Founders at Work.pdf

Paul Graham 211
argument with “/etc/passwd” and sure enough, the server displayed the password
file right in the browser. And there were accounts with no passwords.
I mean, this is programming 101.
There was another competitor called Shopsite that was better technically,
but still not too dangerous. Plus they were out in Utah; they weren’t really connected
to the startup world. Whereas iCat was in Seattle, which was much more
startuppy. For some reason there were no serious competitors in Silicon Valley.
Livingston: Tell me about some of the other major turning points in the first
year or two of Viaweb.
Graham: There were a lot of turning points. Basically Viaweb’s history was one
turning point after another, alternately up and terrifyingly down. A couple days
after we launched came the next turning point, when a giant company called us
up and wanted to buy us, right on schedule. It was just like we thought it was
going to be. We’re these great hackers, we write this clever piece of software,
we launch the thing, and rrring, there goes the phone and it’s some big company
wanting to buy us.
Livingston: What happened?
Graham: There was kind of a clash of cultures. First they came to check us out.
They showed up wearing these Bill Cosby sweaters, like someone in corporate
affairs has told them that when they go and visit startups, they’re supposed to
not wear suits and they’re like, “Uh, what do we wear?” “Wear a sweater that
looks like some macrame class knitted it collectively.” So they show up in their
Bill Cosby sweaters and march up the stairs past all the landlady’s kids’ shoes in
the corridor, and walk in, and this company they’re supposed to be buying is
just a grad student apartment with some computers in it.
But they still wanted to buy us after that, so we arranged to have a meeting
at Julian’s loft in New York. One of our investors was a metals trader, so we figured
that he must be a great negotiator and we’d let him handle it. The guys
from the big company said, “We want to buy you for $3 million.” And he said,
“Well, I won’t sell you the company for $3 million, but for $1 million, I’ll sell
you an option to buy the company in 6 months for $20 million.” At that point
the guys from the big company just got up and walked out.
Livingston: How did you feel?
Graham: For the first day or so, it didn’t register with me what had happened.
Then I felt really bad. I realized that if they’d bought us for $3 million, it would
have been more than a million for me personally, so I felt like I’d lost a million
dollars. I’d had a million dollars, and then lost it. I was aghast.
I called up the guy we’d been talking to at the big company and I said, “Do
you still want to buy us?” and he said, “No!” He had lost face, I guess, with his
colleagues for wasting their time on us.
Livingston: So that was a harsh dose of reality about the acquisition process.
Graham: That was my first introduction to something that turns out to be a
very important lesson for startups: it’s never a deal till the money’s in the bank.