Web Masters Episode #12: Craig Kanarick

In 1994, Craig Kanarick co-founded Razorfish, one of the first global digital media design agencies. By 1999, the company had 1,200+ employees, nearly a dozen offices around the world, almost $100m in annual revenue, and a successful IPO. By 2001, Craig and his co-founder had been forced out after they’d become the posterboys of dot-com excess. So what really happened? Find out on the Web Masters podcast.



Razorfish – Logos Download

Craig Kanarick:

I think we were somewhat misunderstood. I think people thought that we were trying to become celebrities or that we were trying to get recognition for ourselves, and that’s just not really what we were trying to do. I think that our models, our role models in some ways were more like Steve Jobs and Bill Gates and Barry Diller or Sumner Redstone at the time. You knew the name of the CEO. But what you really knew was the business, and that’s what we were trying to do. We had no interest personally in being famous or recognized. But we wanted the company to be known because we thought what we were doing was really awesome, incredible work and deserved recognition.

Aaron Dinin:

The person you just heard speaking was Craig Kanarick. I’m guessing a lot of you listening right now don’t recognize that name because, well, this isn’t 1999. But back then, Craig and his business partner, Jeff Dachis were kind of a big deal. They were the co-founders of a company called Razorfish. Razorfish was a new media design and consulting agency that specialized in helping big established, some might say old companies transitioned into the digital age. They were pretty good at it too. In five short years, they grew from two men in an apartment to 1,200-plus employees with offices around the world and IPO and a multi-billion dollar market cap.

During their journey to internet stardom, they hosted lavish company parties and hung out with celebrities, traveled the world and gave sold-out talks to thousands of adoring tech enthusiasts. In other words, for many people, Craig and Jeff were poster boys for the kinds of late ’90s access that led to the dot-com boom. But as you heard Craig explain, that’s not how they saw themselves.

Craig Kanarick:

We’re helping companies like Charles Schwab completely reinvent themselves. We had things to say about what was going on in the world and what was going to happen in the world, and I have to tell you, in retrospect, we were right. We were right about pretty much everything that we said about what was going to happen. The one thing that we were wrong about was how long it was going to take.

Aaron Dinin:

Unfortunately, being wrong about how long it was going to take was a big thing to be wrong about. But Craig and Jeff, certainly weren’t alone. In fact, we could argue being wrong about the timeline is kind of the defining characteristic of the late ’90s dot-com boom.

Craig Kanarick:

Pets.com, taking out Superbowl ads to get people to buy pet food on a website, which is crazy, but it’s not crazy. Now it happens. Now, probably 90% of pet food is bought on a website.

Aaron Dinin:

To be fair, Craig is right. In fact, just this morning, I was running low on dog food, and I didn’t even have to pull up a web browser to order more food from a website. Instead, I just asked Alexa to do it for me, which is a good reminder that we live in a world that visionaries like Craig were imagining decades before a lot of other people could see it, and sometimes, unfortunately, those kinds of visionaries who are a little too far ahead of their time can make the people around them a bit uncomfortable, or in Craig’s case, maybe he was making people uncomfortable because he had a strange habit of dying his hair bright blue, wearing a matching fluorescent blue suit. Are you ready to hear his story? Great. Let’s get dialed in.

[INTRO]

Aaron Dinin:

Welcome, everyone. It’s time for another episode of Web Masters. I’m Aaron Dinin, your host. I’m a serial web entrepreneur. I teach in the innovation and entrepreneurship initiative at Duke University, and I also study the history of internet entrepreneurship. This is the podcast where we explore parts of that history by talking with people who built some of the world’s most influential and important early websites and web-related thingies. Speaking of web-related thingies, worth noting, even though it won’t be the focus of this episode, our guest, Craig Kanarick was part of the team that created and launched the first banner advertisements on the web that happened back on October 27th, 1994 with AT&T banner ads placed on hotwired.com, which would eventually be shortened to just wired.com as in Wired Magazine.

Since Craig’s invention of banner ads is just a brief footnote in this episode, that should tell you we’re in for a good one. But before I share Craig’s story, I need to share a few details about something else you’re also going to enjoy. This podcast is being created with the support of our sponsor, Latona’s. Latona’s is a boutique mergers and acquisitions broker that specializes in helping people buy and sell cashflow-positive internet businesses. That includes everything from e-commerce sites on Amazon FBAs to SAS Apps, domain portfolios, blogs, other types of content websites, basically any online work from anywhere business you can imagine. If you’ve ever thought about launching an online business but don’t want to start from scratch checkout Latona’s. Their website is filled with listings for already profitable internet businesses you can buy today, or well, start buying today. I suppose buying a business is the kind of transaction that might take a few days to complete.

Alternately, if you’ve already got yourself a profitable internet business and are thinking of stepping away, Latona’s can help you find the perfect buyer. Either way, if you’re thinking of buying or selling an internet business, be sure to head on over to the Latona’s website. It’s latonas.com. That’s L-A-T-O-N-A-S.com.

Now, back to Craig Kanarick. I’ll admit, I didn’t know what to expect before talking with him. A quick Google search on the early days of Razorfish brings up a trove of articles about the company and its prominent co-founders. If I’m being honest, the articles really aren’t that flattering. They include stories of parties build with strippers and Vegas boondoggles and fancy cars, dot-com boom and burst, millions of dollars earned, millions of dollars lost, and in the middle of all that is Craig, usually with hair dyed, some bright shade of blue, red, or green, and wearing an equally bright suit to match. You can’t help, but read the stories and think, “Huh, so this is why the dot-com bubble burst.”

But of course, that’s what those articles are designed to make you think. They want you to believe the dot-com boom happened because a bunch of overly eager investors put too much trust in a bunch of young 20 somethings with MBA’s who didn’t have real businesses but knew how to throw good parties and spend lots of money. Of course, there’s probably some truth in that. It certainly makes for a good read. But within minutes of hearing from Craig, you’ll quickly realize his story and the story of Razorfish simply doesn’t fit such a one-dimensional narrative.

For starters, Craig wasn’t some MBA student just trying to ride the coattails of a popular trend, who is actually more of an Ivy league educated Star Wars nerd, who is genuinely fascinated in exploring and understanding early digital technologies.

Craig Kanarick:

So I started the University of Pennsylvania in the fall of 1985 as an engineering student. I was given an email address. It was right around that time that I sort of discovered two things about the internet that were pretty fascinating. One was email, and the other was usenet, a series of online bolt and boards on every subject imaginable. So that was really the beginning of me understanding what it was like to have, I’m going to call it millions, but I’m sure it was only thousands of computers all sort of connected to each other at the same time.

I was a undergraduate. I studied both philosophy and computer science. I thought I was going to build robots, and that was my sort of way of creating an artificial intelligence major. I was probably fascinated with star Wars movies and thought that robots were really awesome and wanted to build computers that could think. It sounds crazy talking about it now, but when I got the printed course catalog or the printed brochure from Penn, because there were no websites to look at or videos, they had a cognitive studies program, which allowed students to combine a computer science degree with either a linguistics, philosophy, or psychology degree. To me, philosophy made the most sense and was the most interesting of the three, so I chose that.

Aaron Dinin:

What’s interesting to note here is that, while an 18 or 19-year-old interested in artificial intelligence and robotics wanted to stand out by today’s standards, Craig is talking about 1985, that was still wildly new, even for his college.

Craig Kanarick:

When I got to Penn, I went to my advisor and said, “Okay, I’m in this program, what do I do?” They said, “Oh, congratulations. You’re in the first year of the program. So go get a major in philosophy and go get a major in computer science, and let’s come back every semester, and you can tell us which courses you think are really good core courses and which overlap and which don’t.” It’s like, “Are you kidding me? What?” I got in. So it didn’t matter. There was no program. It was a double major. But there was a paragraph in the book that made it seem like there was one. So it was kind of a funny experience for me. Maybe my first entrepreneurial gig was designing a cognitive studies program, either that or mowing lawns. I’m not sure.

Aaron Dinin:

So as you can hear already, Craig definitely was more of a techie than a business guy, and he continued that work after college as well, spending a few years as an engineer before returning to school to get his master’s degree at the famous MIT Media Lab. He graduated from MIT in 1993, which was right around the time the World Wide Web was starting to pick up steam with the general public. But of course, it wasn’t the web as we know. It was a very primitive version of the web, and at the time, even Craig had trouble seeing what it was going to become.

Craig Kanarick:

I said to my friends that the internet was like a really big, slow, hard drive or really big, slow, I guess it was a laser disc drive. To me, the internet was valuable, but I didn’t see the full picture until sort of around that time when I graduated from MIT in ’93 when the World Wide Web was just starting to break out of its eggshell.

Aaron Dinin:

Honestly, that’s a bit unusual because I feel like everyone I’ve spoken to so far for this podcast says that as soon as they saw the internet and the web, they knew it was going to change the world. So I got to ask, why do you think that wasn’t the case for you, or do you kind of think maybe those other people are lying a little?

Craig Kanarick:

Well, to be clear, I knew where the world was going. I didn’t think the internet was the core of where the world was going. What I knew was that digital technology was going to take over the world. When I got to college, one of the first things I did in 1985 was went to the bank to open a local bank account in Philadelphia, and they explained to me this new technology they had called an automatic teller machine, and I was fascinated about the fact that I could go interact with a robot, right? I was trying to study robotics, that I could interact with a machine instead of a human.

So by the time I got done with undergraduate and two years of graduate school, what I knew was that we would be looking at screens way more than we ever had been. So for me, I thought what was going to happen is that screens were going to invade our lives and that digital was going to replace analog technology. So I knew that technology was going to be important, that screens were going to be our primary form of interface moving forward and that screens were really ugly.

Windows was hideous and ATM machines were ugly. Most screens we interacted with were really ugly. So what I thought we would do was get into the screen business and that what we would do is design anything that was on a screen, whether that was redesigning Microsoft Word or redesigning ATM machines or redesigning DVD or LaserDisc interfaces or websites. It didn’t matter to me. I was agnostic about what was powering the screen. So that’s what I knew. I knew that we were headed towards a major, major revolution, that we were going to be infected with technology and that digital was going to find a way, that digital was a force of nature.

Aaron Dinin:

This is a big distinction between Craig and most of the other web pioneers we’ve met so far on the show. When a lot of these other people first saw the web, they focused on the aspects related to connectivity. In contrast, Craig was drawn to interfaces and how people would engage with the new technologies. That’s an important difference because it foreshadows the direction Craig’s career would take. He didn’t go on to launch a revolutionary technology. Instead, Razorfish was at its core, a digital media design agency, meaning his team was focused less on what new technologies they could build and more on how people would interact with them, and Craig began laying the foundation for that kind of company as soon as he left MIT.

Craig Kanarick:

I think my first freelance gig out of college was I got hired through this other friend of mine to do a startup screen for an IBM computer for a PC that when you first opened it up and plugged it in to the wall and turned it on, it basically came up and said, “Thank you for buying me. Can you tell me what time it is?” Which was literally to set the clock on the computer because the computer was not connected to any network by which it could download what time it was. Through that firm, we did some graphic design. We had a project to do some ads, the equivalent of banner ads on prodigy, which ran at the bottom of the screen. They were not necessarily clickable, but we did a bunch of graphic design stuff.

Our client from IBM asked us to learn about the World Wide Web, learn what this thing is, learn about HTML and see if you could build a web page for the PC division of IBM. So my friend Otto and I went away for the weekend and did all the research we could. I don’t remember if we bought a book on how to do it or what it was, but I learned HTML. We did some graphic design, and we came out of that weekend with a five-page website for the IBM PC division.

Aaron Dinin:

It seems worth pausing to underscore that the little banner ads Craig is referencing here included, as I mentioned earlier, the very first banner ads on the web, so that’s pretty cool. It’s also kind of cool to think that Craig built the first website for IBM PCs, and that was a by-product of learning HTML in a weekend. So again, we’re talking really early days of the web back when I guess it was okay for Fortune 500 companies to hire a couple of 20 somethings to build your website who’d never written HTML before, which again is pretty crazy to imagine. At this point, Craig is getting gigs through a design agency he was consulting for, but he was frustrated having to work under the direction of someone else. So what comes next is an example of what would eventually become Razorfish’s trademark competence, though some might call it arrogance. Craig decides to leave the design agency and set out on his own.

Craig Kanarick:

I was living in New York City at the time, and this company, Tangent Design that I was consulting for was up in Westport, Connecticut. I didn’t really enjoy the commute back and forth, and I was a bit of an arrogant (beep) and thought, “Well, I’m doing all this work, and all this company is doing is sort of negotiating the contract and marking my rates up. I could do that. I could go get clients on my own. I could build a client base and get to keep all the money and wouldn’t have to schlep back and forth to Connecticut.” I printed up some business cards with my name on it and hit the pavement and tried to get clients.

Aaron Dinin:

So that was the start of Razorfish?

Craig Kanarick:

So that was me going out on my own, and that’s got to be now probably early ’94, something like that. I was just trying to meet anybody who was doing anything digital in New York City, and I got introduced to these three guys that were setting up a magazine. Well, it wasn’t really a magazine. It was called blender, and it was going to be a CD-ROM subscription. So it was going to be like a magazine, but it was going to come on a CD-ROM. Like a magazine subscription, you would pay for the subscription, and you would get a CD-ROM in the mail every two months, and it would be filled with music and entertainment content.

It was started by Felix Dennis of Maxim magazine fame who had a lot of money and a lot of publishing experience. I was going into their office and meeting them and literally helping them take computers out of their boxes and plug them in. We were chatting, and I mentioned that I grew up in Minneapolis, and they said, “Oh, you’re from Minneapolis. We had a guy in here earlier from Minneapolis. Seems like he’s about your age, who’s been trying to convince us to hire him as our chief marketing officer, our head of ad sales. Maybe you know him. His name is Jeff Dachis.”

I said, “Not only do I know. I grew up with him. I knew him a nursery school. We went to the same summer camps. We sat next to each other in Hebrew school. What’s he up to these days.” I went home that day, and Jeff was on my answering machine. They’d called him and given him my phone number, and we got together and chatted. I sort of explained to him what the internet was, and I brought up a web browser, and I remember showing him in real time who was clicking on the website. So you could look at these live views, these live log files of who is clicking on the website at the time, and his eyes lit up, and he was the first person that didn’t look at me as some sort of nerd freak because he had been in the marketing world and understood the power of direct marketing. He had a direct marketing firm for a long time, and we chatted a little bit more and decided that we would go into business together.

Aaron Dinin:

So basically, you’re saying Razorfish, a company that would soon be worth billions of dollars was started by two old grade school buddies who randomly reconnected in New York City and decided to launch a company? I mean, it seems almost miraculous that it all just sort of fell into place and worked out as well as it did, right?

Craig Kanarick:

The beginning of the business, we were co-founders. I like to tell a shortcut and say that the beginning of the business, I did all the work, and Jeff was the business. I was the designer and the programmer and built the stuff, and Jeff dealt with all the business issues, which were significant. I think it’s an important lesson for entrepreneurs. I mean, it was a great balance. We knew each other from childhood. We had a builtin level of trust. We had a very natural division of labor. He was very interested in opening up the bank account and getting the office lease and negotiating the lease and getting the financing and billing the clients and collecting all that money, and I had no interest in that. I just wanted to be an artist and a scientist and write software and design pretty pictures and do those things.

It was a great division of labor. At the same time, we both understood what the other person was doing enough that we could counsel each other. So I could still go to him and say, “What do you think of these designs?” His input was valuable, and he could come to me and ask about business issues, and I knew enough about them to be comfortable to give him valid feedback. So it wasn’t a complete don’t ask, don’t tell, go do your thing. It was a great collaboration from the start.

Aaron Dinin:

I always love asking, where did the name Razorfish come from? I mean, could you get any more ’90s internet startup-y?

Craig Kanarick:

So the name itself came from pointing at a dictionary. Now, we didn’t just say whatever comes up first, we’re going to use. But our naming process was like a lot of typical naming processes. We first sat around the room and smoked a lot of weed and looked at anything we saw in the room and were like, “Oh, you’re wearing red shoes. How about red shoes design? The room is white, pure white design.” We just brainstormed. Then we went on a walk and brainstormed. Then we looked in a dictionary and brainstormed and just made all these lists.

Jeff, I believe he had a landline telephone in his room that wasn’t connected anything. It was just a prop, and we would actually sit there sometimes and pick up the phone and pretend that we were answering the phone for the agency, and it was very clear that some of those names got crossed off really quickly. We didn’t want to put our names on the door. We wanted the company to be not tied to our identity. We wanted to be strong leaders of the company and be visible, but we didn’t want it named after ourselves. That was a conscious decision.

Then we had a deadline. We had Time Warner as a client. They hired us to build a website for the New York Botanical Gardens. We just narrowed the list down really quickly and really carefully and Razorfish Rose to the top as the best name.

Aaron Dinin:

Wait, so you didn’t have a name, but you already had Time Warner as a customer. That’s pretty crazy, right? How the heck does that happen?

Craig Kanarick:

I was lucky, really. I mean, a lot of it was luck. This first customer that we had, the first client, Time Warner, I was asked by an old friend and colleague who ran the internal telephone system at Time Warner and their email system to come in and speak at a day-long internal seminar to Time Warner employees about what the internet was and what the World Wide Web was. So I showed some of the work that I had done as a freelancer, I worked through Tangent Design and was lucky. There was a guy in the audience who was the manager of Time-Life books and hired us to build this website.

Aaron Dinin:

But it couldn’t have been all luck, right? I mean, there had to be something else going on.

Craig Kanarick:

So I have to say through Tangent Design, I had a pretty good portfolio, and then getting Time Warner as a first client for Razorfish was a pretty good launch. Jeff was really good at marketing. We emailed everybody we knew and every business card we had, and I guess we had some angels on our side, and some new projects just started to come into our lap. It just grew very quickly from there.

Aaron Dinin:

Sure. But maybe I’m reading between the lines a bit here. But how much of it was also related to how early you were in the industry? I mean, it’s not like there was a ton of competition in the web design space at the time, was there?

Craig Kanarick:

So really, there were just a few of us there at the very beginning. So you’re right. There wasn’t a lot of business. There also wasn’t a lot of competition. Time Warner hired us to build a website for the New York Botanical Gardens, and it’s very clear that we all had conversations around e-commerce. We said, “Well, why don’t you sell the Time-Life books on the website? Why don’t you sell tickets to the botanical gardens on the website?”

Everyone said, “No one’s going to type their credit card in to a website. Are you kidding me?” I remember saying, “You’re crazy. All these infomercials, people give their credit card numbers over the phone all the time. People hand their credit cards to people in stores where they take a Xerox copy of their credit card. You should do this.” They said, “No way, it’s not secure, and we’re not going to do it.” That was the end of the conversation.

Aaron Dinin:

How ridiculous does that conversation sound 25 years later. But it’s important to remember that there was a time not too long ago when people thought nobody would want to enter their credit cards on websites. That should give you an idea of just how early Craig and Razorfish were in the web industry. Being so early was a big part of what allowed Razorfish to grow rapidly. Without any established firms to compete with, Craig and Jeff could secure the kinds of big enterprise customers that startups typically can’t get. But that’s not to say it was necessarily easy.

Craig Kanarick:

We played all the games that small companies play to try to impress clients. I remember in one meeting, we had a big client coming, and we asked a couple of other people down the hall if they could interrupt the meeting, just come down the hall in the middle of the meeting and come into the office and hand us a bunch of papers and say, “Here’s that thing you were waiting for,” and then leave to make us look like we were bigger than we were.

We sent out a press release to every single email address that we knew of every week, whether we had something to say or not. We came up with some sort of announcement. We hired somebody. We launched a project. So we were extremely aggressive in marketing and in just getting business.

Aaron Dinin:

The constant string of press releases and self-promotion was something Razorfish became famous for, or to some people, all that self-promotion made Razorfish infamous. If you dig through the archives of articles and forum posts about the early New York tech scene, you’ll find plenty of references to Razorfish’s press release addiction. It even led to a popular joke at the time about how the company put out a press release when Craig’s co-founder Jeff tripped over his own shoelace, which of course wasn’t true, but people kind of believed it because it seemed like something Razorfish might do still.

Still, Craig and his co-founder Jeff didn’t mind all the attention. In fact, they worked hard to get it. As marketers, they understood that their success was intimately tied to their ability to get people talking about them. So much of what they did in the earliest days of their business was drive awareness for the brand. It worked. Razorfish quickly gained a reputation of being one of the top digital agencies in New York that paid big dividends in 1996.

Craig Kanarick:

Omnicom, which is a big ad agency holding company chose a new CEO, guy named John Wren, W-R-E-N. One of his first moves as CEO was he wanted to expand into the digital agency business. So he hired a consultant to go out and find the five best companies out there, and he ended up finding six, and he made investments in all six of us. He bought somewhere between 25% and 40% of each of those companies and announced them all in the same day. That gave us the growth capital to move into a much bigger office, to redo our own marketing and our own business pitch, and also to go out and use a credit facility to buy other companies.

Aaron Dinin:

That last part was the really important part, right? As I was researching Razorfish, I saw that you all acquired lots of other companies, which was a big part of your growth strategy.

Craig Kanarick:

Well, it was because there weren’t enough people to hire, right? So there just weren’t enough qualified people in this business. There was a point where it changed, and there were tons of people available because people wanted to be part of this cool new thing, or they smelled money. But there really just were not a ton of people to hire. We were getting a lot of customers, a lot of clients. We needed resources to be able to deliver those services, and we couldn’t grow fast enough by interviewing and hiring. It was much easier to go to San Francisco, for example, and find this company called plastic that was basically doing the same thing that we were and felt culturally just like we did and to just join forces.

Jeff, he wanted to be the fish, not the bait. We wanted to be the brand. We thought that we were the strongest brand in the space and that we knew what we were doing. So we went and found people who were like-minded who wanted to be part of our team and recruited them into our team and merged them in. We did that very successfully through acquisitions in San Francisco, LA, London, and then we acquired, but really merged with a company that was very close to us called Spray, which sort of doubled the number of locations, and all of a sudden we had offices then in Stockholm, Oslo, Helsinki, Hamburg, and Amsterdam. Our first model of growth was through acquisition.

Aaron Dinin:

The other important detail of the Omnicom investment was that rather than purchasing its ownership stake from the company, which is the traditional way of investing, the ownership stake, Omnicom purchased in Razorfish came directly from Craig and Jeff themselves. This turned the two young entrepreneurs into some of the earliest 20-something internet millionaires, and it enabled what we might call a lavish lifestyle that became a big part of their personal brands.

On the surface and the way it was portrayed at the time, Craig and Jeff were spendthrift wannabe celebrity playboys, and Craig readily admits they certainly had some fun with the money. But the personal branding was for them also another important marketing strategy for the company. Also worth noting, it was for the most part a successful marketing strategy, and this is where the story of Razorfish ages a bit better than maybe it seemed it might at the time.

In a lot of ways, Craig and Jeff were popularizing the phenomenon of the tech founder celebrity. So yes, at the time, it was unusual to have these two young brash, 20-somethings leading a fast-growing tech company, speaking at conferences around the world and being the focus of highly public praise in gossip. That’s more common today. It’s even something that for better or for worse young entrepreneurs aspire to. Whether they should or not is of course a completely different question.

While it’s got its perks, Craig will be the first person to tell you that it also has plenty of drawbacks. One notorious example, Razorfish hosted a party that to this day remains part of New York tech scene law.

Craig Kanarick:

Our first experience with this weird difference between the image we were trying to portray and what got reported was we actually did launch a content piece called the Razorfish Subnetwork, which was really a place for us to put a bunch of our art and content that we made for other people. At the time, meeting other people in the industry was really important. There was this thing called the World Wide Web artists consortium. We would have monthly meetings in a conference room with some speakers, and you get to meet other people who were in the industry, and there was also a big mailing list.

Maybe somebody would be like, “Hey, let’s all go to this bar this night and tell other people who work in the industry.” We decided to throw a party. We decided to have a really good time at the party and just have fun and throw an awesome party. We had an empty floor in our building. So we got the space for free. We had a friend who was a DJ who DJ’ed the party. We had an artist friend who did the décor, and we threw a fun party, and one of the things we did is Krispy Kreme Doughnuts had just moved into New York City. So we got it catered by them. We had a bunch of doughnuts. I think we had pizzas. I don’t know what else we had. It was not very complicated, but we decided to have a bunch of weird art installation pieces in the party.

So we hired a couple of belly dancers to come and do belly dancing. All of a sudden, we just stopped the party and had belly dancers. We had a Drum Corps. We would stop the party and have a Drum Corps drum. We had a couple of Argentine tango dancers. So we would stop the company and have tango dancers. So we had these weird dance music interventions that would happen. The DJ would stop, and for five minutes, somebody would perform and do weird things. We shot this three-hour long video of people sitting around in an office and going back and forth and coming in and out of the office and partying, and there was a pile of baby powder on the table that was meant to look like a big pile of cocaine, and there were empty bottles lying around.

Aaron Dinin:

Wait, is this a real VIP room? Or was it a recording meant to look like one as its own type of, I guess you’re calling it an art installation?

Craig Kanarick:

Literally, a TV on a AV stand, and it said live feed from the VIP room. But there was literally a VCR machine there with the tape in it playing. We just did all sorts of crazy things. So our elevator was really slow, and a lot of people came to the party. We ended up having a line around the block for people who were waiting to get in to the party because the elevator was really slow. So we sent down four people with all these doughnuts and passed them out to people on the street while they were waiting to get in the party. The fire department came because they were worried about the capacity issues. When they saw a giant line, he didn’t know what was going on. They asked what was going on with the video, and they demanded to go to the room, and we were like, “Guys, it’s a videotape.”

We unplugged the video and showed them. They’re like, “We have to go see the room.” So we walked them down the stairs to show them the office that was literally that exact office. There was nobody in it. They were like, “Great, thanks.” They took a bunch of doughnuts and they ran. The reason I tell the story is the next morning on this mailing list, the World Wide Web artists consortium mailing list very rapidly went wacko and sideways. Someone posted effectively, “I wasn’t at the Razorfish party last night. Was anyone else there? I heard they had strippers there.”

The next response was basically I wasn’t there either, but I wouldn’t put it past those guys to have strippers dancing on the conference room table using their investor’s money. Next thing you know, it became fact, right? Apparently, we had strippers at the party, and it just turned into this ridiculous story. I think if you google the worst internet party of all time or the most infamous, there’s stories about this thing. It’s crazy, and it built our brand. Not exactly the way we wanted it to, but it did build the brand. I’m a little embarrassed about that story, frankly, but I thought I would tell it to you. You can decide whether you want to use it or not.

Aaron Dinin:

And as you heard, I did want to include it here because in my mind, it’s a critical part of not just the Razorfish story, but all entrepreneurial growth stories, and in a lot of ways, the purpose of this podcast, Craig’s story is a good reminder that every successful and unsuccessful entrepreneurial venture has the public narrative, which is what most people see and the private narrative of the people actually building it. Usually, those two perceptions are quite different.

Craig Kanarick:

I think a lot of what people don’t understand about being an entrepreneur is not only is it much harder than you think it’s going to be. I also had to do a lot of things that I didn’t think I was going to have to do. I was in the food industry for a long time, and I would talk to entrepreneurs who they had a really great cookie recipe, so they got into the cookie business. Then they realized they had to do sales and build a website and pay the electric bill and get insurance and evaluate insurance. Then when they employees, they had to evaluate an insurance plan, and they never had time to make cookies anymore. Either that, or all they did was bake cookies, and they were sick and tired of baking cookies. They thought they were going to love doing it all the time, and they didn’t.

So what I say to entrepreneurs is it’s never what you think it’s going to be. You can get close, but you’re going to do things you never thought you were going to. You’re going to do more than you ever thought you were going to do. You can do less of the things that you like doing. The things that you like doing, you’re not going to like doing that much anymore, and I think that’s a big lesson. I think the other one is, of course, it’s a very lonely role. It’s a lonely role and a lonely road. Entrepreneurialism is this. Sociopathic behavior that best and that you are right, and other people don’t see what you see and that you have to do a lot of this by yourself and on your own, and you have to portray everything is going really great because that’s your job is to sell people on how great it is so that people will invest in you and trust you like, “We’re great. We’re awesome. We’re making tons of money. We’re the best people in the world. We’re the best clients in the world.”

You need to be a little bit of a sociopath. You need to have this incredible amount of confidence, and at the same time, this unbelievable amount of self-doubt. You need to balance your ability to work really hard and to just stick with it even when things are not going well. It takes a very complicated mental construct, and it’s a lot of work.

Aaron Dinin:

Entrepreneurship is a lot of work. I’m not saying it’s all terrible work. No, because hard work isn’t necessarily a bad thing. For example, putting together these podcasts every week is a lot of hard work, but I enjoy it. Still, I guarantee the experience of actually doing it is probably very different than what it looks like from the outside. But the outside of podcasts like this mostly seems like a cool opportunity to talk with interesting people, and it is. But that’s only a tiny fraction of how I spend my time. The rest of my time is taken up with dozens of emails to schedule interviews, hours of editing and lots of promotional work. The same is true for Craig.

From the outside, running Razorfish looked like a big party. But from the inside, building and managing Razorfish required tons of effort in order to give the impression that working at Razorfish, if you’re a potential employee or working with Razorfish, if you’re a potential customer was well, a big party.

Craig Kanarick:

I used to talk about the culture at Razorfish. We worked hard. There’s a lot of stories about companies where people worked really hard, and certainly, there was access at times. Again, we’ve been misconstrued sometimes about overdoing it. We either famously or infamously flew all 1,200 people to Las Vegas for a three-day offsite to work and to get to know each other. We had grown very quickly. We had offices all around the world. We had something like 22 offices in nine countries. We needed to get everybody in a room together so that they all knew that they were part of the same team.

While it’s portrayed as this boondoggle, where we flew everyone to Vegas to party, what was interesting is that we actually did a lot of work.

Aaron Dinin:

Yeah. I mean, honestly, when I was reading about the history of Razorfish and the scandalous nature of some of these things that you all did, I kind of didn’t understand what the big deal was. I mean, a lot of that stuff seems almost routine now. Big corporate perks like travel and luxury offices are basically expected these days in order to recruit the best talent.

Craig Kanarick:

Right. The war for capital, you have to have perks. We also built a culture where people enjoyed going there. People used to talk about going out to a party, going out on a date, going out for a bike ride. People used the word out for something they enjoy. But they would talk about going into the doctor or into the hospital or into the office. What we wanted to do was build a place where people would say, “I’m going out to work. I’m going out to the office. I’m going out to Razorfish. I’ll see you later.”

If people could do that, we’d be really happy. There’s a lot made about building a brand and being audacious. But we had to be audacious. A revolution was happening. A revolution did happen. People were listening to this on a computer, which at the time was unheard of. Like I said, we knew what was coming, and so we beat the drum to say, “Listen up, this is happening.”

Aaron Dinin:

To be fair, Razorfish did a really good job of beating that drum. Within four years of launching, Craig and Jeff had offices around the world, well over 1,000 employees and were ready to go public. Here’s the thing. They weren’t some flybynight.com with no real revenue model. They were generating nearly $100 million in revenue. By any reasonable measure and even plenty of unreasonable measures, that’s a very real business. So in April of 1999, they raised $48 million in an IPO.

Craig Kanarick:

We went public, and it was all very exciting and interesting to be part of that universe and was great to tune into the news and see our company talked about, and it was fun in a lot of ways. It also was really miserable. The amount of work that we had to do to go public, the amount of work that we had to do in reporting was miserable. The unbearable distraction of everybody constantly monitoring the stock price and talking about how much money they were worth on paper than asking how much money I was worth on paper and treating me differently because I had a couple hundred million dollars of fake money, paper money, that was very difficult.

So there’s the personal impact for me emotionally was (beep) up and people treated me differently. I didn’t know what to do. I didn’t get into it for the money. I didn’t sell any stock. I didn’t know if I was being stupid or smart by not selling the stock. I sort of just didn’t pay that much attention to it. The distraction at work, like I said, it changed the conversation enormously. It also revealed some people’s true nature when they, all of a sudden were out of their lockup and could sell their shares and take a bunch of money off the table and leave, including people who said they were going to be with us for the long haul.

So I was revealed to some people’s inner nature and disappointed in some of them, frankly, and what they did. In retrospect, it was probably smart. I mean, they protected themselves. He’d say money changes everything, but it did.

Aaron Dinin:

So this is all occurring in like April of 1999. So the dot-com boom is pretty much on the horizon. But it kind of sounds like Razorfish should have been able to weather that because you were making money. So what happened.

Craig Kanarick:

A whole lot of things happened at the same time. The market started to mature where our clients were all of a sudden starting to understand that after spending millions of dollars on building websites, they needed to make them profitable. They weren’t just marketing exercises, but they needed to get some return on that investment. Number two, there were enough people out in the world who were claiming to be able to do what we did, that our clients were able to bring a lot of their work in-house and build internal technology departments. Number three, there was this internet, digital universe boom, where all these companies were going public, and there were just so many more companies that had no (beep) clue what to do.

So it was really hard to separate the wheat from the chaff and understand there was tons of computer-based companies and e-commerce companies and consulting firms, and it was littered with companies of every kind of quality. People forget that there was a derivatives market going on. So the financial markets were also rapidly changing, and there was a banking crisis. The banks and the bankers were more interested in making money off of all this trading that they were in bringing solid companies to the market, and everybody was lumped into the same category.

So a whole lot of things happened at the same time. Then through 2000, through the course of the year 2000, all sorts of things started to pop, right, and break

Aaron Dinin:

Like what? Like what was breaking? Was it the business model or the expenses or customer acquisition or maybe a combination of lots of things?

Craig Kanarick:

We started to lose business because clients would pull their stuff in-house. Our clients started to slow down because they really needed to figure out how to get a return on their investment. Employees left because they took their money and ran, good employees. Bankers were churning up all sorts of stuff all the time. Bankers were telling us, “Stop being profitable. You don’t need to be profitable. Your competitors aren’t profitable, and they’re being rewarded for that. So just go after growth, and you’ll raise more money. You’ll do a secondary. You’ll do this, you’ll do that.”

Look, I’m 32 years old, and I’ve never run a publicly traded company before. My board and my bankers, who I trusted to give me advice, they’re saying, “(beep) go grow, just do stuff.” So stupid me, I listened to some of my trusted advisors, and we grew too quickly. We didn’t pivot with the industry. We didn’t learn how to specialize as an agency into various forms. We didn’t know how to market ourselves anymore. It’s funny to be a firm that really built itself on the idea that the world is changing fast. You need to be flexible. We almost didn’t change fast enough ourselves, and the irony is not lost on me.

Aaron Dinin:

But isn’t Razorfish still an agency, or at least the name is, but it seems to have changed hands a bunch of times? Obviously, you’re no longer involved. So how did that happen? I guess you and Jeff left or got pushed out at some point?

Craig Kanarick:

Pushed out is a fine terminology. Look, we had a choice. At the time we’re getting destroyed in the press. We’re getting humiliated on 60 minutes in Wired Magazine. We have people calling Jeff’s cellphone in the middle of the night with not quite death threats, but death threats. We’re part of a massive class action lawsuit about fraud for our stock price. It is not that enjoyable, fun place to go out to work anymore. So we said, “Look, we can lay off another 400 people that we’ve just been doing and watching people cry when we tell them that they’re getting laid off. We can burst our doing this for another two years, or we can just walk away and let it be somebody else’s problem.” In discussions with the board and other people, everyone collectively said, “Yeah, you know what, go.”

Aaron Dinin:

So where’d you go? I feel like I read something about you becoming basically an unpaid kitchen chef’s aid or something like that?

Craig Kanarick:

Yeah. I ended up working in a restaurant. Our office was right across the street from a very well-known cooking school. During those months of layoffs, I would be talking to people about how they were getting laid off, and I would look over their shoulder out the window at these hooking school students taking a cigarette break with their big white hats on and thinking, “God, that would be so much better. I would so much rather learn how to make soup or bake a cake than do this. I’m going to go to cooking school.”

Long story short, I had known Mario Batali through a bunch of other mutual friends. I bumped into him at an event. We started talking, and he said, “Why don’t you come and be a free slave in my kitchen? Why don’t you come do an internship, an externship in my kitchen?” I couldn’t believe it, and I said, “Sure.” So I went and spent a few months as a prep cook intern at an Italian restaurant in New York.

Aaron Dinin:

From 20-something internet tech millionaire to unpaid prep cook intern. That is quite a career trajectory. Even though on the outside, it might sound like an outcome to be ashamed of, again, we’ve got ourselves a situation where what people see on the outside isn’t what the entrepreneur is actually experiencing.

Craig Kanarick:

I’m really proud of building that team and building a community of people that to this day, I’m still in touch with, people who are still leading the industry that worked with us, and we built a great brand and a great company. I’m also really proud of the work that we did. I’ve work that I did, work that I collaborated with that’s in permanent collections of museums, and we helped radically reinvent companies like Schwab and other companies. So we did outstanding work for our clients, always, always. All of our product, all the things that we delivered were extremely high quality. We innovated, we saw the future, and we built a great place for people to thrive and build their careers, and we opened up a place where people found themselves. It’s clear with some of these people that are still in that industry 30 years later, that that’s what they were able to do in our modest little place. So I’m really proud of all of that.

Aaron Dinin:

Craig is proud of what he built during his time with Razorfish, and it’s hard to argue with that. Like lots of late ’90s tech companies, Razorfish was a true pioneer in an industry that was completely new. Everyone had a lot to learn, and many of the things Craig and his company did, even if they seemed a bit unorthodox or even extreme at the time, became the foundations on which so many future careers and businesses have been able to thrive. So for someone who made a career out of drawing attention to himself in somewhat controversial ways, I think this podcast episode is one bit of positive attention that Craig deserves. If you agree, well, I hope you consider sharing this episode with everyone you know so more people could hear Craig’s incredible story.

While you’re at it, hey, why not subscribe to webmasters so you’re the first to know when we’ve released our new episode each and every week. You can also follow us on Twitter. We’re @WebMastersPod. I’m on Twitter too at @AaronDinin. That’s A-A-R-O-N-D-I-N-I-N. I also write articles based on these interviews, as well as lots of other articles about startups and entrepreneurship over on Medium.com. Just search for my name there. You’ll find everything I’ve written.

I’d like to thank Craig Kanarick for taking the time to share the Razorfish story. He’s on Twitter. His handle is @Kanarick. I also want to thank our sound engineer, Ryan Higgs, for all his slicing and dicing and leveling and whatever other magical things he does so well, and I want to thank our sponsor Latona’s. If you’re interested in buying or selling an internet business, be sure to check out latonas.com. Finally, of course, I need to thank all of you for listening to this episode. We’ve got another one coming in just a few days. But until then, well, I guess it’s time for me to sign off.