November 1998

November 4 – Mark Maxwell

I needed serious help with the business side of ONElist. We had a couple of engineers, and we had customer support, but no business development. Mark Maxwell worked with Carisa at a previous company, which is how I met him. It turned out that he left that company early in the fall and was looking for a new job. His outgoing personality was a good contrast to my nerdful introversion.

From: Mark Fletcher
Date: Wed Nov 4, 1998 9:13am
Subject: Mark Maxwell

Hey Gang,

ONElist is now up to 5 official people (and Carisa in her unofficial but equally important role), with the news that Mark Maxwell has agreed to come on board. He will be helping out with a lot of the business activities that I’ve been neglecting due to either time constraints and/or sheer ignorance/stupidity (you decide).

Mark’s first activity is completion of our business plan. With that we can actively target funding/acquisition. Our goal is to have something in the works by the end of the year. Mark will also be working to get advertising and other revenue streams for us. And he will be looking at partnering possibilities/other ways to promote ONElist. Welcome Mark! Now, we need to work on doubling up on the other names. Anyone know of another Scott, Ethan and Kate that we can hire?

Also, an update on other things. We did an ad test for Xoom over the weekend. It was for some sort of digital camera. 1300 people visited their site because of the ad, and 5 people actually bought the camera because of it. We are still analyzing the ad server logs to figure out some precise numbers as to who actually saw the ad, and how many times. We will be doing some more tests with them; they will be giving us 3 ads this time and we will be rotating them. They will also be advertising ONElist to their users in a couple of weeks. We get 25% of the profit from any sales during this test. But much more important is the information we’re getting from it, in terms of how our users are responding to advertising, what kind of information an advertiser wants from us, and how an advertiser wants to target their ads.

Thanks!

Mark

November 5 – Retiring the Original ONElist Machine

From: Mark Fletcher
Date: Thu Nov 5, 1998 9:47pm
Subject: new web server

Hi,

This is somewhat of a moment in ONElist history. The original ONElist machine, linux73.dn.net, is being retired. The DNS changes will hopefully go through Friday morning. The new web server is linux169.dn.net. It’s faster, has more memory, and is cheaper. We will also be getting a second web server soon.

Kate, instead of logging into onelist.com to do the mail, telnet to linux169.dn.net now. The login is admin and the password is the same. All tech support email is already going to the new machine.

No crying now. Linux73 was a good machine, but it’s time to put it down. 😉

Mark

November 18 – Maintenance Notice

Whoops. During this time, we were going so fast, that we sometimes made mistakes. Whenever we upgraded the system, we had to guess how long it was going to take. Sometimes we got it right, sometimes we didn’t.

From: ONElist Tech Support
Date: Wed Nov 18, 1998 8:11am
Subject: Maintenance Notice

Hello,

This is a notice to let you know that the ONElist system will be down for scheduled maintenance on Wednesday, November 18 from 6pm to Midnight Pacific Time. We continue to experience explosive growth; in the past three months we have more than quadrupled our user base. To keep up with our growth, we are continuing to upgrade the hardware that runs the ONElist system. That is what we will be doing Wednesday evening. Any email sent during this time will be stored and sent out when the system is back up.

We are committed to providing the best service possible for our users.

Thanks for using ONElist!

The ONElist Team

From: ONElist Tech Support
Date: Thu Nov 19, 1998 8:45am
Subject: Change in Maintenance

Hello,

The system maintenance scheduled for last evening has been delayed. We realized that it was going to take significantly longer than we had originally planned. To minimize interruption of service, we have rescheduled the downtime to begin Friday, November 20 at Midnight. ONElist will be back up Saturday at Noon, Pacific Time. We apologize for the inconvenience.

During this upgrade we will be transferring our archives to a faster system. We now serve over 43,000 lists, and our archive system needs to be upgraded.

Any email sent during this time will be stored and sent out when the system is back up.

We are committed to providing the best service possible for our users.

Thanks for using ONElist!

The ONElist Team

November 22 – Does ONElist Look Like a Bitch?

The talks with Xoom had been progressing over the previous couple of weeks to the point where they had decided to make us an acquisition offer. They wanted to present the offer in person, so we set up a breakfast meeting. The suggestion was made that we meet at Il Fornio, an upscale restaurant in Palo Alto. The reason they wanted to meet at this particular restaurant was because, and I quote, “that’s where all the deals are made.” Sounded like a couple of kids playing make believe grown-up business games. But, it was a free meal, and we were curious as to what the offer was going to be, so we went.

Scott and Mark accompanied me to the meeting. From Xoom, Russell was there, along with their CTO and one other person. Over our poached eggs and Belgium waffles, they outlined the terms of the deal. They were offering 100,000 pre-IPO options in Xoom, as well as employment for us. The options were to be split amongst the 5 of us.

Now I suppose that most people reading this have no idea how to evaluate that offer, so I’ll try to explain. An option is the right to purchase a share of stock in a company at a fixed price. Lets say you have an option to purchase 10 shares of Xoom at $10. If the stock is currently trading at $20 a share, then you can make $10 per share. If the stock is currently trading at $5 a share, then the options are worthless (who’d want to buy a $5 share for $10?). Another detail about options is that generally they vest over time. That means you don’t get all the options at once, you get a percentage of them over a period of years. In this case, the options would vest over 4 years, so we wouldn’t receive all 100,000 options until after we worked at Xoom for 4 years.

Let’s look at the big picture here for a moment. We had a service that was growing fast, rapidly approaching 1 million users, and we were the leader in our field. Xoom at that time had about 3 million users. Granted they were much more of an established business and they were on the verge of an IPO. But offering us only 100,000 options (not even real stock) was very disappointing. It amounted to only a small percentage of their company. If I had any self-esteem, I’d say it was even insulting. On the drive home from the restaurant, reviewing the offer, I summed it up through a quote from the movie Pulp Fiction, “Does ONElist look like a bitch?” That’s how we felt.

We turned down the offer. Russell wanted us to give him a counter offer, but I didn’t bother. In hindsight, this was a good decision, to say the least. Xoom did in fact have a successful IPO in December 1998. The next year, they were acquired by NBC, which merged them with Snap.com. After that, the company was renamed to NBCi.com. At some point, the company ended up on the scrap heap of failed dot-com bombs. We never would have made it the 4 years to vest the options fully. Besides, things would get much more interesting two days later.

November 24 – First Contact

Smarting a bit from the Xoom encounter, we continued our routine. It was Thanksgiving week and I was looking forward to at least a couple of hours away from the computer. The answering machine that I had connected to the second line in my house – the ONElist line – could be listened to remotely, and I had given Mark Maxwell the code to do so.

When I got home from work that day, there were two messages waiting on the machine. The first was from someone with a German accent, and because it was a low quality answering machine, I couldn’t understand the phone number he left. The second message was from Jon Callaghan of CMGI’s @Ventures venture capital fund. As I was listening to these messages, Mark Maxwell called. He had heard the messages as well and he had called Jon back. They were interested in talking with us. Mark told Jon that we were considering an acquisition offer (the Xoom deal, which we weren’t really considering), but that we’d talk with them in a week. Jon was anxious to talk with us, and asked us to come to their office the next day anyways. Not quite knowing what to think, but figuring that an interested VC wasn’t the worst thing in the world, we agreed to a meeting the next day. Seeing how I was only tangentially aware of whom CMGI was, I needed to do some homework, and quick.

November 25 – CMGI Meeting

It was now the day before Thanksgiving. Mark Maxwell and I drove over to @ Venture’s office in Portola Valley, an upscale area of the peninsula about 30 minutes south of San Francisco. We met with Peter Mills and Jon Callaghan from CMGI, and Mathias Schilling from Bertelsmann Ventures. Mystery solved, Mathias was the other message on the answering machine from the day before. They had both called. Jon was an associate at @ Ventures, and was around 30 years old, kind of that typical Stanford active outdoors type. Peter was the managing director of @ Ventures, which means he was the head honcho. He was in his 50s and was second in command at CMGI, the parent company. Mathias was also around 30 years old and had relocated to Santa Barbara, where Bertelsmann Ventures was located, from Germany the year before. All seemed intelligent and very interested in ONElist.

It was a very informal meeting. We didn’t have a presentation, but neither did they. CMGI and Bertelsmann had decided to invest in a company together, and they liked the space that we were in. The meeting lasted maybe an hour. They asked a lot of questions about ONElist, and we asked a bunch of questions about them. At one point, when CMGI was explaining their investment strategy, Peter said that “[we] don’t fund assholes.” To which Mark replied, “Good, because we don’t take money from assholes.”

In the end, we shook hands and they said that they’d be in touch. Mark and I went off to lunch at The Oasis, a local Menlo Park watering hole. We weren’t quite sure what to think about the meeting. We adjourned to our families for Thanksgiving.

November 27 – The Exploding Offer

It was now the morning after Thanksgiving, and I received a call from Jon Callaghan. They liked what they saw and they wanted to invest in ONElist. I asked him for the terms of the deal, and had to wait a minute as he worked his way to his office (he was calling from his home).

They wanted to invest $3.5 million into ONElist. In return, they would receive 2 board seats and roughly 40% of the company. Jon said that what was really important to them was the percentage ownership number, implying to me that there was more room to negotiate with the amount of money they would be investing.

We received the official term sheet the following Monday, November 30. A term sheet is a document that outlines all of the details of the deal. This term sheet or Letter of Intent was about 5 pages long. We immediately rushed to our lawyers at Wilson Sonsini to review it. Over dinner at their office, they explained all the provisions of the deal. The offer was made up of fairly standard components. It was a tough deal, in that it was weighed heavily in the VCs favor. They would effectively be gaining control of ONElist. They were guaranteed a return of at least 5 times their investment before anyone else received any money. And Scott and I had to work an additional 3 years to vest our stock in the company.

We decided to accept the deal, after negotiating an increase in the investment to $4 million. I really wanted the deal to happen, and quickly, so I didn’t try to negotiate any of the other conditions of the deal. Very much a mistake in hindsight, but I had reasons. I had no idea what normal deal terms were at that time. Also, I was feeling pressure because we had heard that eGroups, our main competition, had just received funding from Sequoia Capital, the VC firm that originally backed Yahoo. Additionally, we were all burned out from working full time jobs in addition to working on ONElist. This deal would allow us to work on ONElist full-time, as well as hire additional people to help. And in doing research on CMGI, I had come to the conclusion that their network of companies would be able to help us out.

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