South Airport Boulevard may not be steeped in the same mythic sense of possibility as Sand Hill Road, but today dreams are being reborn at a liquidation auction at the Ramada Inn of South San Francisco, a purgatory where the spirits of dead dot-coms are relieved of their earthly belongings to better float into the entrepreneurial ionosphere.
Like everyone else here, I have come to bury dubious business models, not to praise them – and more importantly, get some computer equipment cheap.
The nearly 1,000 lots on sale this day are from a collection of failed Internet companies whose identities have already faded into the mists, replaced by the 26-page list of items on sale.
When I arrive at the Terrace Room, the bidding is already underway as the auctioneer warms up the crowd with the first hundred lots, mostly miscellaneous office furnishings, lava lamps, a few monitors and hard drives, and a cheap Stratocaster guitar. A friendly young woman sets me up with an auction guide and a bidding paddle (for a $300 credit card deposit) and I take one of the few empty seats.
There are four varieties of bankruptcy named for the chapters of the code where they reside: 7 and 11-the ones most commonly chosen by corporations in default on their debts – and the less notorious 12 and 13. Chapter 11, which is a form of corporate reorganization where the company works off its debt, is typically not suitable for tapped-out dot-coms that laid off their human capital long ago. So dot-coms tend to choose Chapter 7, where assets are simply handed over for liquidation in exchange for forgiveness of debt.
It helps to remember the auctioneer’s interests are best served by driving the price as high as possible, since the real beneficiaries of the event are not present – the creditors, who in some cases are owed big money. In addition to fetching the highest price for the creditors he represents, most items have a 12 percent “buyer’s premium” tacked on to the sale price, which is the auctioneer’s margin.
Some of the frivolous and gratuitously expensive items, totems of dot-com excess, elicit groans and head shaking from the crowd. Kidney-shaped desk tables on casters, likely $500 each new, barely move at $20. There are few takers for the 35 “Blue Fabric Posture Armchairs” that the auctioneer reassures us were “very expensive” and “designer”. The winning bid is $50 each, but then the winner announces he only wants three. Everybody groans again. It’s going to be a long day.
A willing crowd
As we swing into the real action – the tech equipment – the auctioneer seems relieved that he won’t have to goad the bargain-hunting crowd into overbidding because they’re willing to do it on their own. An initial trio of Dell workstations, probably 18 months old, sell for $560 each. With the PC industry in full-flail mode, that is a lot to pay for a used machine when you could get it brand new for a hundred bucks more. Still, it’s a testimony to the low-residue business models of the Internet age that the difference between last year’s startup and this year’s is no more than a configuration of magnetic particles inside these machines; everything else is negotiable.
Is buying at auction a good deal? It can be. Higher-priced items like servers are the biggest bargains because they have the fewest bidders. General office furnishings and equipment are also cheap, if you don’t mind the somewhat curious tastes of their previous owners. Individual workstations and laptops tend to be overbid because there are a lot of bargain-hunters like myself in the audience shopping for themselves.
My bidding yields three Dell workstations for $400 each, a Dell server for $900, and a Sony laptop for $900. Needless to say, caveat emptor applies in a big way. When I picked up the laptop, I found it missing the battery (a $250 item), a fact I could have ascertained through better research and less impulsive bidding. The auction company is at pains to make sure bidders understand everything is sold “as is,” so participants should factor potential disappointments into the bidding.
But sometimes the sense of the possible still pokes through. When a stack of new, sexy folding cell phones came up for bid, the auctioneer mentioned that the dot-com still owed $90,000 in back fees to Sprint, which had promised they would never, ever activate any of the phones.
Despite this, he got $1,300 for the lot of them. It’s a fine line between the suckers and the dreamers, but out here at the Ramada, all that matters is that they’re still being born every minute.