agreeable personality. They picked people who were pretty junior, who didn’t
have much experience with real-world customer projects, and they basically
killed the company. Once you have a product that nobody wants, it doesn’t
matter how good your management team is.
So 4 or 5 months after our shareholder meeting, they came in and fired the
CEO—demoted him to COO or something. They put in one of their own partners
as the CEO. He hung out there for a while. They put in more money, I
think another $10 million, and he gradually figured out that the numbers that
the CFO was giving him were bogus. He began to run his own numbers, and he
realized that they were losing money on every project and that, if they got one
more project from a customer, because the software was so bad, it would cost
them more to serve that customer than the revenue. At that point he said,
“Forget this, I’m shutting it down.”
So they tanked the corporate shell and welched on all of the creditors, landlords,
and so forth, and they handed over the assets of the company to Red Hat,
which was another investment that they had. They gave all these contracts and
the software to Red Hat, essentially for free. They kind of gave people the
impression that the company had been sold to Red Hat. Now, if an ArsDigita
creditor came to Red Hat and said, “I want my money. You bought this corporation,”
Red Hat would be very careful to say, “No, we didn’t buy that corporation.”
But it seemed to the public that Red Hat had bought this company, so the
VCs could say that, “Yes, this was another successful investment.” Red Hat got
some advantage: they got some revenue that they could report, and since they
didn’t pay anything for this stuff, they didn’t have to say, “Oh, by the way, this
$10 million spike in revenue is due to an acquisition.” So it looked like they just
had growing sales. They hired a handful of the programmers and stuck them in
a suburban dungeon out on Route 495.
So that was the end, but it didn’t take too long. Our shareholder meeting,
I think, was in April of 2001. I sold out in June of 2001. They tanked by
January 2002.
Livingston: If there was one thing you could have done differently, what would
it have been?
Greenspun: The one thing would probably have been slightly slower growth, I
guess. Not to worry so much about the competition, concentrate on getting
really good people who shared the company’s vision, who could be mentored to
the point where they could then recruit somebody else. Basically, just limiting

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