All aspects of the architecture business are suddenly slowing, indicating an overall weakening in commercial real estate demand. A key read on the industry, the

What was Silicon Valley like after the bubble burst in the early 2000s?

The collapse was sudden, shocking, and depressing. I think most of us saw it coming, but the speed and severity came as a hell of a shock. Take a seat around the fire pit, youngsters, and settle in for a longish answer from a Silicon Valley native who labored in the trenches at two firms at the heart of the boom-and-bust cycle (parental discretion advised).

By 2000, it seemed like everyone I knew in their 20s and 30s was working for a dot-com. (That should have been a warning sign right there.) Not just San Francisco Bay Area locals; new college grads and experienced business and technology professionals were migrating here from all over the country (and world) in the years leading up to the crash. Commentators famously compared it to Florence during the Renaissance. The housing market was beyond ridiculous at the peak. I mean worse than the usual “Bay Area ridiculous” that’s been the status quo since the 1980s. (People were resorting to paying six months or a year’s rent in cash in advance in order to get a decent apartment in San Francisco.) Having moved back to Palo Alto, CA in 1998, I barely recognized my home town; every billboard up and down Highway 101 advertised some kind of Internet business with a silly name. I worked for a high-profile consumer Internet company (Excite@Home) whose gleaming new headquarters itself served as a billboard of sorts, looming over 101 in Redwood City, CA, with our logo visible to thousands of cars whizzing by — or rather inching by; traffic during that period was as bad in the Bay Area as it was in Los Angeles, with even I-280 turning into a pretty bad traffic jam most mornings as people commuted south from the City to thousands of newly created jobs at newly created companies up and down the peninsula.

Leading up to the crash, I worked in a job that was tightly tied to the state of the “dot-conomy.” As a lawyer in one of the corporate groups at Wilson Sonsini Goodrich & Rosati in Palo Alto, the Valley’s largest law firm, from 1998-2000, I contributed in my own little way (there were hundreds of us) to the IPO, M&A and VC factory that was WSGR at that time. It was the best career decision I ever made because of the doors it opened, but it also became sheer misery by late 1999 when everybody and their dog was trying to go public at once. When I left to go in-house to Excite (April 2000, coincidentally the date of the first NASDAQ (exchange) market “correction”), my group alone (loosely defined to include two partners, several associates and paralegals, affiliated with Mario Rosati) was working on nine Initial Public Offerings (IPOs) simultaneously, at various stages of SEC filing and review, on top of all the usual Venture Capital financings, Mergers and Acquisitions and general corporate work. And we were a small group compared to some in Larry Sonsini’s wing of the firm!

Corporate Finance is one of the most cyclical areas of transactional work around. When public markets are going strong, everyone is in a rush to close public offerings while the window is open. When the window is shut, nobody can do much but sit, wait, and complain about it (with the occasional “fire sale” of distressed companies and assets). Of the nine IPOs we were working on that spring, I think two of them (both life sciences, not IT or Internet businesses) made it out later that year. The remaining companies never went public. I think they either went under or were eventually acquired by larger competitors. The IPO market has never been anywhere near that active in the decade since; I think our firm handled more tech IPOs in 1999 than there were in the entire country in 2001-03.

I was relieved to have joined a relatively large, mature, “stable” Internet company in 2000. Excite had been around since the dawn of the commercial Internet in 1993, as a rival to Yahoo! (company), Lycos (company) and AltaVista. We had 3,000 employees and were doing $600 million revenue at the peak. I was hired to support the corporate development team in doing acquisitions, strategic investments, joint ventures and other fun deal stuff, as well as public company governance and securities work. Unfortunately, the slowdown was apparent soon after I arrived. Excite, like all Search Engines and portals, was supported entirely by Online Advertising. This was before paid search, so it was mainly banner ads, as well as an increasing number of “rich media” ads as it was already becoming clear that users were getting weary of banners and Click-Through Rates plummeted.

Keep in mind that in that era, online advertising was still relatively unproven and big brand marketers spent only a tiny fraction of their budgets online. Our business depended heavily on ads bought mostly by other consumer Internet companies that were all spending venture and IPO money like drunken sailors in a land grab rush to gain first-mover advantage in their respective markets. When the capital markets clamped down in early 2000, and VCs started getting cold feet as they saw signs of delayed exits and lower valuations, the flimsiest of the dot-coms with no revenue and crazy burn rates started going under. Their ad buys shriveled up along with them, driving CPMs way down as the amount of available ad inventory kept growing while demand was shrinking. In the third quarter of 2000, online advertising shrank overall for the first time, dropping 6.5% to just under $2 billion. The average price of a banner ad plummeted from a $50 Cost per Thousand Impressions to less than $5. (See…) This explains in large part why Yahoo!’s stock price went from nearly $100 when I interviewed there in early 2000 to under $10 a year later.

The dominos fell pretty quickly. Progressively larger dot-coms went under, each one casting a bigger shadow on markets for labor, Commercial Real Estate, Network Equipment, Enterprise Software, Advertising and Advertisements, and all kinds of professional services. Equipment makers, infrastructure providers and landlords soon started getting hammered as failed startups liquidated everything, dumping tons of barely-used equipment on the market (notoriously Herman Miller Aeron Chairs, as well as the expected PCs, servers and network equipment). Large corporations started downsizing as well, reacting to poor macro conditions, meaning they dumped millions of square feet of vacant office space on the market for sublease just as demand evaporated. I and everyone I knew started reading Philip Kaplan‘s on a daily basis. (Ironically, FC is no longer active, but you can see its own epitaph at

Gallows humor pervaded for a while — people held “pink slip parties” to make the most of the situation, and begin networking in search of the next job — but it soon became apparent to many that there were far too few jobs to be had. Stories appeared in the newspaper of net outmigration from the San Francisco Bay Area for the first time in living memory; there was a U-Haul shortage (no joke) as people rented them for one-way moves back to Las Vegas or Dallas, TX or wherever the economy was healthier to get a regular job. Enterprising promoters held raves in the abandoned former headquarters of failed dot-coms (including ours). Bankers, lawyers and accountants who’d struggled to hire fast enough during the boom found themselves with a large number of highly paid workers with nothing to do. From Ariba (product) to VA Linux Systems (now Geeknet), everyone’s stocks got clobbered. The NASDAQ Composite Index chart is worth a thousand words:

In a lovely coincidence of timing, services like E*TRADE Financial (company) had brought discount stock trading to the masses, and retail investors bought into risky dot-com stocks at highly inflated valuations, only to see many of them lose 90-99% of their value within a couple of years (100% for the bankruptcies like Webvan). Unemployment plus heavy capital losses plus high cost of living equalled financial disaster for many people. I knew many couples where both partners were laid off from dot-coms within months of each other. (One highlight was representing a friend at an EDD hearing where she had to fight for her unemployment benefits.) On top of everything else, the terrorists attacked in September 2001, and the broader financial markets panicked. It had mostly been a tech meltdown up until that point, but pretty much everyone’s stock was killed in late 2001-02.

Back to Excite@Home, we were busy selling off assets throughout 2001, hoping to pay down debt and refocus on the core @Home residential broadband Internet Service Providers service. The conflicts of interest and lawsuits are fodder for another post, but suffice it to say that it was too late to turn the Titanic. We filed for Bankruptcy Law within weeks after 9/11 (terrorist attack), making for a thoroughly depressing fall and winter. The company shut its doors in March 2002; as part of the legal team handling the bankruptcy, I was one of the last 50 or so employees left standing, less than two years after joining a company of 3,000.

One of the most poignant scenes was the Network Operation Centers at 550 Broadway—once the pride of the company as nerve center of a pioneering nationwide fiber-optic backbone, a “parallel Internet” with distribution and caching architecture to push large files as close to customers as possible. (This was designed by CTO Milo Medin before Content Delivery Networks (CDNs) like Akamai Technologies (company) became significant players.) A beehive of activity that resembled NASA Mission Control—appropriate considering Medin’s roots as an engineer at NASA Ames Research Center in Mountain View, CA—the NOC was shut down along with the network after we’d transitioned the last of the cable providers off our broadband network.

There was a countdown to the shutdown, and then everything was switched off. It felt like pulling the plug on a brain-dead patient in the hospital ICU. After the last ops and engineering staff were laid off, I remember wandering through the cavernous, deserted NOC, strewn with assorted equipment that was left to be carted off to auction, looking up at the huge projection screens that forlornly flickered “No Signal.” It felt downright post-apocalyptic, with huge diesel generators out back standing ready to provide backup power to a NOC and data center that no longer needed it—a few short months after the summer of rolling blackouts that confirmed the necessity of such uninterruptible power sources.

But I digress. Bottom line, within a year after our wedding, both my wife and I were laid off from failed Internet companies. Grateful not to be saddled with a mortgage, we gave notice, put our possessions in storage and left town, like thousands of others, uncertain at the time whether it would be temporary or permanent. Although this predated the term “funemployment,” we spent a month on a cross-country road trip, trying to decompress while I applied for jobs like crazy and called every recruiter I knew. There were absolutely no jobs in the Bay Area for a corporate deal lawyer like myself, so I cast a wider net. Eventually I landed a good in-house job at a large tech/media company, Gemstar-TV Guide, which was a relief. The only hitch was that it was based in Pasadena, so we had to relocate to Southern California. So I guess we did our part to ease the traffic and housing conditions in the Bay Area. (You’re welcome.)

I didn’t mean to turn this into an autobiography, but I think my own experiences (and those of my friends and family) were representative of conditions at the time. (My folks have lived in Palo Alto and Menlo Park since 1975, and added some perspective.) The Excite@Home headquarters sat empty for five years before Stanford finally bought it in 2007 and turned it into an extension of its outpatient medical clinic. Overall, the recovery was S-L-O-W in coming; it wasn’t until around 2003-04 that things started seeming good again. Let’s hope they never return to the overheated state of 1999: What goes up must come down.