Keep in mind that ArsDigita was highly profitable when Philip was CEO. All of the things that looked liked extravagance (beach house retreat for programmers, ArsDigita University, Ferrari prize for recruiting) could actually have been paid for from 1999 profits. ArsDigita had $20 million in revenue and a fat profit when the venture capitalists came in.

The ironic thing is that most VC deals from the past few years were for companies struggling to figure out how to make money. The VCs would go in and try to turn the company into something with a sustainable business and profits. Most of the time they weren't creative enough and failed, losing their investors $millions. In the handful of cases where they succeeded, they built things sort of like ArsDigita with Philip as CEO: $20 million in revenue, happy customers, profit. What is ironic is that the VCs turned ArsDigita from what they were always desperately trying to build themselves (a company with revenue and profits) into the kind of company that has historically lost them all their money (a company with an optimistic spreadsheet and revenue forecasts from not-yet-existing products).

Don't assume that merely because a VC made money in the go-go years of the 1990s that the VC therefore has any special knowledge of business.