The AOL people had been crawling around the building for the past two weeks. Steve was down hiding in Brent’s office. Brent suddenly had nothing to do. His entire engineering team had been brought to a halt by the continual questioning of the AOL technology swat team. So they sat there and wandered through one of the spaces together. For all the time they had worked there, they had never actually spent time in a space. They wandered around and chatted with the avatars that were in the home space. Everyone had taken to the avatar editing tool with gusto, and the home space looked like Bourbon Street during Carnival. Every color known to man was represented by the assembled throng. It really was compelling to wander up and talk to someone who was living in Australia. All of a sudden they noticed a group of four avatars huddled in a corner. They steered over to “hear” what they were talking about. One of the last features placed in the program was something called “group linking.” A number of avatars could link themselves together as a group so they could have their own conversation separate from the rest of the space. When a new avatar approached, a group sign would pop above their heads. Clicking on that virtual sign would immediately erase all text in your chat window and replace it with the group conversation. This way you could join a conversation in progress and quickly catch up on the conversation up to that moment.
They steered towards the group until the group sign appeared, and then clicked on it. Then they quickly scrolled through the conversation to get up to speed. They couldn’t believe what they were reading. It was a cancer support group. Three of the avatars were speaking to a fourth who had obviously just found out they had cancer. They were offering advice, support and suggestions of resources. Two people were from the United States, one was from Canada and one was from Britain. And yet they were all there for each other in this virtual world, a support group that never could have existed in the real world. All Brent and Steve could do was watch and be amazed.
Brent sighed. “You know, when I joined this company, I had this feeling that we could build something that could change the world. That we could do something that was socially as well as technically important. Situations like this are what I thought was going to happen over and over again. Creating communities of people that otherwise never would have known each other. And now it just feels like we are losing our way. That we are grabbing at whatever is in front of our nose. If the studio wants us to go one way, we do. If Vincent says to go another way, we do. If AOL says jump, we do. I really thought we were a religion here, but I am starting to think I got to the church after everyone else left.”
Steve wasn’t sure what he was supposed to say. He was starting to have the same feelings himself. It almost felt like they were waiting for someone to put themselves out of their misery. “Well, remember that we have a pretty good goal standing right in front of us. If we get purchased by AOL, we have the chance to roll this out across the globe almost overnight and affect people in a way that we never could before. Doesn’t that still get us where we want to be?”
Brent thought about this for a moment. “But are we doing that, or is the chance of a lucrative exit driving us? I mean, AOL as an investor and AOL as an acquirer are very different things. This way they get all the upside and keep us away from any potential competitor, so I understand what their driving motivation is. What I don’t understand is how we are benefiting from this path versus a straight investment. The only real gain I see is financial, because we are ceding all control of our future to them. Why are we really going this direction, Steve?”
Steve realized that Brent thought he knew more than he did. That he was privy to some secret conversation that Brent has been absent from. He didn’t know how to tell him that this was not the case. So he played nice. “I think it is really a case of acceleration Brent. By buying us not only do they get our undivided attention, but in a way we get their undivided attention. They have to protect their investment. So theoretically this should accelerate our launch into the market. We get more wood behind our arrow so to speak.”
Brent slowly digested this. Steve could tell it was still bothering him. There was really nothing more he could say, so he decided to beat a retreat. “Well, better see what numbers the hit squad needs from us this hour.” He slapped Brent on the back playfully and headed out the door and down the hall.
When he reached his office, there was a post-it on his monitor. Peter wanted to see him immediately. He walked down two doors and poked his head in. “So, what hoop are we being asked to jump through this time?
Peter didn’t laugh. He got up, motioned Steve in and closed the door behind him. Then he sat down in a little circular desk that was by the window. Steve sat down in the other chair. For the first time that he could remember, Peter looked worried. “Steve, I wanted to bring you up to date on where we are with AOL. As you know, they have been crawling from end of this building to the other for the last two weeks, and it looks like this will be the last day. I am getting a really weird feeling from them, and Vincent is on the road and I can’t seem to find him. I want to make sure that they leave with the best opinion possible, and I am wondering what else we can do before they leave. Do you have any ideas? Can we spring something on them? Maybe let them in on something we are working on?”
Steve didn’t like the panic he was hearing in Peter’s voice. The fact of the matter is there wasn’t anything they were working on. The company had basically ground to a halt while AOL circled their prey. “Well, I think if we try to throw something into the pot at this late of a date, they are going to pick it up as a desperate move. I think we basically have to dance with the girl we brought.”
“How about the numbers? Can we show this as a bigger opportunity? I have asked Barbara to go through the marketing plan and see if there is more money we can pull from the advertising dollars from partners. Do you think we could justify a slice of actual purchases or transactions? I mean, AOL gets a cut from everything that is purchased within their service. If we can show a similar revenue source then that is another way that we fit perfectly within their structure.”
Steve held up his hands. “Peter, we can’t start panicking here. We have to continue to act as if we are the ones coming from the position of strength. If there is one thing I have learned about negotiations, it is you never sit down at a table you are not willing to leave. If they know you have to do the deal, then they know they can just sit there and beat you over the head with baseball bats until you give. If we start throwing things at them the last day that they have never heard of before, they will know they have us right where they want us.”
Peter digested this for a minute. He clearly was uncomfortable when he was not the one driving the process. He was a passenger on this train, and he didn’t know how to act. Steve decided to turn the conversation. “What do you think it is that is giving you that weird feeling?”
“Well, it really isn’t anything they have said as much as watching them move through the company. At first they were spending equal time with all the groups and all the technology. But I have noticed that they have spent almost this entire week with just the client team. And that makes me wonder why they are focusing on that. Frankly, it has me worried. We know there is something screwy with our client. All those people are downloading our client, and yet our installed base of users is slowly going down. We know something is going on and yet we can’t figure out why. My fear is what if they have figured it out. Let me ask it another way. How much information have they asked from you on the financial front this week?”
“Not much actually. And most of the questions they have asked are probably things they could have figured out on their own. I do have to admit that they seem to have lost interest in my side of the house this week.”
Peter seemed to be lost in thought for hours. It was probably no more than thirty seconds. “Steve, I have this feeling that I just can’t shake. I feel like this deal is not going to go down. Just supposing that happens, where does it leave us?”
Steve couldn’t help but be surprised. This was the most Peter had asked him to be involved in the last six months. He wished he could be more optimistic. “Well, if they walked, they would have us in a bit of a pickle. First off, our bridge agreement is for three months. That means that if this deal doesn’t happen, we have about six weeks of money from AOL, and then the tap gets turned off. At that point it starts to get really interesting. First off, we will probably get cut off from the studio. Our agreement with them has us doing all the content creation for them. But as you know, we no longer have a content group. In addition, we killed off our fund raising efforts, so I assume it will take us at least a month to get back up to speed on that. During that period we can probably assume we will lose another half dozen engineers. I think the only reason many of them are still here is the promise of the AOL shares. We are down to six months of cash in the bank at our current burn rate, which we can probably stretch to eight. But without a partner to replace or augment the studio, and no internal content team, we have nothing to entice a partner.”
Peter slowly punched the table. “I can’t believe Vincent didn’t see this coming.”
Steve suddenly felt something he never thought he would feel towards Peter. Pity. He decided at that moment to tell him everything. “Peter, have you ever thought that maybe Vincent did see this coming?”
Peter looked up at him with a confused look. “What do you mean?”
Steve didn’t quite know how to say this. “Well, I did a little research a while back. It turns out that Vincent was one of the first investors in AOL. And that makes me wonder what his real motivations are in this little mating dance. I also am going to tell you about a conversation I had a couple of weeks ago that is really making me think now. Vincent was asking me a lot of questions about headcount, and it was after I sprung on him what the next round was going to be.”
“And that round would be…”
“About twice what he thought it was going to be. I think there is a chance that at that moment he started calculating whether his investment in this company would get the best return as a standalone company or as part of one of his other investments. Given the dilution he was suddenly facing, he may have chosen to go the latter route.”
Peter was furiously processing all this. “Well, that would explain his enthusiasm in slicing out the content group. Makes us more bite-sized.” Then Peter just stared out the window. “What do we do now Steve? I really thought I was doing the best thing for all of us, but now I am starting to wonder. If this is just a plot to snap us up on the cheap, then all they really want is the technology. And our crusade sinks in the middle of the Mediterranean. We never make it to the Holy Land.”
“Well, I guess that depends on your definition of the crusade. If the campaign was to do better than you did with Lazlo, then I think you will succeed. If it is to make a company that can stand the test of time, then we are in a dangerous game of poker.”
“You said that the success of a negotiation was the other side knowing you can walk. Do you think AOL knows that?”
“If Vincent is feeding them information, then we are dead as disco. If not, we could bluff them. I just don’t know if we can risk that bluff.”
Peter thought for a long time. “So we have to play the hand we have been dealt.” He put his head in his hands.
What Steve didn’t want to tell him was the bad news. They had been dealt the hand, but the game was already over.