I sat in the offices of one of the leading venture capitalists in Silicon Valley, awaiting the arrival of the two key investors. They were running late, but I was assured that they would be here shortly for this impromptu meeting. ...
My story:
One fine day in California
My mind drifted off, looking out over the greenery of Sand Hill Road. June was a particularly pretty time of the year in California as the grass started to turn a bright yellow. I sat amongst the trophies of now famous initial public offerings. Those little glass slabs that denoted the incredible sums that had been paid for the shares of companies that the venture capitalists had nurtured; or perhaps, more accurately, gambled on successfully.
It was remarkable how far we had come. We began corporate life in a tiny office above a McDonald’s in Maidenhead, UK, but we now resided in stylish headquarters in Palo Alto in Silicon Valley. Just 18 months earlier we had raised a substantial amount of venture capital, which precipitated our move to California. Sun Microsystems had just paid $250,000 for a single server licence of our new product, we had a global distribution agreement with Oracle and Microsoft was courting us for a significant joint development agreement.
We were doing well, by most people’s standards, but I nevertheless still felt that I was a few pages behind where I needed to be in the mythical entrepreneurship manual – “How to keep your shirt when the venture capitalists get involved.” The growth of the company and demands on my leadership meant that events always seemed to be driving my destiny.
Shaken from my thoughts by Tom and Andy’s entry into the room, and our exchange of pleasantries, I had little time to prepare myself for what they had to say next: ”We’ve decided that if the company is to raise an adequate second funding round it needs a new CEO…………...you can stay on as chairman if you like”.
Devastated doesn’t begin to describe the range of emotions that flooded my brain. This was the first time in my life that I had publicly failed. I started to think about all that we had achieved and what specific events had lead to my demise, but I had no context within which to pinpoint the specific errors. Was it that there were particular aspects of the business that were not functioning correctly or had everything just taken too long? It was clear that they had lost confidence in the leadership and vision of me, the founder, yet 18 months ago they had entrusted me with such large sums of money…………..so what went wrong?
Six weeks later
With our temporary CEO conspicuous by his absence, we were summoned to a windowless room at our corporate lawyer's office to be told the VCs were shutting us down with immediate effect.
Despite our initial promise, we weren’t after all destined for public recognition in the form of a trophy on a VC’s desk. Of course our situation was a pretty common one. For every ten companies that venture capitalists invest in, on average only one is expected to make the windfall profits we all associate with venture capital. The remaining nine ventures are disposed of in some way. I knew that when I started, but as Dr. Robert Jarvik, the American inventor, once said: “Entrepreneurs are visionaries with a poorly developed sense of fear and no concept of the odds against them.”
Consumed with the thought that I had become a failure, I tried desperately to figure out what to do next.
Our lead VC quickly established the tone of the meeting when he asked the two insolvency experts involved - one of whom was on the phone from England - how much it was going to cost to shut the company down. The money men hurled figures around; the UK insolvency expert got bogged down in the minutiae of some trivial insolvency point and hogged the phone. Our finance director, also on the phone from England, saw himself being struck off for allowing the company to continue trading, when we couldn't pay our debts. I drifted off temporarily, pondering how I was going to move my family and all our belongings back to England, if the August salaries weren't paid. We had lived well in California and hadn't thought to prepare for this possibility.
Listening with increasing despair to the money men, as they prepared to liquidate my company, I suddenly thought – I wonder if there’s another way? I asked Tom and Andy if they would risk the money it would cost to close the company down mid month, on the chance that I could find a buyer in the next two weeks. Tom and Andy, who by now trusted me about as much as they would Walter Mitty, looked shocked and appalled at this suggestion. They didn't want to prolong the agony of the company's demise any longer than was absolutely necessary, and really didn't want to believe there was any hope of saving the company. But our lawyer, Don, took control of the meeting at this point and gave me the opportunity to explain how I might do this. Don, a quiet self effacing man, was one of the big power brokers on Sand Hill Road and even VCs bent on destruction generally listened to him.
To everyone's amazement, particularly Tom and Andy's, they agreed to pay the August salaries for all employees and settle any urgent debts to the taxation authorities; but not a penny more. This gave me a last chance.
We had two weeks.
On the 14th October 1998, somewhat more than two weeks later, Oracle Corporation, a Delaware Corporation, announced the acquisition of One Meaning Inc of Palo Alto.
Today, the One Meaning technology and many of the people who developed and supported it, continue to play an important part in Oracle’s success. I feel good that my faith in the value of my business was vindicated but still sad that I didn’t have the opportunity to steer the business that I conceived, all the way through to maturity.
The silver lining of course is that the experience provided the spur for me to create Footdown.
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