Alpha Girls

by Julian Guthrie

  It took about two plays for Theresia to realize that fun and friendly were not part of the equation. The flags, which suggested fun and games, were a bait and switch for contact and blocking. Theresia alternated between playing running back and receiver on offense, and cornerback and free safety on defense. But when Jim Goetz saw the way she could throw the ball, he gave her a turn as quarterback, telling her, “You throw and catch better than half the guys out here!” Theresia had learned how to throw a spiral in high school, practicing with a player who became a starter for West Point.

  Team Patterson took the early lead. When Theresia threw a pass to Patterson, Goetz ran to block, and somehow the men collided head to head. In the heat of another play, Theresia was elbowed hard in the stomach. Angela cringed from the sidelines. When Theresia brushed it off, Angela whispered, “Badass.”

  A few minutes later Theresia called a timeout. Bruce Golden, on Swartz’s team, had pulled a hamstring, and Patterson was bleeding from his ear. Theresia told Patterson, “This isn’t fine.” She spotted a girls’ team playing soccer nearby and ran over to see if they had a first aid kit. She insisted on patching Patterson up.

  As the game continued, Team Patterson was ahead by a touchdown. Team Swartz had the ball, with time running out on the clock. In the closing seconds, the Swartz team quarterback threw a Hail Mary pass that was caught for a touchdown. His team cheered as if they’d won the Super Bowl.

  Patterson, his ear bandaged, jumped around on the field yelling, “Trick play! Swartz came in off the bench! They had an extra player!” Team Swartz had had too many players on the field. A penalty was called, and Team Patterson walked away battered and bleeding but victorious.

  Other companies used cook-offs, scavenger hunts, or board games to bond. But in the world of venture, testosterone ruled.

  Back in San Carlos, Theresia, feeling a little bruised and battered, stepped into a role as a different kind of team player. Her husband, Tim Ranzetta, had left his job in Boston and returned to Silicon Valley in 1999. They lived for a year in a small cottage behind a house in San Carlos, then bought their own home. Tim now co-owned a paper shredding company in Salt Lake City and commuted every week. He picked up paper for shredding from corporate clients and then resold the shredded paper. Theresia lovingly called him her “white-collar trash collector.”

  As Theresia landed bigger deals and started making more serious money, the dynamics of their marriage shifted. She had far surpassed her college dream of moving to Silicon Valley and earning six figures. Tensions surfaced between Theresia and Tim without either of them discussing why. Tim was now managing his money and Theresia’s money. It was the only arrangement Theresia knew. It was what married couples did.

  But Theresia got tired of Tim criticizing her for her “retail therapy”—those occasional shopping trips to Neiman Marcus to find a gorgeous pair of shoes on the sales rack. So she negotiated with him: In the future, she would manage 10 percent of her bonus, putting the money into her own account, to be used as she wanted. To avoid arguments, she took to waiting until he was out of the house to spirit bags of new shoes from the trunk of her car into her closet.

  MJ

  MJ, who shepherded Clarify through its ups and downs, had seen the company revolutionize the customer service industry, just as Dave Stamm had predicted. Then she heard news that was both exhilarating and unnerving.

  The networking equipment giant Nortel, which built the optical networks for the Internet, had made an astounding offer to buy Clarify: an exchange ratio of 1.3 Nortel shares for every Clarify share, a lucrative arrangement that put the Nortel offer at about $1.5 billion. As Nortel executives said, “We own the pipes, and we want to own what runs through the pipes.”

  But in a move that rattled MJ, the Clarify board, and CEO Tony Zingale, founder Dave Stamm insisted that the deal must be based on what Nortel’s stock was worth when the deal closed, which could take six months.

  MJ said, “What if it drops by half?”

  “What if it doubles?” Stamm replied.

  MJ and the board suggested that they put a collar on the deal to hedge against possible losses. The board wanted a 10 percent collar up or down: If Nortel’s stock rose by 10 percent, the deal would be worth $1.6 billion. If it lost 10 percent, it would be worth $1.4 billion.

  “No way to a collar,” Stamm insisted. “The tech market is on fire. I don’t want to put a collar on this. Whatever the stock is trading at the time the deal closes is what we get. Let’s roll the dice and see what the stock does. If it doubles, we get double. If it goes to half, we get half.”

  Stamm noted that Nortel had a diversified international customer base. “Our volatility is greater than theirs,” he argued. He also insisted on structuring the deal so that there was no lock-up period for selling shares. “Every shareholder is free to sell the stock on day one,” Stamm said.

  MJ was not accustomed to playing high-stakes poker in such situations, but she appreciated Stamm’s passion. He was chairman of the board, and even more important, Clarify was his baby. He had built a billion-dollar business from an idea hatched through microfiche at the public library. Waiting it out with Nortel was a huge gamble and could potentially cost Clarify hundreds of millions of dollars. But MJ had made her mark by siding with the entrepreneur. “We need to trust Dave,” she told the board.

  So the deal was completed. And when it closed six months later, Stamm—and the Clarify board—were dealt a royal flush. Since the start of negotiations, Nortel’s stock had risen more than 50 percent. The $1.5 billion offer for Clarify was now worth $2.1 billion.

  MJ’s $6 million investment in Clarify returned well over $100 million to IVP. She won the vaunted in-house contest. But when it came time to claim the prize—the car of her choice—she opted to donate the money to the new Center for Entrepreneurial Studies at Stanford’s Graduate School of Business. MJ didn’t care much about cars, apart from her beloved Pinto, but she had to admit she liked the idea of beating the boys at their own game—especially as a part-time partner. In lieu of cash, the IVP partners collectively donated $128,000 to the center.

  MAGDALENA

  Magdalena was having lunch at the Peninsula Golf and Country Club in San Mateo with a young star at Oracle Corp., Marc Benioff. The two had become friends when the database giant became CyberCash’s partner, selling its server software to banks. Benioff, a senior vice president at Oracle and trusted friend of the company’s hard-charging billionaire co-founder Larry Ellison, often sought out Magdalena’s counsel. He trusted her advice completely.

  Speaking softly—the country club terrace was a techie hangout, and he didn’t want to be overheard—Benioff said, “Tom [Siebel] and I have been discussing the fact that small- and medium-size companies cannot afford Siebel’s software and that a subset of Siebel Systems functionality would serve them well. The small- to medium-size enterprises can’t spend a million dollars to sign and another million to implement, so it has to be a hosted offering. But I think Tom is worried about cannibalizing his business.”

  Benioff added, “I think the idea—delivering business applications as a service over the Internet—is great and even large companies would prefer it if it did not require millions of dollars and a year to implement.” After a pause, he asked, “What do you think?”

  “I think it’s a great idea,” Magdalena said without hesitation. “I think enterprise software with its multimillion-dollar price tags for license and implementation will go away over time.” She had long been convinced that “big and clunky” networked software companies would soon be replaced by nimbler pay-as-you-go software-as-a-service, where a business could buy only the software it needed, as it needed it. “We need software that is ‘pay by the drink,’ ” she said.

  Benioff asked, “So should I do this?” And “Can I do this on my own?”

  Magdalena smiled seeing the
start-up sparkle in his eyes. “Yes, and yes,” she said. “And I’m going to help you in every way I can. I will invest, raise money from VCs, help you hire, and help you sell.”

  * * *

  Benioff had recently taken a six-month sabbatical from Oracle to practice meditation in Hawaii and travel to India to visit ashrams and learn from spiritual masters. A highlight of his time in India was meeting Mata Amritanandamayi, known as the “hugging saint” because she had embraced an estimated 25 million people. Benioff returned to the States and to his job at Oracle wanting to build something of his own. He believed the Internet was the way of the future, and he intended to integrate his love of technology with his newfound belief in service.

  Magdalena knew that the spirit of entrepreneurship had always been a part of Marc’s life. When he was a teenager, he and a few friends started a company called Liberty Software to make adventure games for the Atari 800. He earned extra money going to people’s homes to repair antennas and CB radios, and he worked for Apple Computer the summer before his junior year at the University of Southern California. Largely unsupervised, Marc started writing software for a game about raiding IBM’s headquarters. His manager at Apple said the game wasn’t appropriate and later suggested Marc consider a job at Oracle. They had the best salespeople in the world, he was told. In his first year at Oracle, Benioff was named rookie of the year.

  After lunch at the country club, Magdalena jumped on a call with Benioff and Parker Harris, who was running a software programming and consulting company called Left Coast Software with two engineers. Benioff wanted to recruit him, but Harris was worried about getting buy-in from his partners. Harris’s team thought the software would be too easy to write, given their years of experience in the CRM field (including recently at Clarify, Dave Stamm’s company).

  Harris asked Magdalena, “Why do you think this company will win? What are the barriers to entry?”

  “There are no barriers,” Magdalena said. “You have to run faster than everyone else. And execute better. That is your only defense—better execution than everyone else.”

  * * *

  Soon a small team—including Parker Harris, Frank Dominguez, and Dave Moellenhoff—began working out of a one-bedroom apartment Marc rented next to his own flat on the top of Telegraph Hill, a stone’s throw from Coit Tower. They used card tables and folding chairs for desks, and kept a lifetime supply of Red Vines licorice on hand. A picture of the Dalai Lama hung above the fireplace. Benioff, who signed all of his correspondence with “aloha,” was still employed by Oracle, but turned his energies to building his start-up. Magdalena did the same, working her day job at USVP while throwing herself back into start-up fever in the evenings.

  At home, she juggled her mother, her husband, Jim—who was busy with his own career as an attorney—and her boys, Justin, eleven, and Troy, nine. Her older sister and her niece and nephew cycled in and out of her responsibilities. She hired a “manny”—a male nanny—once it became clear that her boys were overpowering their female babysitters, like Gulliver overtaken by the Lilliputians in Gulliver’s Travels.

  Jim played easy-going California dad to Magdalena’s European disciplinarian mom. Jim and the boys did the fun things together, hanging out at Jim’s ranch, where they took care of animals, drove ATVs, operated heavy machinery, and got dirty and dusty. Magdalena was the one who checked homework and pushed the boys to do better. The couple rarely argued, but still their styles were markedly different.

  She attended PTA meetings and ran school auctions and fund-raising events. She took collecting fifteen dollars for a gift for a coach as seriously as she did handling a million-dollar investment. Everything that got budgeted and scheduled got done. When the other parents began debating school decorations—orange, purple, or sparkly—Magdalena walked out, leaving such details to others.

  The boys had a vague sense of their mom’s professional life. One weekend afternoon in Palo Alto, Magdalena took Justin and Troy and Justin’s friend to a café. As Magdalena waited at the counter to order, a woman at the table next to her kids leaned over and asked, “Is that Magdalena Yeşil?” The woman had seen Magdalena on TV talking about e-commerce. Justin’s friend was the first to reply, saying, “No, that’s Justin’s mom.”

  After the kids were in bed, Magdalena made a beeline to her office or to the kitchen table to get in a few more hours of work. One night a fax came in that Jim brought her, sent by Marc Benioff. At the top of the fax were Larry Ellison’s and Magdalena’s names.

  “What are you doing with these guys?” Jim asked, studying the fax.

  “I’m building a company,” Magdalena replied. “To be called Salesforce.com.”

  SONJA

  By early 2000, Eve, the online cosmetics giant, had surpassed even Sonja’s expectations, becoming nearly twice the size of Sephora online. The Internet darling was beginning to attract some high-caliber suitors.

  One of Eve’s biggest fans was seed investor Bill Gross at Idealab. Idealab was comprised of more than forty dot-com companies, including eToys, GoTo.com, Pets.com, Friendster, NetZero, and CarsDirect. EToys was worth $7.8 billion when it went public, making Idealab’s original $200,000 stake worth $1.5 billion. GoTo.com was worth $5 billion when it went public, and Idealab owned 20 percent of it.

  But Bill Gross wasn’t the only one paying attention to Eve. The world’s top luxury brand company, LVMH—Moët Hennessy Louis Vuitton—based in Paris, had purchased the perfume and cosmetics company Sephora in 1997 and opened its first U.S. store in New York in 1998. LVMH had previously made a bid for Eve, inviting co-founders Varsha Rao and Mariam Naficy to a breakfast meeting in San Francisco. They had given the women fancy pens as gifts. “Why don’t you join us? We will all do this together.” Rao and Naficy found the LVMH people lovely, but they wanted to establish their own online cosmetics business.

  Yet as Sonja surveyed the business landscape, she knew that the calculus had changed—dramatically. Eve now carried more than two hundred brands and had raised twenty-six million in venture funding. Naficy and Rao were soon invited to another meeting with the execs from LVMH. This time LVMH wanted to buy Eve for one hundred million dollars. Naficy and Rao were thrilled. They respected LVMH and the executives they’d met, and they thought Eve would now become part of the international conglomerate. They had achieved what they set out to do, to build the top beauty e-commerce site. The financial terms were beyond anything the founders had imagined. The money was game-changing. Rao’s father had told stories of going without shoes as a child because the family couldn’t afford them. Naficy’s family had fled Iran during the revolution with two suitcases to their name.

  The offer also felt well timed. Some economists were predicting a market downturn, and investors were turning skittish. Sonja thought the offer was exceptional and a huge win for Idealab as well.

  But Bill Gross thought differently. He had just raised more than $1 billion from institutional investors and was planning to take Idealab public. He was not about to lose his crown jewel. He said as much during a hastily called board meeting to discuss the LVMH offer. After some back-and-forth, he agreed to consider the deal if he could keep his stake. He was Eve’s biggest shareholder, with 22 percent of the company. A call was arranged between Gross and LVMH to see whether the two could work together. But in the end, LVMH was not willing to buy only a portion of Eve.

  Sonja grew increasingly concerned over the impasse. Naficy and Rao weren’t sure of their next step. Gross had provided critical early support and vision, but they didn’t want to lose a $100 million deal. Sonja considered both sides before stepping in. She told Naficy and Rao that she would talk with Gross.

  She got Bill on the phone the next day. After some casual back-and-forth, Sonja didn’t mince words. “Bill, I would like to remind you that as a board member you represent all the shareholders and not just yourself,” Sonja began. “The of
fer from the LVMH group is fantastic, and all of the other shareholders, including Mariam and Varsha, want to take it. It will be a big burden on you if you veto the deal and later Eve fails.”

  Gross listened but said little. Sonja couldn’t read his reaction.

  A day later Gross made his move. Idealab would buy 80 percent of Eve for $110 million. Not only that, he guaranteed that the stock options held by Eve employees would be worth a minimum of $50 million within eighteen months. As the largest option holders, Naficy and Rao would each get $17.5 million within a year and a half, no matter what happened to Eve.

  Not surprisingly, they accepted Gross’s offer. Rao told Naficy, “Sonja pushed, and Bill stepped up.” Naficy put it another way: Sonja had protected them from being eaten. And she had helped make Rao and Naficy very wealthy women.

  Sonja did quite well, too. She took her venture capital earnings and bought a “dot-com house” overlooking the San Francisco Bay, located near the area of Pacific Heights known as the Gold Coast. The 3,400-square-foot home, originally built in the 1940s, had been on the market for months and was something of a white elephant. The electrical circuits overloaded if Sonja ran her hair dryer and the television set at the same time. She closed off several rooms, had little furniture to fill the big space, and invited a friend who was going through a divorce to come and live with her. They loved those rare warm San Francisco nights when the water turned into a flawless purple slate and the sky was streaked with pink. It reminded Sonja of the line by journalist H. L. Mencken, who wrote upon arriving in San Francisco, “I am thrilled by the subtle but unmistakable sense of escape from the United States.”