Sonja called off her engagement shortly before the wedding and donated the room for their reception to a nonprofit to host a New Year’s party. Her wedding dress went to a consignment shop. But instead of staying home over the Christmas holidays feeling sorry for herself, she took off for Costa Rica with a friend, Anita Weissberg, who lived across the street.
On New Year’s Eve, when she was supposed to be walking down the aisle in San Francisco, Sonja sat alone at a picnic table on Tortuga and began to cry. She cried for the loss of the future she had imagined. She cried because she had thought her life was going one way, and now it was not.
But soon enough, like a warm summer rain, the tears stopped. Snap out of it, she said to herself, the way Cher told Nicholas Cage in Moonstruck, after slapping him. It was one of her favorite scenes in one of her favorite movies.
On their return to San Francisco, Sonja told Anita she intended to ignore societal pressure and embrace being single. She would focus on her own life. She would travel to exotic places, dine by herself, and relish her independence. “I’m going to spend time with my three best friends,” she said. “Me, myself, and I.”
THERESIA
With the departure of Jim Goetz, Theresia was more than ever at the forefront of Accel’s efforts to rebuild, recruiting new stars, chasing new deals, and building team morale.
One of Theresia’s first acts since Goetz left had been to hire a new principal, Kevin Efrusy. Theresia and Efrusy had worked together at Bain. After Bain, Efrusy went on to work as a product manager for Zip2, the company founded by Elon Musk, and as an entrepreneur-in-residence at the venture capital firm Kleiner Perkins, where he founded an applications service provider called Corio that went public in 2000. In her new role as managing partner, Theresia advised Efrusy on a new company that he was chasing for Accel as a possible investment. The company, offering free phone calls over the Internet, was called Skype.
Skype went live for the first time on August 29, 2003, and was an instant hit, attracting close to a million users. Efrusy was one of the first on the team to identify the new peer-to-peer Voice over Internet Protocol (VoIP) as a possible game changer.
“The challenge,” Theresia told him, “is that there are multiple geographies and multiple complications.” For starters, Skype founders Niklas Zennström of Sweden and Janus Friis of Denmark were in hiding somewhere in Europe to avoid being served with court summonses by U.S. lawyers.
Theresia told Efrusy, “You can help us as a principal, but you’ll need to let the Europe guys take the lead.”
Bruce Golden, who had joined Accel as a partner in 1997 in Silicon Valley, moved to London in the summer of 2002 to help develop Accel’s European team with Kevin Comolli. In the summer of 2003, Golden and Accel associate Fearghal O’Riordain made contact with the elusive Skype founders and began negotiations with Zennström, who was based primarily in London, while the Skype development team was in Estonia, in northeastern Europe.
Theresia thought the world of Golden, who had invited her to shadow him on the job before starting at Accel. He was an entrepreneur himself, with several big wins as an investor, including the software companies Support.com, comScore, and Responsys. He was also one of the most principled people she knew. She and Efrusy would support Golden and the London team.
“On the positive side, we are seeing the birth of a new platform,” Golden told the Accel team. “The growth is very impressive. On the flip side,” he admitted, “the issues and risks are beyond anything I’ve ever seen in one company.”
Zennström and Friis were defendants in a legal case involving their earlier company, Kazaa, a peer-to-peer music and video file-sharing site. Kazaa had become one of the most downloaded software applications ever while doing basically the same thing as Napster, which was shut down in the United States for enabling the illegal sharing of music files. Zennström and Friis had launched Kazaa without reaching deals with music and film companies in the United States. As a result, they were being pursued by a phalanx of lawyers for theft of copyrighted materials. Zennström was known to hide under his desk whenever an unfamiliar person walked into the unmarked Skype office.
Zennström and Friis had been instructed by their lawyers not to travel to the United States. Golden agreed to the stipulation that he would not reveal the founders’ whereabouts at any time.
Part of Golden’s job was to evaluate the risks with every deal: What were the risks within the team? Were there technology risks? Were there competitive risks? Were there unique intellectual property risks?
“This company has every one of those risks—and more,” Golden told Theresia and Efrusy.
Golden had discovered that the core peer-to-peer technology behind Skype was licensed via a company that Zennström and Friis partially controlled. This meant that Skype could not entirely control its own destiny and potentially created conflicts of interest. For Skype not to own or fully control its core intellectual property at this stage was highly unusual for this kind of investment. With any deal, Golden needed to see how a company “invented” or innovated in some meaningful way to solve a problem or create an opportunity. Golden also learned that the creators of Skype’s VoIP technology were freelance developers rather than employees where all work was clearly owned by the company. Not only that, the ongoing Kazaa litigation created uncertainty over whether the founders would be able to establish Skype in the United States. It was also uncertain how the FCC would rule on VoIP traffic, including issues such as tariffs and law enforcement intercepts. And finally, Skype was registered as a Luxembourg business entity, something Accel hadn’t dealt with before. “This is very unusual and problematic,” Golden noted.
Yet emphatic voices in Palo Alto and London were saying that this was just the kind of deal Accel should be doing and desperately needed for its portfolio. Golden tried to understand and mitigate the risks, and he studied up on Voice over Internet Protocol, which began to be developed back in 1975 and saw its first public application in 1995. It had started by emulating the telephone network but gradually evolved to an independent set of software standards for instant messaging, conference calls, and video calling. Skype had created a proprietary protocol suite targeted to corporate customers, a rare case of proprietary protocol dominating the open source alternative.
While remaining uneasy over all the risks, Golden and the London team reached an agreement with Zennström and offered him a term sheet in mid-December. The men shook hands, and Golden believed that Accel had a deal. Not long after, though, Zennström called Golden. The deal had to change. Zennström told Golden that he thought the Accel investment was in euros, not dollars. Golden was incredulous. Every term sheet, every discussion, every back-and-forth was in dollars, not euros. Accel’s funds were denominated in U.S. dollars. The change would effectively increase the valuation of Skype and the amount of invested capital by roughly 25 percent, given the exchange rate. This is not happening, Golden thought.
Golden, who believed that deals were sealed with verbal agreements and handshakes, was forced to go back to the drawing board, creating a new term sheet with the latest numbers. After some discussion at Accel, a new agreement was reached. Golden and Zennström shook hands a second time just before the Christmas holidays.
Exhausted and relieved, Golden told Accel’s London and Palo Alto teams that they finally had a deal. He was taking off with his family on a much-needed vacation. They were going on safari in South Africa.
With the Skype deal behind him, Golden and his wife and kids enjoyed the rugged beauty of South Africa and sightings of lions, leopards, rhinos, elephants, and buffalo. Traveling in South Africa’s remote southernmost tip, cell phone reception was as elusive as big game. A few days into their vacation, Golden noticed he had an e-mail from Zennström. Why would he be reaching out now? Standing in a tropical forest in a patch of rare cell reception, Golden learned that Zenn
ström was changing the terms—again. Zennström told Golden that he was getting better offers from other VCs. If Accel still wanted in on the deal, it would need to compromise on the amount it could invest and alter the terms of governance.
Golden considered his next step: Should he cut the family vacation short and fly back to London? Deal with this upon his return? Or try to connect with Zennström now? He at least needed to talk with Zennström. The next time he had cell reception, he would call him—which was challenging enough with Zennström, who had a reputation for swapping out cell phones the way he changed his clothes. After several attempts to reach him, Golden learned that Zennström was on vacation as well and was unavailable. Golden was conflicted. The deal was likely a moneymaker and maybe even one of those rare Picassos, the splashy brand-name deal that Accel couldn’t afford to miss. Part of him wanted to put the deal back on the rails. But he had also reached a point where he could not rely on what he was being told.
Golden worried about the brand risk to Accel, given the possibility of intellectual property lawsuits. He worried about his relationship with the Skype team. Investor-entrepreneur relationships had to last for years and weather lots of ups and downs. Mutual trust and respect were required. Golden needed to know he could sit down with an entrepreneur and have a real conversation about how to work through issues and conflicts. If this is our honeymoon period, what will it be like later? Golden thought.
He felt he had done everything he could to establish a good relationship with the founders, particularly Zennström. He had made the case for how Accel would bring their resources to the table to build a dynamic business based on best practices. He jumped through every hoop, made it over every obstacle. Golden held to his belief that early-stage venture was a relationship business. Zennström clearly looked at the relationship as purely transactional. He wanted to make sure that at the end of the deal, he held all the cards. Golden had to acknowledge that Zennström was a formidable entrepreneur and a fierce negotiator. Skype was an outlier company with smart and aggressive founders, and this was their moment to bring in capital. Zennström had a strong hand to play.
When Golden returned to London, he updated the Accel team. In Palo Alto, Theresia understood Golden’s desire to build relationships and companies. He was the lead on the Skype deal for Accel, and the final call was his. She knew not to be a Monday-morning quarterback. Golden had mentored her when she was an associate. He was an advocate for women, a team player, and took his responsibilities as an investor seriously. He had told her, “Great partners encourage other partners’ moneymaking tendencies and try to discourage them when they have blind spots.” It was a philosophy she was passing on to Efrusy.
Theresia also understood the issue of doing well while doing good. For some investors, deals were strictly business, not personal. For others, business was entirely personal. The best founders Theresia knew were those driven to make life richer, better, and fuller.
“I am concerned,” Golden finally said of the Skype deal. He wanted to work with “people who will be very focused on doing things the right way and creating durable value for the ecosystem around them.”
In the end, after final efforts to find a workable compromise, but facing deal fatigue and far weaker terms than originally negotiated, Golden decided to pull out of the Skype deal. As he did, a dozen other venture firms continued the chase. It was a financial blow for Accel, as Skype went on to become a valuable and important new Internet platform. Golden would have mixed feelings, including regret that he had let his partners down. He would rehash the negotiations in the months to come. Fortunately, he would soon meet a tiny Scandinavian company called Qliktech, where he would serve as lead investor and board chairman, establishing great relationships over more than a decade. The investment would become the best in Accel London’s first fund, returning 80 percent of the fund.
And for Theresia, it was early in the third quarter of a football game, with plenty of time to stage a comeback. She would continue building morale—and figure out her own ways to make the twenty-year-old venture firm shine.
SONJA
On a beautiful weekend in April 2003, Sonja went sailing on San Francisco Bay in a thirty-five-foot J/105 one-design keelboat, Good Timin’, owned by Jon’s brothers Chris and Phil. Sonja and Jon were joined by Phil as they sailed from the St. Francis Yacht Club in San Francisco past Alcatraz Island and toward the majestic Golden Gate Bridge. Jon and Phil were accomplished sailors who had won major races with Good Timin’, and Sonja had done her own share of sailing in college. The wind picked up, the spinnaker was hoisted, and Good Timin’ sliced through the choppy gray waters. Later that morning, they headed to lunch at the San Francisco Yacht Club in Tiburon, where the Perkins boys had spent almost every day of every summer learning to sail, competing for who was king.
Sitting out on the deck of the clubhouse, they were soon joined by several others. Within a half hour, at least fifteen friends had pulled up chairs. The view was great, the stories salty, but everyone wanted to meet this lovely woman named Sonja and hear how she had met Jon.
Sonja kept a photo of the first time she was with Jon, before they had officially met. Jon had been seated directly behind her at the wedding of Anita Weissberg’s daughter in Sun Valley. He was attending with his mother, father, and Phil. Jon and Sonja met at the reception. A clever Anita had seated them together, and they hit it off immediately.
Sonja told Jon she had just ended her engagement. When Jon asked how she was doing, she told him honestly, “I’m okay with it.”
The next day, as everyone returned home, Sonja spotted Jon with his family at the airport. They promised to get together when they were back in the city.
A month later Jon asked her to dinner. From the first date—with the beginning of the disappearing acts—Sonja had a great time with him. But she didn’t hear from him for several weeks. Then suddenly he’d call out of the blue, and they’d get together again.
Sonja wasn’t upset by the infrequency of their dates, as she worked long hours. At thirty-six, she was happily focused on her career. And Jon was putting out fires with his own start-up, Ferry Plaza Seafood.
Sonja began helping Jon out at the restaurant on weekends, selling fish with him behind the counter. She understood sales: Growing up, she had bused tables at a local Chinese restaurant and worked as a salesgirl in the children’s section of Leggett’s department store, where she had learned the art of upselling, offering a shirt to go with the pants, or rain boots with the coat.
Watching her work behind the counter, Jon was reminded of the wide-eyed Charlie on the Willy Wonka golden-ticket tour. As he turned away, he smiled. Her happy energy was contagious.
THERESIA
Theresia had an idea for a new category of investing, one that related to a few of her favorite things: shopping, travel, and real estate. Having landed the WebCohort/Imperva deal, and with her investment in PeopleSupport rising from the ashes and now showing amazing growth after moving its call center operations to the Philippines, she was on the trail of what she believed would be the next great investment opportunity for Accel.
Her “proactive investment thesis,” as she called it, came from watching Google grow into the most popular way to search the Web. In 2003 Google earned $106 million on sales of nearly $1 billion. About 200 million searches were done through Google daily; it was an amazing success for two computer geeks who liked to Rollerblade and hoppity hop around the office. They had started out with a great algorithm for search, with no idea how to make money off what they’d built.
At an off-site meeting to discuss new investment themes, Theresia, now a managing partner, told her partners, “Google is impressive for making a ton of money, but what’s also impressive is how they’re pulling ad dollars away from traditional media—from print, from newspapers.
“To be successful, Google has had to optimize its
‘one box’ search experience. But there are different kinds of searches coming down the pipeline. If you’re shopping online, you’re better off putting in more specific perameters. You want size, color, images, stores, and availability. You want ‘vertical search’ or ‘specialized search.’ ”
Theresia had followed Google’s December 2002 launch of its vertical shopping search engine Froogle—a pet project of Larry Page’s. “It hasn’t gotten very big, and I think it is because it shows the classic innovator’s dilemma,” Theresia said. “Their core business, ninety percent of their revenue, is the one-box search. They have their best people on it. There’s a burden in building another brand. What I’m talking about is the antithesis of one box. It takes you deeper into one category. It creates a better place for users. You won’t need a new algorithm for this type of search, just a new way to organize all the information that is coming online.”
She predicted, “Specialized search engines are going to drive transformational shifts in multiple consumer industries.”
The more she researched “vertical search,” the more excited she became. She was soon introduced to a couple of Stanford grad students who had spent much of their second year of business school working in secrecy on a vertical search start-up. The Stanford students believed they were onto something that could modernize an industry that was fundamental to the American way of life.
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