As the Gerbsman Partners team entered the refurbished warehouse of the technology/dot com company, we were in awe at the luxury of this start-up. As we were to find out, the $ 3.4 million cost to build out the office was but a pittance of the $ 80 million already invested.
The team marveled at the new and colorful open cubicles and glass offices; we observed that everyone had a Herman Miller chair ( 220 chairs at a discounted cost of $ 650 per chair = $ 143k ); we were brought into the upscale kitchen for freshly brewed gourmet coffee; we observed the Miele refrigerator, dish washer, microwave and disposal unit; we were offered 6 different kinds of fruit, French Pastry and Evian water; we sat overlooking a $10,000 pool table and game room.
When the team inquired about the food, fruit and gourmet trimmings, we were told the budget was about $ 8-10k per month. Obviously something was wrong with this picture, however the management and Board of Directors were oblivious to these luxury cost issues.
Well, what can I say – “ It was Dot Com/Dot Bomb time in Silicon Valley”. It was early in 2001 and little did the team or I know that this was just the beginning of one of many similar business models that were not valid and insolvency was around the corner.
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