Founders at Work.pdf

Joe Kraus 69
is—and I only learned this story recently—the negotiator we were working with
went back to Gates and said, “I think the number’s going to be $100 million if
we want to do this.” And Gates said, “How much would it cost us to do it ourselves?”
So the guy went away and built a plan and said it would be about a year
and $25 million and 25 people or something like this. And the interesting thing
is that they didn’t buy Excite for the $100 million, and they didn’t invest and
build it themselves. Instead they did nothing.
Which is really interesting to me in terms of the longer-term history of
Microsoft and the search wars. It’s interesting that MCI and AT&T and these
guys never got into the business.
Livingston: How did you get the Netscape search button deal?
Kraus: That was a gut-wrenching moment. We needed distribution—we
needed eyeballs and more people to be trying Excite. The natural point of distribution
was the browser. The only real point of distribution. No websites had
any traffic of any size to do a deal with. It was the browser getting bundled in
that made the big difference. So we went to Netscape. They had two buttons on
the browser: NetSearch and NetDirectory. NetSearch was pointing to Infoseek
and NetDirectory was pointing to Yahoo. And those deals were free; it was just
free traffic to those services. Unbelievable.
But nobody knew how to make any money off traffic or that traffic itself was
valuable. Netscape wasn’t a media company; it didn’t view that as valuable.
What Netscape wanted was more downloads of its client, which would help
them sell more servers and more client licenses. So they finally decided to put
these two buttons up for bid and there were three bidders: us, Infoseek, and
MCI (with a rumored new service).
We had $1 million in the bank and we didn’t know what we were going to
bid. We sat down in my office, all on the floor. Vinod said we should bid $3 million.
I was like, “How do we bid $3 million? We only have $1 million in the
bank.” And he said, “Well, if we win, I’m pretty sure we can raise it, but if we
don’t win, I don’t know how we’re going to raise it.” And so I thought, “OK, this
is really scary.”
(If you are 22 and trying to make these big decisions, it’s great to have a very
active guy like Vinod helping you out. And I mean active. I was talking to Vinod
twice a day easily. He’s one of the senior partners at Kleiner Perkins and he’s
spending multiple hours a day on my business, which you just don’t get. But
that’s Vinod’s style.)
We decided to bid $3 million. We had no way to pay for it, but we weren’t
going to reveal that. We bid the $3 million and we lost. It was horrible to lose; it
felt like somebody had died. It was just this feeling of, “Oh my God, what are
we going to do?” Because you spend so much time wanting to get the deal that
when you don’t get it, you’re like, “Oh, are we really screwed?” (And I think we
would have been screwed.)
Vinod told us this whole story about how he’d gone through a similar situation
at Sun in losing a deal, and he just never gave up and won the deal back.
He said, “We haven’t lost. Let’s meet with them. Let’s show up in their lobby