From Party Hardy to Party Hardly

SAN FRANCISCO —  The limousines were as backed up as ever South of Market last weekend. Festive techies spilled from the nightclubs, apple martinis clutched in their fingertips. If you weren’t here last year at this time, the locals kept saying, you might never guess that this is a city in the throes of a tanking Nasdaq, a city where creditors are running from start-up to start-up, repossessing foosball machines and office cubicles.

But appearances can be deceiving. Last winter, tech companies were renting whole islands for parties and dancing to the B-52s and hiring Dana Carvey as an emcee. Last winter, the party favors were, for example, free bottles of French champagne. Last winter, a Silicon Valley kid in his 20s who sold his company to Microsoft celebrated his new wealth by renting San Francisco’s historic Regency Building and staging a recreation of the Venetian orgy scene from “Eyes Wide Shut,” with women in leather fetish gear, garter belts and bustiers.

Last winter, even the greenest dot-com staffs were getting nice holiday buffets as a sign of their bosses’ appreciation. Take Petopia. Last winter, according to co-founder David Fraze, the Bay Area online pet food company rented a hall for a laid-back dinner dance. This winter, there’ll be no Petopia holiday party because there’s no Petopia. The company was taken over the other day by Petco after laying off 60% of its staff.

Though much of the tech sector, worldwide, is still partying hardy, the Silicon Valley consensus is that a soft economy and hardened ranks of venture capitalists have ended--at least for now--the industry’s manic phase.

“Those days of start-ups spending tons of money just to get noticed? Those days are over,” declared Margit Wennmachers of OutCast Communications, a San Francisco public relations firm specializing in start-ups. “The tone has completely changed.”

Shareholders and investors, she said, “don’t want to hear about” flashy parties. They want to know how the company’s going to make money. “It’s all about P-to-P, path-to-profitability.” (Or, as the less promising dot-coms have come to term it, “prepare-to-pray.”) The upshot is that life in the tech sector this party season is a less merry whirl.

The situation has necessitated a balancing act for companies whose skilled workers might bolt if the firm’s prospects appear to be flagging. On one hand, companies want to keep costs down; on the other, they need to keep morale up through the current shake-out. Appearing to cut back too far on the holiday festivities may lead employees--and, more disastrously, backers--to conclude that a company’s financial straits are even more desperate than they actually are.

In Orange County, for instance, Vinny Smith of Quest Software has made it a holiday tradition to fly his whole staff to some fancy resort--La Costa, the Bellagio in Las Vegas, the Rancho Mirage Ritz-Carlton--for a two-day company blowout. This year, despite hard work and massive growth, Quest’s stock dropped from $98 a share to about $35. Smith, nonetheless, flew 1,500 employees and guests to Las Vegas for a black-tie bash at the Venetian last Friday.

“I probably shouldn’t even be talking about this--I’m not sure I want my shareholders [complaining] about million-dollar parties,” said the chairman and chief executive in a worried tone.

“But when you’re trying to take over a market, you have to create a great culture. You pay later if you don’t pay now.”

The Bay Area’s Quokka Sports Inc., which teamed with NBC to put the 2000 Olympics on the Web, recently laid off a fifth of its payroll due to a series of acquisitions, but its company party at Bimbo’s 365 Club, a North Beach techie haunt, will go on as scheduled this week, the firm’s publicist said. In the same vein, Rick Herns, a Silicon Valley party planner, said one of his clients--a big tech company whose stock, like most tech companies’, is struggling--turned the San Jose Convention Center into a 3,000-seat speak-easy for its company fete this month.

Most companies, however, are opting to err on the side of moderation. If there’s going to be a party, the thinking now goes, it had better be to generate business or retain talent. No more bashes just to ease the anxiety of sudden influxes of great wads of money, or just because everyone else is throwing bashes. Thus, when Cisco Systems Inc. was asked about one of its marketing groups’ plans to take over the San Jose Tech Mart conference center this week for a Mardi Gras-themed celebration--with a voodoo lounge and a dessert-wielding drag queen named Lady Bon Bon--Cisco’s corporate events staffer wanted to stress one thing: “Last year, there were 3,500 people at that party,” she said. “There are going to be, like, 600 this time.”

Some tech companies, caterers report, have pushed their holiday celebrations into January, when restaurant and hall rentals are cheaper and the cost can be shifted to a new fiscal year. Some have thrown up their hands and settled for holiday lunches instead of holiday balls for employees.

“The whole industry is licking its wounds now,” sighed Darian Heyman of Beyond Interactive, a digital ad agency.

Added dot-com refugee Aimee Rosewall, a veteran of several start-ups: “People just aren’t that anxious to get together and say, ‘So, um, when are you losing your job?’ ”

December will come and go without the annual holiday gala sponsored by the Society for Internet Advancement in San Francisco, an Internet trade group whose bash last year was so big it had to be held at City Hall.

“The fire code capacity was something like 1,500, and we blew it out in, like, 45 minutes,” remembered a wistful Rosewall, who was the group’s events chairman. Pete Escovido, the legendary Latin jazz percussionist, was hired to provide entertainment. At one point, 500 people were lined up outside the landmark building, clamoring to get in.

This year, the party has been delayed until January and whacked down to a measly low-five-figure budget. Two of its sponsors went out of business recently.

Still, hope springs eternal. Matt Golis of RentPayment.com in San Mateo won’t be giving his 12 employees a company party, but that doesn’t mean he hasn’t been thinking about one. “We’re gonna hold off the celebrations till we get our next round of funding,” the 28-year-old chief executive vowed, insisting--as the locals keep saying--that this boom will be back, any day.