop. In just one case, a certain Internet wine company said they would do $1 million in revenues in 1999 and $20 million in 2000. They claimed their street valuation was 17 times revenues, for a moving forward value of $340 million. Interestingly, the words "profit" and "profitability" never entered our conversations.

Given the investment frenzy at the time over dot-com neophytes, I believed the numbers these guys were throwing out. That was until one fateful evening, when after a full day of negotiations, I retired to my house and fell into a deep sleep filled with dreams—both good and bad. In one dream—call it my dot-com intervention—I saw a modern emperor walking naked among his cheering Wall Street subjects. Suddenly, a small boy bellowed out: "The emperor has no profits, and no hope of future profits."

This dream was like a wake-up call. Reality filled my body, and I immediately broke off negotiations with all the dot-commers. Since then I have focused my efforts on continuing to build Winemag.com. our magazine's new proprietary website, and further transforming our bricks and mortar business into a "clicks and mortar" company. And wouldn't you know it: Today many of the dot-com wine businesses have either merged or are aggressively seeking additional capital. And what are they finding? That the venture capital spcialists are a fickle bunch. These days, investors want to see a solid profitability model before opening their purse strings.

This whole scenario reminds me of an old saying that couldn't be more apropos: If it walks like a duck, quacks like a duck, and swims like a duck, it's a duck. For without profits businesses have no reason to exist.

· · ·


Shifting gears to this issue, our cover shines the spotlight on Bill Harlan, a man with a nose for adventure—and success. From his days as a thrill-seeker to the modern era, where he has become a respected vintner and real-estate magnate, Harlan has made his mark, founding cult-favorite Harlan Estate, turning Meadowood into the crown jewel of Napa resorts, and most recently creating a Napa resorts, and most recently creating a Napa office park that many are calling the Wall Street of Wine Country. Our profile of this fascinating individual begins on page 48 of the Wine Enthusiast Magazine.

Also, we recently completed a tasting of more than 170 high-end California Cabernets and Cab blends from the 1997 vintage. The results are in, and as you will see on page 32 of the Wine Enthusiast Magazine, it's a year for the record books.

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