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Web pioneers are back, but not together

Halsey Minor and Shelby Bonnie created the Web's first great content site. Now the CNET founders are in launch mode again - just not with each other.

By Jessi Hempel, writer
Last Updated: August 15, 2008: 11:50 AM EDT

What's everyone yelping about? What's everyone yelping about? What's everyone yelping about?
Or is it digging? Or ninging? Zyng-ing? A rundown of some Web 2.0 startups getting a lot of buzz, if not necessarily a lot of revenues.
Halsey Minor's out-of -the box thinking was as asset for CNET but hasn't always led to success in later ventures.
Shelby Bonnie was more balanced, the technician who ran the company until his 2006 exit amid a stock-option backdating scandal.

NEW YORK (Fortune) -- Halsey Minor is amped up. Maybe it's the Red Bull on the rocks he's been downing for two hours in the living room of his Virginia farmhouse this summer night. Regardless, after playing cat and mouse with this reporter for weeks, the co-founder of CNET, who netted $200 million selling his stake in the Internet's first journalism venture of consequence, is running through a rapid-fire update on his life.

He has started a San Francisco-based, early-stage tech and media venture company to fund outfits like Grand Central, a voicemail system Google (GOOG, Fortune 500) bought in 2006. He's building a 100-room hotel in Charlottesville, Va. Recently remarried, he's restoring Carter's Grove, an 18th-century Georgian mansion he bought from the Colonial Williamsburg Foundation for $15.3 million. He opens a coffee-table book to display aerial photographs of the 400-acre property where he plans to live part-time and raise thoroughbreds.

"I had the archaeologist who did all the work here over for dinner, and he said, 'I just want you to know you have the most historic property in America.' And I said, 'Oh, come on, [how about] the White House?'" Minor then goes on to explain why Carter's Grove indeed has it over the President's residence.

His CNET partner, Shelby Bonnie, is back in the startup business too. His builds social media sites about games, politics, sports and whatever else might appeal to males 13 to 30. The idea is to crank out the sites using a common infrastructure, aggregate them for advertisers, and let the communities that build up around the sites essentially run them. Most of his partners and employees are CNET alums, and he invests in their companies as well. CNET itself was bought by CBS (CBS, Fortune 500) early this summer for $1.8 billion, but both Minor and Bonnie were long gone. In their day, though, they made quite a pair.

Well-heeled members of the Virginia gentry - surname first-names, boarding school, UVA - they went west together and struck it richer. As you might surmise from what they're doing now, Bonnie is the even-keeled one with the operational touch. Minor is the charismatic but volatile dreamer always looking out for the next deal.

Today they work out of nearby family farms in Virginia, and they're about to be West Coast neighbors the way they were in the CNET days: Minor just closed on a San Francisco house that backs up to Bonnie's street.

But there's little chance - no chance, really - that they'll reprise one of Web 1.0's more successful buddy acts for Web 2.0. First they'd have to speak to each other again. (For Minor's response to this story, click here.)

A thing for startups

In the spring of 1992, Halsey Minor found himself in a fix. He was 27 and had wandered through a couple of jobs - Merrill Lynch's investment-banking training program and a brief stint as an executive recruiter. Now he was a would-be entrepreneur looking for partners with cash to help launch an instructional video company. So he called Shelby Bonnie.

Despite traveling in the same circles and attending the University of Virginia at the same time, the two had never met before moving north to Wall Street. Introduced by a mutual acquaintance, they found they had a lot in common. There was the horse-country connection, of course, and their similar career paths. Bonnie, too, had done a stint at an investment bank - in his case, Morgan Stanley. He then got his MBA at Harvard and took a job at Tiger Management, the hedge fund run by legendary investor Julian Robertson.

Bonnie shared something else with Minor: the desire to get into startups. He was taken by Minor's idea, but even more, by his energy and enthusiasm. "You've never seen a more convincing power point delivery," says Bonnie. "He could sell you anything."

So Bonnie started advising Minor on his business plan, and within six months they established a partnership, splitting the company 60/40. Their plan was to launch a cable network for computerphiles called CNET, short for Computer Network. Now all they needed were investors - but investors didn't get it.

"They'd say, 'No one will ever have a TV and a computer in the same room,'" recalls Bonnie. He kept the company afloat by appealing to family and friends, and eventually invested all his gains from Tiger, more than $1 million, and became the company's largest stakeholder.

For a year and a half Minor and Bonnie and their original employee - Bonnie's cousin Matthew Barzun was office manager - worked out of a cramped office in New York City. CNET was going to be about computers, however, which meant they'd have to go West.

Minor headed for the Bay Area, where he set up a studio in some unused squash courts at a health club. Bonnie stayed behind to secure more funding. They traveled back and forth, camping out on each other's sofa bed.

Then, in August 1994, CNET won the venture capital lottery. Microsoft (MSFT, Fortune 500) co-founder Paul Allen put in $2.5 million. That show of faith won CNET a cable deal with USA Networks, and by April its first program aired - a computer-simulated reenactment of the Nicole Simpson murder. A second $2.5 million investment from Allen followed. In July (corrected from earlier version) was launched.

The timing was perfect. The next year Netscape went public and ignited Internet mania. CNET had a public offering soon after, and by 1998 the company was profitable. Bonnie and Minor were both married by then, each serving as a groomsman for the other. Shortly after, they moved into neighboring homes in Sea Cliff (corrected from earlier version), an enclave of San Francisco mansions with views of the Golden Gate Bridge.

Not an easy boss

Minor's volatility could make employees uneasy. In fact, he could be unnerving even when he was doing the right thing. CNET's longtime editorial director, Jai Singh, recalls that after arriving at the company in 1996, he pitched his idea for a tech news site to Minor, suggesting that the company buy the URL. Minor left the room midsentence with no explanation.

"I said, 'Okay, I totally blew it,'" recalls Singh. "Halsey walks back in and says, 'Okay, we got it.' He had gone out and registered the domain name."

The business continued to grow, and the stock price along with it. Some of Minor's most ludicrous ideas paid big dividends. In 1997, with hardly any heads-up, he diverted $19.5 million and 130 employees to create a Web portal called Never mind that Yahoo and Excite were already up and running. Or that Minor thought he would have financial backing from Intel (INTC, Fortune 500) - backing that fell through days before an investor conference call in which expenditures would need to be explained.

"We basically told people it was for a secret project," says Bonnie. He is still incredulous. "Halsey was significantly more courageous about these things than I was." In the end, NBC Interactive (GE, Fortune 500) bought Snap for $190 million, providing CNET a hefty return.

Then one day Minor got up and left the room again, this time for good. He had decided to launch a startup, a flavor-of-the-moment tech incubator. No long discussions with his partner. No succession plan.

Another million down

On March 10, 2000, Bonnie appeared on CNBC to talk about his new role as CEO of CNET. He was composed, if a little awkward. Media shyness would be the least of his problems: That day the Nasdaq closed at 5132.52. The next day the dot-com crash would begin.

"Every week the revenue forecast would drop by $1 million," Bonnie remembers. He never expected to be captaining the company, especially through a financial crisis. Worse, he, too, had been thinking about leaving CNET. After six years in startup mode, he was tired. He had just inherited a family farm back in Virginia that took a good deal of energy to run, but Minor's sudden departure created a succession issue. In fact, Minor didn't even ask Bonnie to take over - he wanted to appoint the company's president. Minor says that he didn't realize Bonnie would even want the job. Board members insisted that Bonnie step in. So he stayed. "I couldn't leave the people I'd created a company with," Bonnie says now.

Minor retained the chairman title for a while. But he soon quit that too and sold the remainder of his stock. "When I was not part of the decisions, I couldn't sell my shares fast enough," he says. In the late 1990s Minor had made a sizable investment in (CRM), and that brought him a substantial windfall around the same time.

The project that Minor left CNET for would turn out, like CNET, to be a Silicon Valley legend, though of a different sort. Along with Scient founder Eric Greenberg, Minor cooked up the idea for the company, called 12 Entrepreneuring, in 1999, when stock prices traveled in one direction. The incubator aspired to turn out a tech startup each month. Minor today recalls the board as "an alpha-male convention": Ted Wait of Gateway Computers, Marc Andreessen of Netscape, Pierre Omidyar of eBay, and angel investor Ron Conway, among others.

But enthusiasm for startups was fading as quickly as the share price of The notion that you could come up with a good idea and be selling stock to the public a year later had become pass. The incubator did little but burn through cash. Greenberg left. Conway led a group of investors in complaining that shareholder money was being wasted. The threat of litigation was in the air. Minor returned 40% of their stakes to investors and headed back to Charlottesville. "They're all big boys and girls," Minor says today of the investors. "The market didn't go their way. Sorry!"

Among those investors was Bonnie. You might have thought his support for his ex-partner would have flagged by this time. But Bonnie seemed to think investing in 12 Entrepreneuring was the honorable thing. "And if Halsey was at the helm, it had potential," he says.

Bonnie's show of loyalty doesn't seem to have made a lasting impression on Minor: "Did he say he was an investor?" Minor asks, then pauses. "Oh, yeah, I guess he was ..."

Minor's other headline-making effort post-CNET also crashed and burned. Minor made a $25 million pledge to his alma mater to kick off an ambitious project that would integrate technology with study of the humanities. But Minor never signed a contract, and he was unhappy with how the project was proceeding. Ultimately, he says, UVA scrapped the whole idea. A UVA spokesperson concurs that the project was killed and says Minor's gift is only one of two in history in which no contract was signed. The school, Minor offers, is "run by a bunch of bow-tied Southerners."

The hard slog

Back at CNET headquarters, Bonnie soldiered on. He restructured, completing four rounds of layoffs in two years. He passed on his bonus, took pay cuts and bought $2.4 million worth of stock.

By 2006, as the company branched out into new content areas like gaming and cooking, the stock had begun to rebound. Then, in May, Bonnie received a letter from the Securities and Exchange Commission announcing a formal investigation into an alleged backdating of stock options.

Among the 130 companies under scrutiny, a few had taken advantage of backdating options to a date before good news was released in order to hand their executives enormous gains (UnitedHealth, Broadcom). The rest, like CNET, were guilty mostly of following questionable industry norms a bit too blindly. Bonnie's explanation: "Imagine all that we cut between 2001 and 2003. We cut all of our outside counsel. We were doing all that we could just to keep our rattling ship from coming down. Did that mean we had as good an infrastructure as we could during that period? Probably not."

Bonnie resigned in October 2006. Almost a year later the SEC told the company it would not pursue a case against CNET or its officers. "It was the thing we had to do at the time," says Jarl Mohn, a media luminary and investor who served on CNET's board when it decided Bonnie needed to leave. "But it is the one thing in my career I'm ashamed of."

Back on the farm

In the summer Bonnie retreats to his farm. He shares a property line with Bunny Mellon, the 97-year-old banking heiress. Her airstrip is just a few hundred feet from his back porch. "It gets really loud every four or five days when she has a doctor come in," he says with a chuckle. He comes to relax and hike with his three school-age kids. He's also practicing for fox-hunting season, which starts in September. And he's remade a stone house on the property to be his Whiskey Media satellite office.

A hundred miles south, Minor has just arrived in Charlottesville for part of the summer with his wife and baby. His three older kids and new stepson would arrive later in the week. He's not planning on going up to see Bonnie. Minor blames the backdating scandal. "It made everybody not want to talk to each other," he says. "Shit, I mean stuff happened while I was CEO, but does that mean it was my fault? And so I was always worried about talking to Shelby."

That may change. Back in San Francisco, the Bonnies recently moved to a home with a larger kitchen in Presidio Heights so that they could all fit around the kitchen table for meals. Minor just bought nearby. "We're going to be neighbors again," says Minor, scratching his chin in contemplation. "Maybe then we'll talk."

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