Founders at Work.pdf

C H A P T E R
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Philip Greenspun
Cofounder, ArsDigita
Philip Greenspun founded ArsDigita in 1997.
Though the company lasted only a few years,
ArsDigita is famous in the startup world both
as the embodiment of a new model for software
consulting and as an all-too-colorful example of
the dangers of venture capital.
ArsDigita grew out of the software that
Greenspun wrote for managing photo.net, a
popular photography site. He released the software
under an open source license and was
soon deluged by requests from big companies
for custom features. He and some friends
Photo by Ellis Vener
founded ArsDigita in 1997 to take on such consulting
projects.
Greenspun and his cofounders fostered a great sense of loyalty among users
and employees. Like Google later, ArsDigita created an environment in which
programmers reigned supreme. The company grew fast, and by 2000 was generating
about $20 million in annual revenue from its monthly service contracts.
That same year, ArsDigita took $38 million from venture capitalists. Within
weeks of the deal closing, conflict arose between the new investors and the
founders. They marginalized and then fired most of the founders, who
responded by retaking control of the company using a loophole the VCs had
overlooked. The legal battle culminated in Greenspun’s being bought out, and a
few months later the company crashed. ArsDigita was dissolved in 2002, but
not before establishing an important new model for the consulting business.
Livingston: Take me back to how ArsDigita got started.
Greenspun: I started building Internet applications in the early 1980s. I always
liked multiuser applications, and I thought connecting people over the
network—if they were separated in space and time—was just going to be
the best usage of computer systems.
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