Founders at Work.pdf

182 Founders at Work
Then we found one venture capital firm, Brentwood Venture Capital. Jeff
Brody, a VC there, saw it and he thought it was great. He said, “We want to
invest.” And they were prepared to put in $4.5 million.
We were just about to sign all the paperwork. It was great, since we were
plumb out of money. I would have lost everything: my house; I would have
been deep in debt; the company would have folded; it would have been a bad
scene. Then we get a certified letter from Sony, and it said, “After due consideration,
we’ve decided not to proceed with you in deploying this product.”
Remember, they had told us they had to have a 1-year exclusive. So we weren’t
very far along with anybody else. We’d begun discussions with Philips, and we
told them it was a year out.
You have to disclose this to an investor, so we went and told Jeff Brody. It
was a real seminal moment for the company. He could have said, “OK, then,
I’m not going to invest if you don’t have anyone to deploy your product.” But he
said, “I believe in you guys, and I think this is going to make it. We’ll still go forward
on the same terms.” As soon as he moved forward, Paul Allen wanted to
get in. So he put in the other $4.5 million, and we ended up raising $9 million
that round.
After that, everything began to change. First of all, Philips came back, and
they immediately said, “We want to do a deal with you.” Because they had been
sitting on the sidelines. We said, “We think we might be able to do a deal sooner
than 1 year.” They said “Great.”
Meanwhile, we had hired a consultant, Spencer Tall of Asia Pacific Ventures,
who had done a lot of deals with Japanese companies. He spoke Japanese
fluently and, in particular, he had a personal relationship with Idei-san, who was
the CEO of Sony at the time. We told him, “Look, we got this letter from Sony.
They said they’re not going to do the deal with us.” He says, “Well, let me find
out why this thing got bottlenecked, how it actually got shut down.”
He went and called Idei-san while he was in the United States—this must
be April of 1996, maybe May. It turns out that he was at a business meeting in
New York and he had his chief technology officer with him. We’re busily working,
and, when you’re building stuff, you’re always doing different builds. They
always have bugs in them. None of them were really working, because we were
in the development stage. And I got a call from Spencer, who said, “I just got off
the phone with Idei-san. He said that his guys didn’t think the thing really
worked and they’re skeptical this would ever be successful as a product. I told
him he really should reconsider. So he dispatched his chief technology officer
on a private jet to your offices to get a demo. This is your big chance to show it
to them.”
I said, “Great. When’s he sending him?” He said, “No. He dispatched him.
He’s in the air now. He’s going to be there in 2 and 1/2 hours.”
I said, “Spencer, we’re in the middle of development here! We need more
warning than 2 and 1/2 hours!” We had been adding a bunch of code, so it was
really crashing all the time at that stage. So I went back and talked to Bruce and
Phil and said, “Look, we have one last chance with Sony. Their CTO is coming
here in 2 and 1/2 hours.”