The Plot Thickens

As the initial celebrations fade into memory, our heroes from Silicon Valley discover that the Old Economy business of selling books is tougher than they suspected. Part 2 in a series.

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Anne Banta had heard someone use the phrase "compassion fatigue" on the radio a few months earlier, and it had resonated with her. She'd had her own moments of compassion fatigue during the preceding year, moments that came when she experienced the loneliness of working in a struggling small business; when she felt abandoned by the people who were supposed to be supporting her; when she questioned how much other people cared--really cared--whether this company, Kepler's Books & Magazines, lived or died. At those times, she couldn't help wondering how she had let herself get involved in such a venture and whether the cause was worth the toll it was taking on her and her family.

But the moments passed, and now--as she stood in front of the small group assembled in her living room this past December--she showed no sign of compassion fatigue, just an intense focus on the matter at hand: coming up with a plan to transform Kepler's from a struggling little bookstore teetering on the brink of extinction into a healthy, self-sustaining enterprise. "Here's what we want to accomplish," she said, passing around photocopies of the agenda she'd drawn up. On it were six circles--or "bubbles of focus," as she called them--labeled A through F, each containing a separate imperative for turning around the business. "Next to these, we need action steps," she said. "We need to put down what the idea is, who's responsible for it, what it will cost, what the expected returns are, and what milestones we're going to use to measure how we're doing."

In her lime sweater, her necklace of polished stones, her brown slacks, and her bobbed haircut, Banta could have been mistaken for a not-so-desperate housewife of Atherton, California, the wealthy enclave just west of Palo Alto where she lived with her husband, a serial entrepreneur, and their son. A native midwesterner with a B.A. from the University of Wisconsin-Madison, she had a bubbly personality and a cheerful disposition, even when her emotions got the best of her, as they occasionally did. But most of the time she radiated enthusiasm, the words tumbling out in cascades of sentences that conveyed nothing so much as her passion for whatever she happened to be talking about. Her resumé included stints at Intel (NASDAQ:INTC) in its youth, sitting near Andrew Grove, and at Adaptec (NASDAQ:ADPT), where she was employee No. 16. Thereafter she had spent more than 15 years as a part-time vice president of corporate communications for dozens of high-tech start-ups, going from one to another as her services were needed.

At the moment, however, her services were needed in a decidedly low-tech business, namely Kepler's. That the Menlo Park store still had a pulse was a minor miracle. Fifteen months earlier, Clark Kepler, the owner and CEO, and son of the founder, had officially thrown in the towel, announcing at an early-morning staff meeting that he, like so many other independent booksellers, had run out of money and ideas for keeping the business alive in the face of competition from the likes of Barnes & Noble (NYSE:BKS) and Amazon (NASDAQ:AMZN). News of the closing had sent shock waves through the community, where Kepler's was a cultural icon. As word had spread, the citizenry had risen up in support, writing letters, posting signs, holding a mass rally, and contributing money and expertise. On October 8, 2005, after yet another rally, Clark Kepler had unlocked the doors and invited everybody to come back in and shop. And shop they did, rescuing the shortened, but vital, 2005 Christmas selling season and giving Kepler's a new lease on life.

By then, a rescue team from Silicon Valley had moved in. It was led by Daniel Méndez, an entrepreneur and computer scientist who had played a crucial role in raising the capital and handling the negotiations leading to Kepler's reopening. With him on the board were Bruce Dunlevie, a general partner at Benchmark Capital and a 15-year veteran of the venture capital industry, and Geoff Ralston, who had until recently been the chief product officer at Yahoo (NASDAQ:YHOO). Banta was the team's principal representative in the company, functioning as an executive vice president of business development and marketing. She was also the one who had made the greatest sacrifice, putting her career on hold and devoting herself full-time to Kepler's. She and the board had hoped they could stabilize the business and formulate a plan in a few months. But now, a year later, with another Christmas season in full swing, they were still working on the plan, and the jury was still out on the store's long-term viability. Meanwhile, its struggle to survive had captured the attention of the media, which accounted for the odd assortment of people and equipment in Banta's living room that December morning. Aside from Banta and Kepler, who was still CEO and chairman of the board, the participants included two industry heavyweights--Michael Hoynes, a former chief marketing officer of the American Booksellers Association, and Hut Landon, executive director of the Northern California Independent Booksellers Association--as well as the company's consulting CFO, Mitch Slomiak. While they discussed action steps, a team filming a PBS documentary on Kepler's moved around the room, searching for good camera angles and positioning the boom mike to capture every word. Later that day, a crew from MSNBC would be coming in to do more or less the same thing.

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