Todd and Peter stood in the middle of the room and looked around them. Their search for an office building had led them to this hovel located in an area known affectionately as the Cupertino DMZ. This was a row of ramshackle R&D buildings on Bubb Road that had all, at one point or another in their heralded histories, been locations for the questionable Apple R&D efforts. This included capital suckers like Pink (operating system that died), Newton (hand held computer that died), Pippin (set-top box that died) and Bogart (server that, well, you get the idea). The joke in Apple was all that one had to do to get a project funded was to get t-shirts made. In other words, there had been a lot of t-shirts made in buildings on Bubb Road. Finally, the finance department at Apple figured out that the best way to make money on Bubb was just to lease all the buildings out to the bevy of VC-backed companies springing up around them. Things had been much happier on Bubb Road since then.
Todd and Peter looked around again. The agent from Cornish and Carey was babbling on his cell phone in the corner, leaving them alone in their thoughts.
"You know," said Todd. "If Lazarus saw this building, he'd probably just raze the damn thing and start over."
Todd was probably right. The building was a fine example of a particularly noxious piece of architecture known as The Valley Tilt-Up. This building was literally built by tilting up the four walls and then attaching all the necessary components after. The reasoning for this slipshod construction was explained away with the excuse than in case of one of those famous Californian earthquakes, the walls would collapse out, not in, and save you all those dollars invested in engineers. The same engineers quickly discovered the flaw with this logic: If all the walls collapse out at the same time, where does the roof go?
Peter and Todd were looking at the back half of a building on Bubb Road. The front was inhabited by some company they had never heard, leaving them with the back and the rear parking lot. However the Cornish and Carey agent had already promised signage on the street by the end of the month. Nothing more embarrassing than having your investors not able to find you. The space was split into two "pods," each with a common middle area and then hardwall offices ringing the outside. Peter had insisted on hardwall offices for all the engineers, under his belief that this made them more effective. One of the VCs had questioned him on this, only to be submerged under an avalanche of behavioral and psychological studies at Peter's fingertips.
The agent approached them. "Do you two have any questions?"
Peter looked around. "How is the building wired?"
"The telecom plant runs through a Fujitsu switch, and all the offices also have analog ports set up. In addition, the building is already wired for 10 base-t Ethernet. There is a raised floor and air-conditioned room in the back that you can use for tech support and QA."
Peter nodded. This was all fairly basic build-in for a Valley office building. "What kind of TIs will you throw in?"
"TI" stood for Tenant Improvements, and was basically work-for-free that the selling party would throw in as part of the lease. Usually this meant things like repainting, moving walls around, and new carpets. In return, the new tenant signed up for a longer lease. Peter decided to shoot for the middle of the road. "If you redo these carpets, get our signage outside, paint the walls and bring the Ethernet plant up to fiber, we'll go three years on the lease at $1.50"
The agent didn't even blink. "Nix the fiber upgrade and we have a deal at $2.50."
Peter snorted. "$2.50 a square foot? That's a little pricey for this neck of the woods. It's not like we are on Sand Hill here. We're not even really on 280."
The real estate agent thought about this for a minute. "I would do $2.00 for a five year lease."
This wasn't much better, and Peter knew it. "A five year lease for a start-up? You obviously have more faith in us than our investors do. I'm afraid that is completely out of the question."
The agent pondered some more. "I will do the three year at $2.00 if you cap the TI at $10,000."
This was probably as good as it was going to get. Peter knew that real estate, both commercial and personal, was being snapped up in the valley faster than it could be built. At the end of the day, the real estate agent knew he was holding the better hand, so Peter decided it was time to fold. He nodded. "We are currently located in our VC's offices. Make up the lease papers and we will sign them."
The agent beamed a megawatt smile and started telling them what a great place that had. Peter tuned out. He could tell the agent was already thinking about the next deal. He turned to Todd. "Arthur, meet your Camelot."
Todd and Peter spent the next ten minutes peeking in offices, imagining new layouts, and claiming which of the hardwall offices were going to be theirs. This took the better part of an hour. At which point it was time to celebrate. Conveniently around the corner was the municipal golf course. Fronting that was a restaurant/clubhouse called "The Blue Pheasant." To the local start-ups, it was known more commonly as either "The Blue Peasant," or "The Welfare Silverado." The latter was due to the plethora of retirees that would flood the course around noon, playing the cheap mid-day rounds. The inhabitants of the Blue Pheasant thus got a front row seat of golf balls flying in all directions, clods of grass being unearthed with every swing, and a sea of bobbing blue-gray hair. It was the best floor show in the valley.
Peter and Todd wandered into the bar area, secured a table by the window, and ordered a bottle of champagne that they had never heard of. A moment later, the waitress returned and unscrewed it for them. Peter filled both their glasses and stared out over the course. A four pack of retirees was getting ready to sail off down the first hole. Todd drained his glass and refilled it. He raised his glass for a toast. "To the troublemakers. Once a start-up man, always a start-up man."
Peter raised his glass in response. "Hear, hear."
Todd looked over his glass at Peter. "So, what is our next step?"
Peter thought about this for a moment. "Well, unfortunately our slides are now going to have to turn into an actual business plan. That will tell us who we have to hire, and in what order. Then we have to decide what the short term and long term opportunities are, and where the next round fits in between those two."
Todd's eyebrows raised. "You already thinking about the next round? Shouldn't we first worry about this one?"
"Not a chance. This is going to be our home-run Todd. No acquisition this time. We are going down the IPO track from the get go. Lots of money, lots of investors, and a big concept that will get us out the door. We are not going for the bootstrap this time. I am not interested in playing that game again."
Todd grinned "That strategy you are dissing got us both houses Peter. It hasn't been that cruel to us."
Peter shook his head. "I want big concept, big noise, and a big IPO."
Todd put down his glass. "So, how do you propose we do this?"
"It's simple. One of the things I have noticed in the start-up business is that it is easy to scale down a concept and still be believable, but almost impossible to scale up. That means that our first business plan is the unbelievable home run opportunity. It doesn't matter whether we think it is actually believable. It just matters if we can show a proof of concept, and the most basic of demos. Once we have proven that, then we go raise the big round and figure out what we think we can actually accomplish. It's the three stages in the life span of a start-up. Stage one is what you want to do. Stage two is what you could do. Stage three is what you can do. That's the only stage that ultimately matters."
"Isn't that a cynical way to set off on this endeavor?"
"Maybe, but it actually plays into the world that the VCs live in. They want to invest in a concept, get others to help invest to develop, and then get the public to buy the reality. And the reality is nine times out of ten the only people who make money on an IPO are the people who invested in the concept."
Todd refilled his glass again. "So mein fuhrer, what is our uber-concept."
Peter smiled. "Snowcrash."
Todd leaned back in his chair and gave out a long moan. Snowcrash was the bible of the Internet virtual reality gang. The novel by Neal Stephenson was the basis for many concepts that were bandied about by that crowd, including avatar (a representation of you in a virtual world), metaverse (the aforementioned virtual world) and more. It was also widely accepted by all but the most deranged that a Snow Crash virtual world was impossible to mount with today's technology. The processors weren't fast enough, and modem connections couldn't handle the data flow. Peter had just opened the valley's version of Pandora's Box. The problems overwhelmed any possible version of the vision. "You're kidding me, right?"
Peter held out his hands. "Well, you can't get any more high concept than that, can you? If any non-revenue, patently obscure concept like Phantoms is going to attract an IPO, then it will have to ride into town on the back of the wildest, most attractive horse in the world. Plumbing is great for making money, but you and I both know that we could never get public on that alone. We would probably get snapped up by Cisco or Intel at another nice but not too nice multiple, and then we would be back with another Lazarus. No, the only thing that will get this public is Snow Crash."
Todd grimaced. "We are going to hell for this one. Well, before we get down that road, let's at least try and get this ship out of the docks. Who are we going to hire?"
Peter thought about this. The good thing about working for Lazarus and his corporate combine was that Todd and Peter had made an incredible amount of contacts both inside and outside the company in their one solitary year. They spent the next hour contemplating, considering, and pondering on various engineers. After another hour they had their hit list of ten engineers who represented their dream team. Paul Cromer, at the top of the list, was already in. The next two were conveniently down the road at Apple. It was time for Todd and Peter to make a house call.