In which an otherwise sane New York salaryman flings himself into the mad, mad world of Silicon Valley start-ups
I hail from a long line of entrepreneurs. Max Raskin, my great-grandfather, converted horse-drawn carriages into trucks by soldering them onto Model-T chassis in his Harlem garage. Grandpa Walter Raskin's patents for keeping ice-cream trucks cold were the foundation of a family-run factory in Brooklyn. And my dad left that business to become a real estate developer on Long Island. Conversations at family gatherings naturally gravitate toward those companies, which Grandpa refers to as "outfits," as in "We once did a deal with that outfit outta Pittsburgh" or "Hey, Andrew, what outfit are you with these days?" I hear that one every Thanksgiving.
Now I have my own outfit. It's called Gazooba, and yes, it's a venture-funded, dewily staffed, Silicon Valley-headquartered dot-com start-up with a business model -- "outsourced viral marketing" -- of unimpeachable buzzwordiness. Gazooba's been around for nine months; I've been around for 34 years, and this is the first time I've done anything like this. What I'm going through is (I think, I hope) both entertainingly unique and instructively universal. So I'd like to share my experiences with you in real time, or what passes for real time in print. I thought about doing it in Internet time, but that would mean writing about things before they actually happen, and my editors tell me that that really pisses off the fact checkers.
But first, some background. Before this whole entrepreneur thing started, I was a New York kinda guy with an apartment in Seinfeld Country and a technical job at a Web consulting company called Netyear Group. At Netyear I became chummy with this fellow, Zen (so named because he was born in Japan), and this other fellow, Shanti (so named because he was born in Berkeley). Zen and I, in particular, had a lot in common. We were the same age, worked on many of the same projects, and got hot and bothered at the thought of starting a company but never did anything about it. We were habitual -- and habitually restless -- salarymen.
In early 1998, Zen and I were traveling to Tokyo once a month, setting up Web sites for Netyear's big Japanese clients. We got to be really good at it, too: our rÃ‰sumÃ‰s include the first direct-sales Web site for automobiles in Japan and an intranet for a fast-food chain. Like everyone else in the industry, we whiled away a lot of airplane hours playing the "If we started an Internet company, what would it be?" game. We had as many ideas as we had frequent-flier miles, but we could never get past the Big Question: Without money for advertising, how would we get people to come to a site?
We were pondering just that question in September 1998 while relaxing beneath the windblown divi-divi trees in Aruba. Aruba's not an everyday destination for salarymen like us, but we'd gotten a bargain, thanks to a travel Web site that E-mails me updates on fares to Caribbean windsurfing spots. When New York-Aruba falls to $300, I'm there. Since Zen had wisely taken up the sport, I forwarded the E-mail to him.
As we lounged Zen commented that it was a good thing I'd sent him the note, since he probably would have hit the delete key without reading it if it had come unsolicited from the airline. All of a sudden, a couple of those cartoon lightbulbs switched on over our heads. Friends listen to friends, right? So, what if we built traffic to our Web site by getting visitors to refer their friends? What if we rewarded them for those referrals? Wouldn't that work for our company?
The drawback was that we didn't actually have a company. But then those cartoon lightbulbs burned brighter. What if we sold other people, people who did have companies, a rewards-for-referrals service that they could run on their Web sites? Thus did Gazooba burst forth upon the world.
The next month, Zen moved with his wife and four-year-old daughter to Silicon Valley to be closer to some of Netyear's subcontractors. But physical separation didn't stop us. We wrote a business plan together, communicating by bleeding-edge collaborative technology: the phone. We showed the plan to our boss, who granted us the time -- and the computers -- to develop a prototype under Netyear's auspices, the only condition being that he could invest. Because I needed help with the venture money, I next approached Shanti with an offer so tempting I knew he couldn't refuse it: "Hey, are you ready to throw away your career?" He was in.
My faith in Shanti's sophisticated fund-raising techniques turned out to be well placed. One December morning while I was visiting Netyear's West Coast office, Shanti came running through the room screaming, "We just had a real-time VC experience!" Shanti, it seemed, had E-mailed our business plan to a select group of investors he'd chosen from Vfinance.com, the unofficial venture-capital A-list. Which is to say he spammed the suckers. Five minutes after he hit "send," the phone rang: on the other end was a live venture capitalist. A few hours later, the live venture capitalist was sitting in Netyear's conference room listening to our pitch. "I think you guys are onto something," he said, and he headed back to Menlo Park.
It was encouraging, but talk is just that until the term sheet arrives. Term sheets are the much-coveted deal memos that VCs use to tell you that they're serious about investing, how much they're willing to put up, and how much of the company they want in return. As of January we still had no term sheet from the live VC, although negotiations continued. Then another VC called. This guy wasn't just live, he was someone whose name we actually recognized! This was getting cool.
The sorta famous VC got his own conference-room pitch, and at the end he said he was impressed. But not ready to invest. "You guys have a good team, but it's World War III out there," he said. "Draw me up a detailed execution plan, and tell me exactly what you're going to do with the money. Make an appointment with my secretary for next week and knock my socks off."
Exhilarated, Zen and I returned to New York to prepare for some serious sock knocking. The following Monday we were back in San Francisco in the reception area of the sorta famous VC. With its trendy furnishings and exposed brick, it looked like Hollywood's idea of a successful Silicon Valley investor's office, if, in fact, Silicon Valley investors ever showed up as characters in Hollywood movies.
The sorta famous VC appeared and invited us into the conference room. After we'd finished our pitch, he leaned back in his chair and carefully lifted both his legs onto the dull-metal conference table. The left foot was bare, liberated from the beige sock that the sorta famous VC held high in the air. The right foot, however, was still firmly ensconced in an expensive-looking black-leather loafer. His message was clear: we had knocked one sock off, but half the hosiery wouldn't cut it. We showed ourselves the door.
In April, after yet another reworking of the business plan, the live VC finally faxed a term sheet to my apartment. It wasn't to die for. The live VC -- along with some other investors he'd rounded up -- wanted more of the company than we wanted to surrender, and our options would vest according to the Valley-standard four-year schedule (to keep us honest). The investors also wanted me to be the CEO, because I have an M.B.A. and because they can't understand the Japanese-influenced English in Zen's E-mail. That meant I would have to move. To Silicon Valley. On that other coast. The West one.
My New York friends tried to console me, reminding me that I could always move back. "Manhattan isn't falling off the face of the Earth," a ski-house buddy said. No, I was. "It's going to be hell out there," I whined to Zen on the phone, "working 24 hours a day, beholden to a bunch of VCs."
"Yes," Zen replied. "And you'll love it."
He knows me too well. I took one last run around Central Park and booked my ticket to San Francisco.
Andrew Raskin is the cofounder and CEO of Gazooba Corp., headquartered in Redwood City, Calif.