Founders at Work.pdf

24 Founders at Work
And then of course, the interesting thing was that when we finally did
launch, each of us had pagers that would send us a page every hour, so we
would know how quickly our user base was growing. It was just phenomenal—
100 people signed up last hour, 200 people this hour. Everyone knew how many
users were signing on and that was very motivating to the whole company.
Livingston: Was there ever a time when you thought you were in trouble?
Bhatia: The only time was when we had to go in for the second round of financing.
We didn’t have any money and Tim was at the Olympics in Atlanta and he
refused to fund us because we wanted a slightly higher valuation. This was what
all the other VCs were telling us, but he wanted to invest at a lower valuation.
We had only a couple of weeks worth of money left and I would not have been
able to meet the next payroll. So as soon as he came back, we literally had to
accept his terms and move on.
Livingston: Couldn’t you have argued legally that by not agreeing to a higher
valuation that they had “refused” you?
Bhatia: At that point you are stuck; you’ve got to make a decision one way or
the other and move on.
Livingston: So really the biggest challenge in the early years of Hotmail was the
funding?
Bhatia: Yeah, it was the funding. And of course then the tough part was in scaling
up to that growth. Our servers would break down and we had to worry
about scalability problems and how to add servers and make it more reliable. It
was not all smooth sailing.
Livingston: Did you ever go out of service?
Bhatia: We went out of service for a few hours sometimes and we didn’t have
proper backups, or the ability to restore things. Reliability was an issue and it
took us some time to cross the reliability curve.
Livingston: Was there ever a time when you felt you couldn’t keep up?
Bhatia: We just handled the problems as they came around: we put in a new
system, rearchitected some of the things. The engineers worked really hard,
and we kind of made it work. But even now there are times when you log into
Hotmail and it says, “Sorry, the server is down.” These are just issues when you
have a very large user base.
Livingston: Web-based email was so new to the world. What did consumers
misunderstand?
Bhatia: We had a sales guy who signed up his mom, and his mom said, “Yes, I
can see that there’s an email from you, but how do I read it?” And he said,
“Mom, go and click on it.” She didn’t know you had to click on it!
I heard another story from a man who said his sister would get into the
Hotmail account not directly by going to http://hotmail.com, but by going to
Yahoo, typing in the word “hotmail,” and then it would bring up the Hotmail
page and then she’d log in. And he’d say, “Why do you do it that way?” and the