Much of the meeting focused on Byzantine legal issues regarding an initial offering. The lawyers from Cooley Godward, a venerable Valley firm, reviewed the status of the Red Herring, an initial filing with the SEC. Most of us had heard the litany before, so the lawyers balanced doing their duty with being succinct. They discussed the accounting issues regarding stock options granted to employees. The SEC claimed that some of these were priced below market. If the federal watchdog only knew how hit or miss these ventures were, how sudden the surge forward toward an IPO could come on, they might better understand why almost every company in the Valley regularly faced the “cheap stock” issue. The lawyers cautioned us against discussing the IPO during the “quiet period,” another faux pas, according to the SEC, because it can be misconstrued as prematurely promoting the stock. We were reminded, as was common practice with IPOs, that the company's employees and investors would be “locked up,” or forbidden from trading in TiVo stock, for 180 days, thus ensuring a more manageable stock price in the six months following the offering. Finally, the SEC wanted clarification about my title, “Virtual CEO,” and asked that it be changed to avoid misleading the market. Old dogs don't take well to new tricks, and it was once again obvious why the new economy germinated in the Valley.
The board cautioned the management team to avoid becoming too distracted or euphoric about the IPO. Not even founders and management committed for the long haul can avoid some preoccupation with the IPO's life-changing potential. The first day of trading can be mesmerizing for those who have worked tirelessly to build the company. To these entrepreneurs, the IPO is proof they aren't lunatics. They are finally able, at least temporarily, to stop protesting to family and friends that this work will make a difference and that they are sane despite having sacrificed everything for this chance. After the IPO, riding the share price around the curves and corners can make you dizzy. Good management must remind people constantly to ignore the jerking and lurching of the market and focus on the horizon. Stay.com.
TiVo had a chance to change the status quo for the better, with a potential we could only guess at. Sure, the market and business model were not yet proven, the incumbents could stonewall, and competitors large and small might hijack the opportunity, but Mike and Jim were up for the challenge: smart, experienced, flexible, capable of learning on the fly, and willing to do what it would take to win. They did not waste any time speaking to me about exit strategies. Personalized television would be their legacy.
I returned home midafternoon, changed into shorts and a T-shirt, opened the doors to the hills, let the dogs mosey a bit, and spent an hour or so working out in the downstairs exercise-room-cum-office-cum-dog-dorm. I lifted a few weights and put in some time on the treadmill while taking and responding to phone messages, my own recipe for multitasking. Then I checked e-mails. Surprise, surprise. Lenny had not disappeared. Tucked in the middle of several messages was one marked “Urgent!”
TO: randy@virtual.net
FROM: lenny@alchemy.net
SUBJECT: Pay Dirt
Hey Randy,
Great news!
Frank called and wants us to present next Monday morning at his partners' meeting. This is the break we've been waiting for. I don't know what you said, but thank you.
One little glitch. Allison, my partner, got a job offer she's considering taking. I think she's losing patience— just when all our work is beginning to pay off! The job offer is from some HMO. She'd be involved with developing a strategy for supporting members on the Net, though it doesn't compare to Funerals.com. She's agreed to come with me for the presentation Monday, but she's wavering between Funerals.com and the new job.
Would you be willing to get together with us after we meet with Frank and his partners? If Allison had the chance to talk with you, I have a feeling she'd be back on board, especially if the meeting with Frank goes well. I realize you don't know her, so I'm forwarding her e-mail along with another revised version of the business plan.
I've given a lot of thought to your question, but right now I need to focus on the meeting.
I can almost smell the money! Finally-- I can't believe it.
Lenny
I let out a sigh. Stranger things have happened. As any other good VC would do, Frank was sniffing around that big market, and Lenny was his only play for the moment. I'm sure that as soon as he heard from Frank, Lenny eagerly set aside all the issues I was raising. Why bother with some loopy metaphysical question if you're going to raise the money anyway and get rich in the process?
Allison's indecision posed a critical challenge to Lenny. If he lost her, it would be a serious blow to his chances. I opened her e-mail.
TO: lenny@alchemy.net
FROM: “Allison Whitlock” awhitlock@digger.net
SUBJECT: Re: California Here We Come!!
Hi, Lenny,
All right, I'll go. I don't want you to fail, even if I'm not associated with Funerals.com in the long run. You have labored so hard for this. Whatever happens, I hope it works out for you. You deserve it.
But please understand, even if I go with you, I am not committing. I'm having trouble seeing in Funerals.com now the idea that attracted me to it in the first place. When we started talking about it and planning for it, when you and your family were having such a hard time with your dad's death, we saw it as a way to help people who are struggling with loss and grief. It wasn't just selling cheaper caskets. As you say, that's a good place to start, and I understand why investors will focus on the economics of the business. But personally? I'm not interested in simply being an e-tailer.
I'll help as much as I can. But I'm not there yet. I have to let the HMO know in ten days.
Later,
Al
It wouldn't have surprised me if Lenny's partner bailed out because she'd received a better offer, something concrete in contrast to the hazard inherent in a startup. But I hadn't considered that she might be at odds with Lenny's lifeless mission or that their original idea might have been more compassionate and compelling than Lenny now let on. I couldn't tell from the little Allison said, but “helping people who are struggling with loss and grief” seemed more intriguing to me than flogging cheaper caskets. A bigger idea. I was already beginning to like this Allison.
The chance to work on a big idea is a powerful reason for people to be passionate and committed. The big idea is the glue that connects with their passion and binds them to the mission of an organization. For people to be great, to accomplish the impossible, they need inspiration more than financial incentive. Lenny appeared to be jettisoning his founding vision for some misguided notion of what success demanded. He was trying to reduce Funerals.com to an equation, a formula, a model. Impatience wasn't Allison's problem. Finding something in Funerals.com to care about was.
HER AMBIVALENCE and Lenny's focus on the formula over the mission brought to mind my experience at Apple, specifically one of the most pivotal negotiations I was involved in there, which was reported only recently for the first time.