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Those are our biggest two right now CHARTS will sell for $6,000, and we charge $1,500 a year for support Now some of the people are shocked by this And when we talk about support, their clients are even shocked by it..

Bhatia: We were kind of torn. Our plan was to use the JavaSoft idea to get money from venture capitalists. But actually the killer arrow in our quiver was always email because we thought that it was even bigger than the original idea. Livingston: But you didn t want to tell people about the killer idea because you were afraid they d copy you Bhatia: That they would copy us, or what if they just shared this idea with

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Netscape Or shared it with anyone else. You have to realize that in those days we had nothing just the idea. When we were approaching venture capitalists, they would shoot us down for one reason or another for reasons we thought were frivolous like, You guys, what is your background So we would tell them that our background was in hardware engineering. Why are you building software Many of them also said, But you re too young. Do you have any management experience No, we said, we re two young kids; we have a great idea. The whole VC community has so many links with each other you never know. Netscape was building email servers. What if the VCs were just to say to them, Hey, why don t you do web-based email And that s it, that s the idea, right There was not that much to protect in terms of IP. Whoever built it first would win the market. So we were afraid and that s why we kept that as the secret. But we were going to do web-based email no matter what, even if we got funding for the other idea.

Livingston: I read that you judged the VCs by their reaction to the JavaSoft idea. Did you plan this clever approach Bhatia: We actually planned to do this. You can t get an audience with any ven-

We charge $1,500, and that covers all phone calls, all trips, e-mails, whatever They never get charged another dime Unless they do something to the database that s their fault and I have to fix it, I cover that If they have a problem with their database, they can ZIP it and send me the data, and I ll look at it and say, We need to change this record and do this etc, etc, and tell them, you know, that s included in their fee Most people don t believe we do it that way They don t think it s enough But you know, it s enough for me Smolin: Did you trademark any of these products Cummings: No.

ture capitalist without sharing a business plan, but we didn t want our business plan floating around somewhere with the email idea. So we would go in with the JavaSoft business plan. If they passed the litmus test of not rejecting us for the wrong reasons and said, OK, we don t mind that you re young, we don t mind that you don t have

management experience, only when they would start poking holes in the actual idea would we share the Hotmail idea with them. That was actually just because we didn t trust them.

of our partners to come in and take a look at this because it could be big. So Tim Draper came in the following week and he liked the idea. After another meeting he said, OK, we re ready to fund you. We like this very much. How much do you want I did some calculations on the back of an envelope and asked for $3 million, which was our plan based on hiring a few engineers. They said, No, that s too much. How much money do you need just to prove to us that you can do this that it s even possible to make email available on the web So I asked for half a million and he said, I ll give you $300,000. I said, Alright, I ll take it. They wanted 30 percent of the company, which would value us at $1 million. It was an intense negotiation; I threatened to go to the other VCs if they didn t pony up the money. We finally settled on a 15 percent split with them and they valued the company at $2 million post money. But they d put in a right of first refusal. Since I was a young entrepreneur at the time, I didn t understand that this basically meant that you couldn t go to any other VC. So even though they didn t get their chunk in the first piece, in any subsequent round they would have the ability to take up the entire round.

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