When the call came, they weren’t even surprised. The AOL people had decamped and headed back for the East Coast, like locusts heading off to the next field. One week of complete radio silence had then ensued. When they were finally about ready to pick up the phone, they got the response from Vienna via registered mail.
AOL was passing.
Peter and Steve sat in his office and looked at the short little letter that had issued from the other coast. It almost seemed to be thrown out without a second thought. If there was a form letter for one company rejecting another, this was it. Peter looked at it one more time and then threw it dismissively on the table. “Well, now what?”
“This isn’t going to make you feel any better, but I did some a little digging around and apparently this little stunt has been pulled before by our friends on the East Coast. In fact, it even has its own name. It’s called “Being Put On Life Support.” They come in, do the same song and dance they did to us, tell you how much they have fallen in love with you and your company and then promise to pay the bills. That is the part where they put you on life support. Then they come up with a reason why they can’t do the deal, and they pull you off life support. The patient then proceeds to die, unless…”
“Unless what?”
“Well, apparently the final move is them coming back into the room while we flop around on the gurney, and after much hemming and hawing they decide to buy us after all.”
“So what’s the bad news?”
“They offer half as much as what they offered before. At that point you are not exactly in a position to argue.”
“Great.” Peter was rubbing his forehead. He looked like he hadn’t slept for the last week. “So all we can do is wait for the phone call. I won’t accept that. What else can we do?”
“Not much, I’m afraid. We have lost our lead dog for the next round, and our lead VC has crawled under a rock somewhere and can’t be found. Not that we even have a round to lead right now because we shut it down for AOL. The bills are going to stop being paid by AOL in about six weeks, and then we are working without a net. We can shut down marketing and sales completely, as I mentioned before, and we don’t even have content for them to support. My greatest fear is the next phone call is going to be from the studio telling us we aren’t getting any more content. At that point you can start carving the tombstone.”
“How long can we limp along like this?”
“Well, we can always continue to slash costs, but my feeling in this kind of situation is that if you are going to die, you might as well die with your boots on. Otherwise you are really just avoiding the inevitable. Saving costs just buys us a little more time. It really doesn’t change the end result.”
“All true.” Peter leaned over, rolled up the letter from AOL and fired it across the room into his garbage can. “Two points,” he mumbled. “Are we really going to let this happen, Steve? I was determined not to let another Lazarus take me out prematurely, and instead it is going to happen all over again.”
“Well, having two of your companies bought would not be most people’s idea of a failure, Peter.”
“True again, but I really thought we had a chance at an IPO on this one. I thought if we could get out ahead of the pack fast enough with a big enough idea, we could shoot out before anyone got wind of it.”
“Maybe that was the problem.” Steve blurted this out before he even realized he was thinking it.
Peter looked at him. “What do you mean?”
Steve had nothing to lose at this point, so he kept going. “Maybe the problem was that your goal was not building a great company, it was building a great IPO.”
“Is there a difference?”
“Well, the end result is the same, but I think the focus is important. I think an IPO is the side effect of a successful company. A successful company is never a side effect of an IPO. If you concentrate on building a good company, then the IPO will come by itself. You don’t even have to pay attention to it. But if the focus is the financial end game, then you wind up making decisions that hamstring your company later in the game.”
“If I didn’t know better, Steve, I would say you are criticizing me. Isn’t this the game as it has been laid out for us? I’m not making the rules here, I am just obeying them. And get big fast is the rule. I mean, how many times during our pitches did a VC tell us that the secret to succeeding in the valley was to ‘fail fast’?”
“Well, I think I am criticizing the game as it has been laid out then. I mean, how many of the companies on this road do you think will be independent companies in five years? I would guess that ninety percent of them will have been bought, merged or will have gone under. All these names, all this money, all the t-shirts and it will mean nothing ten years from now.”
Peter Laughed. “Well, I certainly thought we would be one of those companies that would last. Look at our erstwhile partner. AOL started off as a bulletin board for computer hobbyists, for crying out loud. And they slowly built it up to be the company that it is today. Regardless of what we think of them right now, you have to admire the perseverance to stay on that road.”
“Now there’s an interesting question,” said Steve. “Do you think if AOL was started today as the company it was it would still succeed?”
“Probably not. Some VC would give them $40 million and tell them they should try to become the portal for all computer hobbyists. Then they would have to acquire a bunch of companies to become the premier destination for all hobbyists. Then they would have to hire a pack of consultants so they could become an e-commerce and advertising platform. And then they would be out of business twelve months later. We as an industry have lost the most important emotion for building successful companies, Steve. Patience.”
“Do you think that happened with us?”
Peter bit his lip and then nodded slowly. “Perhaps. I was so blinded by the chance to accelerate our business with AOL that I never thought about whether it was really in our best long-term interests. I guess I also let Stivo talk me into the studios too early. I don’t know, I really don’t know any more.” Peter rubbed his face suddenly, almost violently. “Spilt milk. It is our job to figure a way out here. We still have AOL on the hook. It is our job to still get them into the boat. We can still push our vision forward. But first we need to get all of us into AOL and in a position where we can influence the place. Destroy from within.” Peter was getting his old fire back.
They both started as the phone rang. Steve motioned to Peter if he wanted him to leave the room, but Peter wanted him to stay. He picked up the phone and answered with a cheery “Peter St. John.”
He listed intently to the phone, and made a “V” sign with his fingers to Steve, signaling that Vincent was on the other end. He nodded a couple of times. “And did they tell you why they had chosen to pass?” More nodding. “I see. They are sure it was on our end and not theirs?” He scrunched up his face, obviously not happy with what he was hearing. “So, what is the next step? Yeah. Yeah. Do you think that would help? OK… Well we can try it and see what happens. Great. Thanks for the G2, Vincent. We will let you know what happens. Great. Bye.”
Peter slowly placed the phone back on its cradle. “Interesting…”
“What did they say to Vincent?”
“The reason they chose to pass was some problems with the client side of our technology.”
“As you suspected. What specifically?”
“Well it turns out that there was a fairly nasty bug that cropped up when our client and the AOL client were installed on the same machine.”
“Steve stared at him. “How could that be? We tested our client with theirs before we went out there. And it worked fine. Took forever to download but once we fixed the server settings everything was great. I don’t understand.”
“That was with the 3D client, Steve. We never checked the new 2D client. I was so focused on getting it done in time for studio that I never even thought to check it. I bet they knew about this the whole time. Now we are figuring out where the cards are on this table. They are going to use this to knock us down. And we have to fight with everything we have to push them back on it. This is a tiny bug. Ridiculous. Hell, it could be because of a mistake on their side.”
Peter just kept shaking his head. “I can’t believe I missed it. Don’t you get it? That is why we were getting that weird dynamic where all those people were downloading our client, but our total visitors was not going up.”
Suddenly it hit Steve. “Oh my God. All the AOL users couldn’t get on.”
“Right. All of them were sunk before they even started. If we knew how many of our downloads were people with AOL, we could have lined it up. I can’t believe we missed this. God dammit!”
“Peter, stop. What else did Vincent say?”
Peter blinked as if he were suddenly refocusing on the room. “Well, it is going down pretty much the way you anticipated. Vincent talked to them this morning, and he thinks that if we call and re-engage with them they will do this deal for a lower amount. He claims he is working on our behalf over there.”
Steve smiled to himself. “They knew, all right. And I bet Vincent has known too. All he has been doing for the last month is figuring out how many unnecessary pieces of our company he could get rid of before he sold us off to them. He didn’t invest in us as a company. We were an R&D project for AOL. A way that they could develop new technology off the books, and Vincent gets a quick little pop from the investment. Everyone wins.”
“Yeah, except us. So, what we going to do Peter?”
The moment had come. Peter sighed, a rattling sound that seemed to go to bottom of his bones. “I don’t see a choice. At least we will have jobs come next month. We make the call. We do the deal. We live to fight another day.” The old Peter was back. He clicked through his phone book until he found the number for his contact at AOL. He picked up the receiver and punched in the numbers. As the call connected he looked over to Steve and gave one last little smile.
“This is what happens to revolutionaries when they run out of revolutions.”