Her pregnancy was welcome news to Theresia herself, but she was a worrier. She wondered how she would be a great mother and still be a great partner. She wondered how she would create the perfect environment for her family. Growing up, her worries had centered on getting perfect grades. At Bain and Accel, her worries had been about winning deals, while establishing a name for herself. So it was natural that she worried about the timing of her pregnancy. First the stock market had collapsed, wiping out $5 trillion in market value for tech companies. Then the country had been hit by the terrorist attacks of September 11, 2001. Fear and malaise filled the air.
On top of that, Theresia had to figure out what to do about maternity leave. She’d heard stories about women in other industries taking time off after having a baby and then returning to find their best clients taken away. What would happen when she was eight months pregnant and wanted to be the lead on a deal? Could she still do it, knowing she was about to have a baby? Bias against pregnant women and mothers was real and systemic. She had read the stories and research reports and talked to friends. Working moms were perceived as less competent and committed, even though the research proved otherwise. Women who had children in prime child-bearing years reportedly never recovered earnings relative to their husbands. No such bias existed for working dads, who in fact earned more than their childless male peers.
Robin Richards Donohoe shared a cautionary tale with her of the remarks of a certain well-known VC at the annual Kleiner Perkins Christmas party. Donohoe had just had her second child but was determined nonetheless to show up to the party. As she stood with a group of male peers, the jocular, well-known VC approached and said, “You all know Robin, right? She used to be a major deal maker. Now she’s a mom.”
It was a kick to the gut. But Robin had realized after her first child was born—she had been thirty-five at the time—that she couldn’t have it all. She cut back to working four and a half days a week instead of five. With her second child, she planned to work four days a week. She made another difficult decision. With a big deal coming their way and Bill Draper traveling extensively, Robin told Bill, “I can no longer pull the Saturdays and Sundays and late-night due diligence. We need a third partner.” She figured it would be better to give up some of her carry and some of her ego of being Bill Draper’s sole deal maker to stay in the game. She was grateful she had become a partner before she had kids, had done a ton of travel to India to establish the fund, and had a supportive husband who was a singer and songwriter with flexible hours. Even with all this, though, work was a risky juggling act.
Robin’s story kept Theresia tossing and turning at night.
MAGDALENA
Magdalena and Marc Benioff were confident they could raise venture funding for Salesforce. Magdalena, of course, had USVP, and Benioff knew VCs in the Valley, including former Oracle president Ray Lane, who had just joined Kleiner Perkins Caufield & Byers. Magdalena organized meetings so that various groupings of USVP venture partners could meet Benioff, chairman and founder, one day and Salesforce execs John Dillon, the CEO, and Jim Cavalieri, the systems engineering head, another day.
The meetings advanced up the food chain until it was time for Benioff to present to the full USVP partnership. Benioff could be mesmerizing when he was on, but he came across as aloof when he wasn’t. He loved talking about how Salesforce’s software for salespeople could be sold in an entirely new way: online and by service rather than as a massive package that was expensive to buy, complicated to install, and generally far more than what most clients needed. Salesforce had what it called “multi-tenant architecture,” where the same software served different customers and made resource distribution more efficient. The CRM software would be accessed over the Internet with no hefty up-front licensing fees.
Parker Harris, Dave Moellenhoff, Frank Dominguez, Paul Nakada, and the programming and tech development team had built a prototype within a month of joining Salesforce in March 1999. (Dominguez flew down from Portland during the week and slept on a futon under his desk.) That July Magdalena had been the one to convince Benioff to leave Oracle to work on Salesforce full-time. She told him, “It’s time for you to be a full-time entrepreneur.” Salesforce had ten employees and a two-page website, with a recruiting page that requested that résumés be sent to [email protected].
Salesforce had gained traction by offering free trials to small companies, mostly start-ups. A few months later, with its staff doubled, it moved out of Benioff’s adjacent apartment on San Francisco’s Telegraph Hill and into a new space downtown at Rincon Center, where employees hit golf balls down the length of the office, flew remote-control helium blimps, and set up their own desks with materials from Home Depot. They ran brilliant marketing campaigns conceived by Benioff, hosted parties with the rock band the B-52’s performing, and staged rallies and mock protests to disrupt competitors’ events. They generated the kind of press coverage that most companies could only dream of. Benioff adopted the motto “If the press loves it, so do I.”
Benioff told the USVP partners that Salesforce marked the “end of software” and that the company’s Web-based service would be “as easy to use as Amazon.” Salesforce had a Ghostbusters-like logo with the word SOFTWARE inside a red circle with a slash through it. The company phone number was 1-800-NO-SOFTWARE, and Benioff and the team wore NO SOFTWARE buttons.
USVP’s Irwin Federman listened to the pitch and thought, Okay, so you don’t have to buy the whole salami. You can buy it by the slice. The Brooklyn native and self-described “bean counter”—he started his career as an accountant—thought there was a market for it, but Benioff had valued Salesforce at $100 million. He wanted to sell 10 percent for $10 million. Federman looked at Benioff and thought, He’s got holes in his head. He’s crazy.
He knew Benioff through Tom Siebel, who had begun his career at Oracle as well before starting his own company, Siebel Systems. Federman was an early Siebel investor, as was Benioff. Both men had made a lot of money from their Siebel investments.
When it was Magdalena’s turn to make the case for Salesforce, she told the USVP partners, “We are going to take on Siebel Systems. We are basically going to take the ten to fifteen percent functionality, the pieces of Siebel that people actually use, and offer that for a very small portion of the price you would pay for Siebel.” Siebel charged a million dollars plus for the licensing, she said, which typically required an outside company such as Arthur Anderson or Accenture to come in and handle the implementation, which could take up to a year and cost another million dollars.
Federman listened closely to Magdalena. She had been investing in enterprise software companies and knew what she was talking about. But he still wasn’t convinced. “I can’t gag this down,” he told his partners afterward. “It’s all about valuation.”
Magdalena, who had committed $500,000 of her own money to Salesforce over her lunch with Benioff in San Mateo, was shocked when USVP passed. But after making pitches to multiple firms—including Accel, where she met Theresia Gouw Ranzetta—and Kleiner Perkins, she realized there were two primary problems. Venture capitalists had a hard time believing that companies were going to put their most sensitive data—proprietary customer lists—on servers that were not their own. On top of that, Benioff himself did not always inspire confidence in investors—he could come across as a take-it-or-leave-it figure. He’d had a charmed career, thanks to Ellison. The two worked and played together, meditating in Japan and sailing the Mediterranean on Ellison’s yacht. But Benioff on his own was unproven: a salesman, yes, a founder, not yet.
Not long after Federman turned Magdalena and Benioff down, he got a call from Tom Siebel, who told him, “Look, I’ve got the Internet domain name Sales.com, and I’ve decided to do what Salesforce is doing, only better.”
Siebel reminded Federman that he’d had the idea early on to sell software on demand to small- and mediu
m-size businesses. Siebel had offered Benioff, then at Oracle, the job of running the division. When Siebel changed his mind, Benioff, who had also been mulling over an idea for an Internet-based start-up for sales teams, had launched Salesforce.
Federman liked the concept a lot more coming from Tom Siebel. Siebel had a reasonable valuation for Sales.com and was a tech superstar. He didn’t have any slogans, buttons, or B-52’s, but he had already built a behemoth and had a great business partner in Patricia House, who co-founded Siebel Systems. Federman thought of Tom as the duck gliding effortlessly across the pond, and Pat as the little legs going a hundred miles a minute under the surface.
Federman told Siebel that USVP would invest in Sales.com. Sequoia Capital founder Don Valentine also became an investor in the new company.
Magdalena was incredulous when she heard the news. “You turn me down and you invest in a competitor?” Magdalena asked. “I’ve really got mud on my face.”
Magdalena didn’t always agree with Federman, but she admired him. He too had come to California with little money and knowing no one. He had taken the CPA exam and earned the highest score in California, and began to rise through the ranks, from bean counter to chief accountant to CFO to CEO; he’d led an extraordinary turnaround of a company called Monolithic Memories. Along the way, he’d met Tom Perkins, who became a friend and a leading venture capitalist. Federman saw venture capital neither as good nor bad. “As the Bible says, judge not lest ye be judged,” Federman would say. “Everything doesn’t need a report card. VC does what it does. Some things it produces are qualitative, some things are no good.”
Federman then threw another wild card at Magdalena. He wanted her to work with the guy Siebel had chosen to run the new division of Sales.com.
“You want me to counsel the competition?” Magdalena asked.
“We have Sales.com as a portfolio company,” Federman said. “You have Salesforce.com as your private investment. I trust you won’t make us privy to Salesforce, and you won’t make Salesforce privy to us.”
As a board member of Salesforce—not to mention its first outside investor—she was, in effect, Marc Benioff’s boss. She was helping to build Salesforce. On the other hand, she worked for USVP. It had a multibillion-dollar fund invested across industries but concentrated in several telecommunications companies at very high valuations. Those valuations were now tanking, as the economy went from bad to worse. She had her own money tied up in the fund. She was a significant breadwinner in her family, and the pressure to succeed was constant. Moreover, each partner had committed his or her personal money through the firm to a real estate lease on Sand Hill with more footage than they now needed. They were locked into the lease at the same time that they were laying off staff. And Salesforce, which had come out swinging with some early successes, was now struggling like every other start-up. Magdalena was constantly worried that Salesforce might run out of money. Comfort was nowhere to be found.
Federman appreciated Magdalena’s deal flow and her judgment. She was not an ideologue who always had to prevail. She was fact-based, data-driven, and practical. Federman felt confident that she would see the pragmatic, who-is-buttering-your-bread side of the Siebel deal.
Magdalena soon realized she would have to compartmentalize her brain. She likened it to people who had a ton of affairs yet managed to keep their spouses and their lovers separate and happy. She would just have to be respectful of her husband—USVP—and her lover—Salesforce—at the same time.
PART
FIVE
Girl Power
2002
LATE FALL 2002
Magdalena normally avoided all-women’s industry events, likening them to “bitch sessions.” But she liked the woman who organized this annual women-of-venture-capital getaway to Hawaii, and she did a lot of business with the sponsor, Silicon Valley Bank. Plus, she looked forward to time away from the gloomy news from the markets, including business scandals involving Enron and WorldCom. She looked out the plane window at the shimmery, slate-gray Pacific Ocean, and hoped for relaxing days ahead.
Her expectations for the weekend were low. First, she never understood how women could call themselves “minorities.” She grew up Armenian and Christian in Muslim-dominated Istanbul. Armenian Christians comprised less than 1 percent of the population in Turkey. That was her idea of a minority. Second, she felt that women were often more competitive with other women than they were with men. She’d read studies showing that women (and men) preferred to invest in companies run by men, especially by handsome men, and that two-thirds of female investors thought a project was better when pitched by a man than by a woman, even when it was the same project.
She saw it as a disservice to join all-women’s groups or to speak on all-women’s panels, arguing that no one promoted “all-male panels.” A woman she knew in Turkey had once told her, “My mother was a great seamstress because she had a lot of ‘stitch and bitch’ sessions with her girlfriends. It was her ‘stitch and bitch club.’ ” But in Magdalena’s mind, gender was not just a woman’s issue. Gender equality was an issue for both genders. Still, who could knock an all-expenses-paid weekend for twenty female venture capitalists in a swank oceanfront home on Oahu?
Silvia Fernandez, a senior vice president at Silicon Valley Bank, had come up with the idea for the annual gathering, after hearing her boss talk about all the off-sites that he hosted for the men of Silicon Valley. Realizing there were too few networking events for women, Silvia hosted the first getaway in 1999 with Sonja Hoel, Robin Richards Donahoe, and Kim Davis, who had done the F5 Networks load-balancing deal with Sonja.
Silvia wanted the weekends to be intentionally antiguy: Instead of whiskey, golf, and cigars, she planned mani-pedis, massages, and cooking classes. She understood the power of girl connections from her years in the Girl Scouts, when she learned to host events, dreamed up elaborate scavenger hunts and games, made connections for life, and realized the power of many.
After catching up on work during the five-hour flight, Magdalena was met at the airport and whisked to the beautiful private home of Silicon Valley Bank CEO John Dean, two doors down from the estate where the television show Magnum P.I. was filmed. There to greet her was Sonja Hoel, who embraced her like a long-lost friend. The women had first met in 1996, six years earlier, when Magdalena pitched CyberCash to Menlo Ventures. Since then their paths had crossed at occasional National Venture Capital Association events. Sonja began making introductions.
Kate Mitchell, a partner with Scale Ventures, said half-jokingly that she came to Hawaii out of curiosity “to meet the other nineteen women in venture capital!”
To Robin Richards Donohoe, the phrase women venture capitalists was almost an oxymoron, given how few of them there were.
By early evening, everyone attending had arrived. Magdalena, with a mai tai in hand, looked around and thought, This isn’t so bad.
Silvia gave the women time to settle in. One joked that it felt like returning an animal to its natural habitat after years in captivity. After drinks and dinner, Silvia announced she had a few “ice breaker” games for everyone. The women refilled their wineglasses, and Silvia handed out sheets with the women’s names in the left column and fun facts on the right. The object of the game: Try to guess which facts went with which names. Silvia and her SVB team had culled personal and professional tidbits for each woman by calling their administrative assistants and scouring Google.
“ ‘Avid fly fisherperson and duck hunter, has two hunting dogs, taught an undergraduate economics course at MIT which was always oversubscribed (with mostly male students),’ ” Kate Mitchell called out. The answer: Maha Ibrahim, a partner at Canaan. “ ‘Speaks two dialects of Chinese fluently, teaches spin classes three times a week, has run the Boston Marathon, has three children under the age of ten.’ ” It was a profile of Sarah Reed of Charles River Ventures.
Sonja had got to know Silvia through the annual getaways, but she was still impressed by her résumé: “Climbed a 20,000-foot peak in Northern Pakistan in the middle of a snowstorm, spent a vacation in the village of a tribe of former headhunters (not the Silicon Valley kind), had an ‘Uncle Joe’ who was a mafia crime boss in the 1950s, and had a youth soccer career that included taking the ball down the field and scoring for the opposing team.”
As the evening progressed, the women changed into their pajamas and continued their conversations. As there were a limited number of rooms with beds, air mattresses were brought out and inflated. It was after midnight when the women finally retreated to their rooms and beds.
The next morning the women set about making breakfast for the group. A morning hike would be followed by snorkeling and spa time, culminating in the early evening with a private cooking class back at the house. Sonja, going over the itinerary, couldn’t have been happier: no fist bumping, no black diamond runs, no gates to slalom through.
Saturday night Silvia introduced another round of games that mixed the personal and professional. First, she asked about some of the most memorable pitches they had received as venture capitalists.
Robin, a southerner like Sonja—Sonja attended UVA and Robin the University of North Carolina at Chapel Hill—recounted the time several entrepreneurs came in to pitch a new type of condom.
Alpha Girls Page 14
