“John, I think that’s enough.”
He fell quiet for a second, as if to change gears. “Look, Jerry,” he said, “the name of the game is to create a sense of scarcity. It’s a game of numbers—the more people we interest, the more likely we are to get the money we need.”
Another short silence, then he began to pour it on again. “There’s a number of individuals you could cut in on the deal. The Sun guys—Bill Joy, Andy Bechtolsheim, Scott McNealy. Will Hearst from the Examiner. Sparky Sparks, he’s a good guy. Steve Jobs. Ross Perot. Listen, I’ll also send around some e-mail to the other KP partners to get their suggestions.”
Now I knew I was in big trouble—this could turn into a free-for-all. “Enough!” I shouted. Then, softer, “I mean, I think I have enough to get started. Let’s see what kind of response I get from these, and then if we need more, we can ask the other partners, all right?”
John seemed disappointed that I didn’t want his partners’ help as well. But he reluctantly agreed. “OK, OK. But they’re ready anytime you want them.”
I thanked him and hung up the phone. Calling in the KP partners can be like calling the fire department. They tend to show up in force and attack a project with benevolent but single-minded fury. The fire is sure to be out when they leave, but the furniture may be waterlogged and the windows broken. I figured we weren’t that desperate yet.
“Christ, maybe we should install a revolving door,” Robert whispered as he attempted to steer one visiting group into the demo lab while I led another one to a conference room in the back. Curious engineers would occasionally poke their heads above their cubicles to check out the latest crowd of visiting suits, like laying hens startled in their coops. Typically, we hosted two or three visiting delegations a day, and I would spend the brief interludes fielding phone calls, sending out business plans, checking references, and scheduling the obligatory follow-up meetings.
Most firms would first send in a senior partner and one or two associates. The associates would then return, accompanied by morejunior associates. These associates were the venture capital equivalent of fraternity pledges, brown-nosing their way through an internship in the hope of someday making partner. Typically, they were recent M.B.A.s hungry for the next-larger-size BMW, eager to prove that they could make a startup’s CEO jump through more hoops than the associates from rival firms.
Pierre Lamond, a general partner of Sequoia Capital, visited along with an associate.
“What’s the pre-money valuation?” Lamond asked.
“Fourteen million.” Each morning, I practiced saying this with a straight face in the mirror while I shaved. John and I had agreed to start at this valuation when we talked to the venture firms, knowing that they would be more price sensitive.
“We’re on a short fuse here,” I prodded.
“We can make a quick decision,” Lamond’s associate replied. Lamond nodded and then they left.
The associate soon returned with a research assistant, to study the market potential. The assistant set about applying the market estimation techniques he learned in business school, appropriate for introducing a new flavor of chewing gum into a crowded market but utterly irrelevant to our situation. “I’ll call you and we’ll go over these five-year market-share projections again,” he said.
“Look,” I said when he called, “rather than me reading this to you over the phone, why don’t you just have your spreadsheet call my spreadsheet?” I was joking.
“Sounds good to me,” he responded flatly. He continued to call us, requesting information for several weeks after his partners had decided not to invest.
Dave Marquardt of Technology Venture Investments dropped in to look us over. He asked to try the demo. Taking pen in hand, he signed his name on the screen. I looked at Robert nervously as the computer hesitated on the idiosyncratic scrawl. It translated as “MUD.” Marquardt thought this was hilarious. I figured that was the end of it, but he continued to profess high interest in the deal. He was soon unavailable, however, away in Europe on an extended vacation when the time came for a final decision.
Arete Ventures, a firm specializing in utility industry financing, was inexplicably interested in GO. A small East Coast partnership, Arete was eager to coinvest with Kleiner Perkins. Jake Tarr, a young partner-to-be with choirboy looks and the boundless curiosity of a puppy, seemed to have an infinite amount of time to interrogate us. After he spent more than an hour on the phone with Kevin, going over the same subjects with him for the second time, Kevin begged me for some relief.
“Doesn’t this guy have a life? What possible difference could it make to him how we plan to paint the plastic cases?”
“It could be worse—he could be totally uninterested,” I said. But it was little comfort. “By the way, how do we plan to paint the cases?”
“Who the hell knows?” Kevin huffed, and stomped back to his office.
Jake Tarr’s insatiable interest in the product was exceeded only by his curiosity about the other firms we were talking to. One day I called Lamond’s associate from Sequoia, to take his temperature, and he mentioned that Tarr had called him to compare notes.
I was amazed. “How the hell did he know to get in touch with you?”
“I think he just called around town until he found someone you were talking to.”
That shouldn’t be too difficult, I thought. “What’d he say?”
“He wanted my opinion of the price,” the associate said. “He thinks that fourteen mil pre-money is too high.”
Tarr, it seemed, was already lobbying to lower the price. “And what do you think?” I asked.
“Don’t know. We still have some more questions . . .”
“We add more than just money. We like to get involved with our companies.” This was Jim Furneaux of Bessemer Partners. Since he worked for an out-of-town firm, he was selling harder than most. A large, soft-spoken man who looked as if he’d been drawn out of circles, Furneaux was based in Boston, although Bessemer was headquartered in New York and had a partner in Silicon Valley. “Our firm can move more quickly because we have a small, tight-knit partner group.”
“That’s great,” I said. “It’d be a real help if we could limit the number of meetings and information requests. We’re really getting buried.”
“No problem.”
On his first visit, Furneaux stayed for four hours. Then he talked to both John Doerr and Mitchell Kapor by phone. He called in a handwriting-recognition expert from Boston to evaluate our handwriting technology. Then he asked for a list of references, all of whom he contacted, and a list of background reading material, which I assembled and sent. Next he met with Robert and Kevin again, separately. He even perused our “key man” insurance and company-mission statement. I was sure he was ready to make a decision, but this turned out to be just the beginning. “Now I have to get my partners involved.”
He went home to Boston and asked his West Coast partner to come in. The man was skeptical; he’d been burned on a similar deal before. Furneaux quizzed Kevin yet again, this time about heat dissipation and display technology. He wanted some projections on handwriting-recognition speed. We cooked some up. Did we have any market research materials? I pulled something together for him. Then he asked another East Coast partner to visit. Furneaux returned to San Francisco and met with us again, as well as with Vinod Khosla. But the West Coast partner was still unconvinced, so both John Doerr and Vinod Khosla drove out to his office to persuade him.
“My partners still have some doubts,” the man said. So Furneaux called in another consultant to look at the deal. To my surprise, I learned that there was a fourth partner in New York, apparently the most senior partner, who was yet to be satisfied.
“I think we need to get you out there to visit,” Furneaux said. So far, this quick investigation had taken more than eight weeks.
Jay Hoag, of Chancellor Capital Management in New York, returned my call. He was at a conference at Silverado, a posh resort i
n the Napa Valley.
“I could stop by on my way to the airport,” he offered.
We gave him the standard pitch and demo, and sent him off to his flight. He called about a week later from another meeting, at the Princess Hotel in Scottsdale, Arizona.
“Is there anyone else I can share due diligence with?” This was a unique approach to asking who else was interested in the deal. “Due diligence,” a legal term, refers to the responsibility of the investors to look into the companies they invest in with adequate care.
In a stroke of luck, I ran into John Doerr later that day outside an expensive Italian restaurant called Prego’s, on Union Street—the yuppieville of San Francisco. I asked if he could take a few minutes to review the financing with me. To my surprise, he walked over to the curb and sat down. I sat next to him and brought him up to date. “Sounds good, just keep going,” he said. Passers-by were trying not to notice the two grown men hunkered down in the gutter like wayward drunks. I wondered what they would think if they knew we were discussing a multimillion-dollar financing. Then I asked John what to do about Jay Hoag’s request. “Tell him to call Sequoia. They’ve done their homework and will share it with Jay even though they’ve turned us down.” It was a brilliant suggestion.
When I called Hoag back, he was off vacationing on Nantucket for two weeks. When he returned, I tracked him down at an investors’ convention at the Hyatt Hotel in Monterey. It was now early October, and I was starting to sweat. There was a lot of activity and professed interest but no real commitments, and, more important, no lead.
“Jay, we need a decision.”
“I understand. Fourteen mil pre is hard to swallow. But I’ll be back in my office next week and talk it around.”
I called John Doerr. “Look, we have about four weeks of cash and then it’s the Doggy Diner. No one buys the price.”
“All right.” He sighed. “Let’s drop it to twelve and close it up. Put out the word.”
I hit the phones in a flash. “We have lots of interest, but no definite lead investor yet. I need to know if you are in or out at twelve million pre-money. Call me by five P.M. on Monday.” On John’s advice, I tried to make it sound like a last chance. For the six or seven people I could reach, I tried to answer their unresolved questions. For the remaining fifteen, I left a message on voice mail.
By Monday at six, not a single investor had called. They could smell desperation upwind in a blizzard. I felt like a plate spinner in a vaudeville act whose props had just come crashing to the floor.
“Jerry, this is a really interesting journal article about cursive-handwriting recognition.” Todd Agulnick was standing in my doorway, holding up some papers. “We should contact this guy.” I was exhausted and demoralized, and felt like telling him to pack up his belongings and go home for good. Our budget had called for hiring an expert in recognition, which we needed desperately, though I doubted it would matter anymore. But it was important not to scare the team, particularly Todd.
I looked at the name on the paper, one of those unpronounceable foreign names with strange accents above the letters: Rasha Božinović, Ph.D. The only evidence of the author’s address was his apparent affiliation with the State University of New York at Buffalo. On a lark, I called the head of the computer science department there, who told me that Božinović had been one of his students, but he had returned home to Yugoslavia. For some reason, I found this funny. I imagined him tending sheep on a rocky slope on the Adriatic Sea, thinking deep thoughts about computational linguistics. In reality, he was doing research in a government laboratory. To my surprise, his professor had a phone number I could call. This was turning into a Hitchcock thriller, and I was hooked. A quick calculation showed that it was late evening there, about ten o’clock. I decided to risk calling. A pleasant-sounding older woman answered with something other than “hello.”
“I’m looking for Rasha—calling from California, USA. Is he there, by any chance?” I avoided slaughtering his last name, choosing instead to risk the offense of sounding overly familiar. My words echoed electronically around the world, decaying into a long, hissy silence.
“Hello?” It was a young male voice.
“Are you Rasha?”
“Yes?” He sounded guarded.
“My name is Jerry Kaplan. I’m calling from California. I read your paper on cursive-handwriting recognition, and frankly, I would like to interest you in a job at my company in San Francisco.” There was a prolonged pause. I considered that his taking a call from the United States might get him in trouble with the local authorities. “You mean like the Golden Gate Bridge and crooked Lombard Street?”
“Yep, that’s the place.” Somehow, I knew I had him.
We talked for about fifteen minutes, then I went for the close. “If you don’t mind my asking, how much are you paid now?”
“The equivalent of about two hundred dollars.” He stopped, then realized I wouldn’t know what that meant. “A month,” he added. I figured this was some kind of mistake.
“We’re talking in the range of fifty to sixty thousand dollars a year, plus benefits.”
I heard a loud crash, as though something had fallen off a table. I didn’t wait for an answer. “Is it legal for you to fly here for an interview?”
Rasha laughed and said, “At that price, who cares?”
I was starting to like this guy.
I sent him a round-trip ticket by international courier, and a few days later he arrived for the interview. He was a tall, thoughtful fellow with a prominent Adam’s apple, and when he spoke, his voice rose and fell in gentle, rolling waves and his head listed from side to side. The engineers, too, liked him right away. I talked it over with Robert and Kevin in my office.
“Look, Jerry,” Kevin said. “How the hell can we hire this guy, knowing that we could be out of business by the time he gets here?” He was right, of course. The three of us were scared to death that all the hard work we had put in was about to go up in smoke, and here I was, talking about recruiting a guy from the other end of the world. I could see that the stress was taking its toll on my partners, as well as on me.
I was so tired that my mind began to wander as I tried to formulate an answer. It struck me that this must be what it’s like to have incurable cancer. You wake up every morning wondering if it’s a dream. Then you remember: there’s something horrible that is slowly killing you, and you’re helpless to do anything about it. So you go on acting out a normal life as though it makes a difference. I leaned on the window and gazed at the sturdy brick warehouse across the street. I noticed a small concrete cornerstone with the year 1904 on it and realized that the building must have survived the devastating earthquake in 1906. Somehow this seemed comforting.
Finally I thought of something to say. “The way I see it, it’s a moral challenge. If Rasha shows up and we’re dead, I’d feel personally responsible. On the other hand, we have an obligation to act on the assumption that we’ll pull through. I think we should plan for success, even if it seems unlikely. We’ve searched high and low to find someone with his skills, and I don’t want to set us back anymore. Besides, what would we tell the staff?”
“It’s not that bad,” Robert said. “We can reserve enough money to send him home with the equivalent of six months’ pay, easy.”
“Good point, Robert. Hell, let’s do it.”
“Joyride to hell,” Kevin said, shaking his head. “Let’s do it.”
“John, this is your Tuesday wakeup call.” I was talking to his voice mail. “No one wants to invest. We’re screwed. What should we do?”
He called me back around noon. In contrast to my gloomy tone, he was upbeat. “I just got off the phone with Jim Furneaux of Bessemer. He thinks it’s worth one more shot at his partners. If you can convince them, he’s ready to be the lead. They have a meeting in New York this Friday. You can present to them there. Good luck.” I hastily made travel arrangements for this one last-ditch effort to keep the company alive.
The meeting took place at the top of an art deco office building in Rockefeller Center. The New York partner sat in a Chippendale wing chair; he looked like a young Winston Churchill in suspenders. He sized me up with a smug growl as the others filed in and took places around the table.
“So what is that, some new kind of laptop?” He pointed his unlit cigar at my plastic mockup. He appeared to know little or nothing about our project. The other partners in the room, who had been loud and intimidating when I met with them previously, sat quietly as I looked around for some guidance.
The whole scene seriously annoyed me. I had spent months dancing for them while they dangled before me the promise of an imminent decision, and now it seemed that they hadn’t kept one of their own partners adequately informed. My instinct was to tell them to stuff it and walk over to the Carnegie Deli for a decent reuben sandwich.
But then I thought about the crew back at the shop. Most of them had no idea what was going on—how close we were to losing everything and what Herculean efforts it took to keep the company funded. They had simply signed on to a dream and were ready to do whatever was necessary to pursue that dream, like a latter-day children’s crusade. Until that moment, I had always found strength in the knowledge that if I really wanted to, I could bag whatever I was doing and just go home. This belief enabled me to accomplish hard things. But it was different now. Despite my own desires, I felt a larger obligation to the team: the only decent thing was to do what was best for them, not for me. Perhaps if they understood what was happening, I might have felt differently. But it was precisely their ignorance of the situation that placed the burden squarely on me. I now understood what it meant to be an adult.
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