Burnout in the Valley and Beyond.

Running fast and furious, dot-com CEOs (in the Valley, the Alley, and the Prairie) risk burnout--and even the industry's homemade remedy may not help them survive.

Gregg Grossman, managing director of New York executive recruiter The Vantage Group, ran into something not well publicized in the dot-com revolution. He was attending a meeting at a Manhattan company that was not performing very well. It desperately needed more cash and more talent, and was having serious problems moving from one operating platform to another.

Still, he didn't fully understand how precarious the firm's position was until he tried to find the 20-something founder with whom he was supposed to meet. He wasn't in his office, in the conference room, or talking to one of his staff at the mismatched desks jammed together in the cramped office space. Instead, Grossman found the executive in a back room, sitting on the floor between two filing cabinets, searching frantically through the Yellow Pages for consulting firms that could help build the systems his company needed to improve its dwindling chances for success.

"The guy was burned out dead," says Grossman. "And he's continued to burn."

Burnout? How could the brash, young leaders who have been pounding their breasts for the past three years possibly be suffering from a management affliction more common to establishment Corporate America than the entrepreneurial fringe of the New Economy?

Old-time technology baton Wilf Corrigan, founder and CEO of semiconductor maker LSI Logic, scoffs at the notion. "They're too young to burnout," he says. "Maybe they're hyper ventilating more because of the valuations."

But CEOs, venture capitalists, and recruiters in the Internet industry say, sotto voce--burnout, however enigmatic it may seem, does exist in the dot-com executive ranks. And big money--say, a 25 percent stake in a $50 to $100 million company that was created from scratch in six months--is no salve.

PORTRAIT OF A BURNOUT VICTIM

In contrast to the popular view of the burnout as a sallow-faced genius sitting at a desk clutching a half-empty bottle of whiskey, Dr. Beverly Potter and other experts define burnout as a loss of motivation among formerly enthusiastic leaders. Potter, author of Beating Job Burnout: How to Transform Work Pressure into Productivity, says that the two keys to maintaining your motivation are rewards (such as money and public recognition) and control.

The money half of the equation generally isn't a problem; the control side is. The Internet economy is a chaotic culture that imposes ridiculous time constraints on its executives. In March 1998, for example, David Friedensohn (who says he's doing just fine, thank you) incorporated BigStar Entertainment. Just 18 months later, the 38-year-old CEO took his company public on the success of turning bigstar.com into the Net's largest entertainment Web site.

John Helm contrasts his time at McKinsey & Co., helping to restructure companies, with his just-concluded stint as CEO of SpringStreet.com a nationwide guide to rental apartments that he sold to Homesrore.com. "[Then] we'd have about three months to figure something out," he says of McKinsey. "These days we've got three days, maybe if we're lucky, three weeks. People are negotiating a deal in three hours."

The pace of change has been so unrelenting over the past two years, it's been nearly impossible to predict what the competitive landscape would look like in three months, says Chip Austin, cofounder of NYC-based venture capital fund i-Hatch Ventures. "If you can't do it in three months, it's not worth doing."

Add to that the traditional pressure familiar to all CEOs: pleasing the financiers. Given the number of firms vying for capital, dot-coins absolutely must meet expectations, even when--or especially when--they're losing money. "You can't afford to miss a quarter," says Seth Goldstein, principal at the NYC-based VC firm, Flat Iron Partners.

"People underestimate the pressure you're under as a public company," says Mark Kvamme, former CEO of CKS and now a venture capitalist at Menlo Park, CA-based Sequoia Capital. 'And a lot of companies are going public before they're ready."

Worse still, the dot-corn CEO often faces these pressures with limited support. "There are far more CEOs in this industry than there are COOs," says Henry Bar-Levav, president and CEO of Oven Digital, an Internet consulting and development firm. That's due, at least in part, to the sheer volume of startups sucking talent into top spots. "Right now, there are probably somewhere between 100 and 200 openings for CEOs in the domestic dot-com universe," says A.T. Kearney's Gary Klein. "I've never seen anything like it."

And Gregory Slayton, CEO of Click Action, which facilitates permission-based direct marketing e-mail campaigns, notes that there are 800 CEO searches in California alone for dot-coms. "There aren't 800 qualified CEOs anywhere in the country," he says

In their searches, many companies have taken to raiding Fortune 1000 ranks, but old-school executives often prove ill-equipped to deal with the dotcorn's unique requirements, accustomed as they are to working in a slower moving, established market with a bigger support staff

Hence, the choosing of younger and greener candidates. "A lot of these companies are run by people who don't have experience in corporate life," says Friedensohn. And most of these youthful CEOs face extra pressure because they've only known success, says Shyton. "Failure is a good thing. It hones and sharpens one."

It is experience that offers CEOs context when they need it most. "When people burn out, they've lost perspective," says Gary Steele, CEO of Portera.com, a Silicon Valley B-2-B Web hosting services firm. He's been heeding the advice of investor Ruthann Quindlen, a partner at Institutional Venture Partners, who says that burnout is often self-imposed after three to four years. "The company is doing fine, but it isn't the success they'd expected," she says.

WebEx CEO Subrah lyar has seen burnout infect CEOs via their employees, who become disillusioned when they see others striking the job jackpot before they do. "People become restless by the third year if you're not showing progress," he says, "and that tends to zap the emotional energy of the person running the company.

The CEO, then, must act as a bulwark against these emotional swings, a draining task in itself "You have to be Mr. Sunshine," says Brewster Kahle, CEO of Alexa Internet. "If the president is having a bad week, it's like a big fractious family trying to do too much."

THREE CEOS IN THE VALLEY

But many West Coast executives are asking, why put yourself through all that turmoil? There's a new business model in town and it's one that some claim better accommodates building large companies in a short time frame.

By applying lifecycle theory to the office of the CEO, Silicon Valley has identified three periods in a startup's life that requite different types of CEO. The first type launches the company. The second shepherds it through its hypergrowth period. The third oversees its transition to IPO. (A fourth type typically comes in later to run the functioning bureaucracy.)

"There are very few people who can take the company from startup to CEO [of a public company]," says John Helm. "Here on the West Coast, it's accepted and expected that the guy who gets the thing set up will pass the baton."

Jaye Muller, former CEO and current co-chairman of jFax.com, used the system on the East Coast. A former East Berlin rock musician who sold a record that almost hit gold in Europe, Muller invented a scheme for receiving faxes and forwarding them to his e-mail inbox when he was on tour with his band. The technology became the basis for jFax, a company he set up in 1996. He was soon working 16- to 18-hour days, including weekends. "I was doing everything from finding the team to the financing. I was exhausted."

When Muller found a CEO, Richard Ressler, who had the experience to run jFax, he kicked himself upstairs and began playing music again. "Things are much better now," he says.

One indication of the growing trend toward serial CEOs, notes Kahle, is the increasing use among Valley CEOs of sabbaticals-what he calls just being on the beach. But there may be stronger forces pulling at CEOs to outstay their usefulness. "We haven't gotten very good in this business of transitioning CEOs because there's such a mystique about them," says Kahle.

And it gets worse as the CEO becomes a celebrity. "We're at a stage where CEOs have become heroes," says Bar-Levav. "When did you see these people on the cover of Time magazine 20 years ago?" Add celebrity to phenomenal stock valuations and suddenly the rewards loom larger than the loss of control. Celebrity CEOs feel affirmed in their decisions and continue with policies that appear to have made them wealthy and famous. All the while, the needs of the company are changing.

The paradox, however, is that even in Internet time, Wall Street likes some sense of stability Investors love to see a company go from a PowerPoint presentation to an IPO in 18 months--but they want it done with one CEO.

"People would have issues with three CEOs in 18 months," says i-Hatch Ventures' Austin. "There is an incredible amount of pressure for a CEO to stretch [to fill the role]. Stretch sometimes works out nicely. Sometimes it works well for the company, but the individual becomes a basket case. Sometimes it doesn't work for [either]."

With more dot-com IPOs just over the horizon, we may be about to witness the onset of a burnout epidemic if the market doesn't hold up. "I wouldn't say it's chronic yet," says Gordon Gould, former president of the Silicon Alley Reporter and current CEO of consumer wireless startup UPOC.com, "but give it another 12 to 18 months and it will be."

Setup for Upset

What are the factors that lead to CEO burnout?

Christina Maslach, a professor of psychology at the University of California at Berkeley, has written about it in The Truth About Burnout: How Organizations Cause Personal Stress and What to Do About It. "It's a mismatch between the person and the work environment," she says. Here are the six areas where you and the office can collide:

Workload: Do you have the time and resources to get done what you need to get done? If not, it can start to impinge on your family life.

Control: Are you able to make decisions or are changes in your industry making them for you?

Reward/Recognition: Money's the obvious gauge, but getting told that you're doing a great job by a customer or board member helps.

People: You've got to have a strong, trustworthy team under you. If you can't delegate with confidence, you'll end up taking more responsibility on your shoulders.

Fairness: Subordinates aren't the only ones concerned with social justice. You'll feel vulnerable if you think someone on your board is ganging up to block your initiatives.

Values: Family ties can pull you away from the company, but so can a desire to have something in your obituary other than having been a CEO.