Despite all the evidence of success, two months after leaving Novatel I still didn’t have any major investors, and I was rapidly running through my early capital, even with most people agreeing to work with me for equity. But with a functioning prototype, I knew major funding was just around the corner, and I started using my credit cards for cash advances, knowing I’d be able to pay them down in a few weeks. I was so excited about the prospects that I even started looking at multi-million dollar mansions in the hills of Rancho Santa Fe that I’d be able to buy soon.
I CAME SO CLOSE
The Nikean story was an exciting one, and I had no trouble lining up potential investors to hear my pitch, which I was gradually honing to a fine polish. I now had a functioning prototype, and for $30,000, the Townsend Agency had even developed a concept Super Bowl ad at my request. The ad featured a caveman jumping from rooftop to rooftop in downtown San Diego, eventually coming across the Nikean X-1 wireless e-mail prototype, which he stared at while the announcer’s voice said, “Everything is about to change.”
The concept was a blatant rip-off of Apple’s 1984 ad in which it announced the Macintosh computer. I wanted the glitz of a potential Super Bowl ad to convince potential investors of just how big the potential was for Nikean.
Even with the Super Bowl ad concept, though, I was let down at the end of each presentation. They let me down easy, but they let me down, nonetheless. “Sanjay, the product looks great, but you have no experience with manufacturing a device like this and no relevant entrepreneurial experience. Get the right people around you, and we’ll take a look at your proposal again.”
My problem had shifted from lack of product to lack of credibility. And I was running out of cash. I called my father, who was recuperating at home following his heart attack surgery. “Dad, everything okay at home?” My father could always tell when I was in trouble, and I’d been keeping him apprised of progress with Nikean. “Hap,” he said, “just tell me the truth. What’s the situation?”
“Everything looks great,” I said, “but I haven’t lined up an investor yet. I really need some help.”
My father had made money in property development, not gee-whiz technology, and he reminded me of it. “Son, I have no idea how the sort of business you’ve started works. I don’t understand why you need millions of dollars. Just make the product and sell it.”
“Dad, I know this sounds crazy to you, but you have to trust me,” I said. “Remember the conversation we had after your heart attack about living life and taking chances?”
My dad grew quiet, but after a moment he said, “I remember.”
“Dad, I’ve never asked you for money. I had scholarships my whole life. You didn’t invest in VideoDrive. I really need your help now.”
The next day, I received a wire for $100,000 and a phone call from my Dad. “Son, I love you, and I want you to succeed. Make this work, but don’t ask me for any more.”
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I knew that credibility was the key now to getting investment. Since I already had a product, I translated this into two things: customers, and gray hair advising me. I paid off my credit cards with the money from my father, paid some outstanding bills from suppliers, and toned down some of my spending. No more-five star hotels or shopping for mansions.
I still had to put on a show for partners and investors, though, and an upcoming wireless conference in Seattle was just the place.
I used the last of the cash from my father to book the presidential suite at the Four Seasons in Seattle, home of our partner, AT&T Wireless. The objectives were to impress AT&T and to create some buzz around the product. I was a lot into buzz. I also arranged for a popular club to be the venue for the coming-out party. At the party, I planned on having clowns and a magician, and an AT&T representative and I were going to give speeches.
That afternoon, I went to get a haircut at Nordstrom’s. It was the most incredible haircut I had ever had, in large part due to the attractiveness of the hairdresser and the head massage I got after the cut. I explained to her the momentousness of the event I had planned and the company I had created. “Are you still taking investors?” she asked me.
“Not really,” I replied as if I already had significant investors. “But if you know someone, then you never know.” That evening before the party, she came by my suite, which I was now thankful I had booked, so I could impress her and the potential investor, a shorter man with a bit of an attitude and a very expensive suit.
The man was Seth Warshavsky, who, unknown to me at the time, was a king in the early online pornography world. He was introduced to me as simply a wealthy potential investor. “Got a business plan?” he asked.
I happened to have one handy, and I gave it to him. “We’re throwing a big rollout party tonight with our partner, AT&T. Would love it if you could join us.”
Warshavsky bounced agitatedly and said, “No, don’t think I can do that.” He then fired a couple of quick questions at me, nodded, and then grabbed the girl’s hand and said, “I’ll think about it,” as he hurried out. Later, I realized who he was and that he was presumably looking at investments to diversify out of his pornography business. But for all I know, he was just trying to impress the girl.
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The rollout party cost me a lot of working capital, but it worked. AT&T introduced me to Skybersoft, a solutions provider that worked with Palm Computing as well as many cellular carriers. They gave us our first purchase order for one hundred units for $40,000. We promised to have X-1s ready for shipment by the end of the first quarter of 1998, which we announced in a press release. Novatel still hadn’t announced shipping of the Minstrel, and I felt that in our PR battle, I was winning.
SAN DIEGO—(BUSINESS WIRE)—Feb. 18, 1998—Nikean, Inc., a wireless solutions provider, today announced the shipments of the X-1R wireless modem to Skybersoft, a leading solutions developer for the PalmPilot(tm) organizer, and to cellular carriers in the United States and Canada.
The Nikean X-1 was the world’s first handheld commercial mobile e-mail device. Yes, that was me.
I had customers, and now I needed clout. One day, my father happened to mention that Frank McKenna, the remarkably successful former premier of my home province, New Brunswick, had stepped down and was likely to be named Canada’s Ambassador to the United States.
My father knew McKenna peripherally through his New Brunswick businesses, and I was able to get a phone number. I contacted McKenna and suggested he be on the board of Nikean, and he was gracious enough to agree to meet with me on a trip to Toronto.
We soon met in his suite at the Royal York Hotel in downtown Toronto. He was very casual, but that didn’t reduce the aura of power he carried with him.
I showed McKenna the device, which wouldn’t operate in Canada because I didn’t have the right data plan. He appreciated the difficulty and understood the concept well enough to agree to be on my board if I paid him $5,000 per month. We agreed on a three-month contract, and I paid him the first $5,000 immediately. I was certain that having him on my nonexistent board would be impressive enough to gain investment.
While I was travelling and plugging holes in our investment presentation, the company was starting to run on fumes. I was running up credit card debt again, but having paid off earlier bills, my credit rating was unspoiled, and I received an offer in the mail every couple of weeks for a new credit card, which I would promptly get and max out with a cash advance. Most of my unpaid debt, though, was on my American Express Platinum card. Their limit was the highest, and I was able to run up substantial hotel, air travel, and other service charges, approaching $100,000. I must say, if you want to go bankrupt, do it in style with American Express.
I was in pure austerity mode at this point. I went from five-star hotels to Motel 6. I walked into the Nikean office one day and announced that, from then on, everyone would be a contractor, and we wouldn’t be doing payroll deductions for taxes, dropping our spending on salaries by one-third. As I made t
he announcement, Maureen, the office manager, was at her desk but facing away from me. She was critical in implementing the new policy, so I asked her to turn around, and I could see that she was crying.
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Two days later, at 9:00 a.m., there was a knock at the office door just after I’d arrived to start another day of scrambling for funds. Maureen answered the door and then quickly came to my desk. “There are two men at the door. They want to see you.”
“Did they say who they were?”
She looked toward the door and then back at me. “They’re police officers.”
Surprised, I went to meet the two gentlemen. I didn’t see police uniforms, but one of the men took a badge out of his pocket, flashed it at me, and asked, “Are you Sanjay Singhal?” I replied affirmatively, and the other man gestured toward the door and said, “We’d like you to come with us.” As I walked toward the door, Maureen followed me, and I whispered to her, “Don’t worry, I don’t know what this is about, but I’m sure it’s some sort of misunderstanding.” She looked dubious but went back to her desk while the rest of the office staff stared in shock as I was taken away.
In the parking lot, I was walked toward an unmarked vehicle and, for the first time, I began to wonder if I was being kidnapped. Ironically, I was relieved when I was shoved into a backseat that was separated from the front by a metal cage, proving that I was actually in police custody. We rode in silence for fifteen minutes while I was literally “taken downtown” for questioning, and on arrival at San Diego police headquarters, one of the officers took me into a small, bare room with a desk and a chair on either side.
As I was ushered into one of the chairs, I asked, “What is this all about?”
The cop grinned at me and said only, “You’ve been a bad boy. Wait here.”
I was left alone for ten minutes, wondering what the hell was going on, and then the door opened and a new man entered. He was dressed in slacks and a crisp white shirt, with a badge pinned to his belt. He introduced himself. “Good morning, I’m Detective Anderson. I need to ask you a few questions.” Without waiting for a response, he threw a sheaf of papers on the desk in front of me, pulled one sheet out, handed me a pen, and said, “Write down your signature.” I quickly wrote down my signature, and he looked at it, frowning. Then he said, “Okay, write it down again.” I wrote my signature again, and this time he nodded, pointed to the sheaf of about fifteen sheets of lined paper and said, “Now write your signature on those sheets.” Shrugging, I took a sheet, signed the top, and then began reaching for another sheet when Anderson grabbed my wrist, saying, “No, you have to fill it.”
“Fill what?” I asked, confused.
He pointed to the first sheet and said, “Fill that sheet. I want to see your signature in three columns, filling every line, on every one of these sheets.”
While he watched, sipping coffee and occasionally disappearing for a few minutes at a time, I proceeded to sign my signature 1,500 times over a two-hour period. My wrist burned as I scrawled a vague semblance of my signature on the last line, and then Anderson gathered up all the sheets, walked out of the room, and was replaced by yet another man who I vaguely recognized but couldn’t place. He came around the desk, sat down, and said, “You don’t recognize me, do you?” I shook my head, and he chuckled, saying, “You really are a basket case. You bought furniture for your office from my shop last week, and the checks you wrote bounced. That signature thing is an exercise to see what your signature is like once you get tired, so they can match it to fraudulent documents or checks.”
I stared at him, dumbfounded, as he continued. “We didn’t need to do the exercise. I’ve been asking around and knew you’ve been deliberately writing bad checks. These guys are my friends, and I asked them to bring you down here to teach you a lesson. Now make sure you get me my money, or you’ll be back down here for real next time.”
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Despite the dire signs, I felt I still had a few aces up my sleeve. I had received a call from a portfolio manager, Brian, at Bear Stearns. He said that there was a wealthy angel investor interested in speaking with me. The angel turned out to be Mark Spitz, the winner of seven gold medals at the 1972 Summer Olympics. I was set to meet with him at an Italian restaurant in Los Angeles, and I decided to drive up to LA from San Diego.
Getting to the address in Huntington Beach turned out to be more difficult than I thought, and I stopped at a surf shop for directions. The clerk, a cute girl with a Mickey Mouse hat, asked how she could help me. I said, “Hi, I’m looking for 221 Main Street. It’s an Italian restaurant?”
“Sorry, I’m not from around here,” she replied. In California, nobody is from “around here,” but they’re all really friendly.
“That’s okay,” I said. “I just need to know if Main Street is east or west of here.”
“Um, really, I don’t know the area.”
I was getting frustrated. “Okay, have you ever been to Main Street?”
“Well yeah, but I don’t really remember where it is. Somebody drops me off here. I think maybe it’s west.”
I tested her. “Which way is the ocean?”
“That’s easy. It’s over there,” she said as she pointed her finger east. Unfortunately, the ocean was three blocks west, and I had just driven past it. She must have been the only California surfer girl who didn’t know where the ocean was.
I was fifteen minutes late for the meeting, but Spitz was waiting comfortably for me. He was famous, so I expected an entourage of some sort, but he was by himself. It was a repeat of the Seth Warshavsky experience, minus the pretty girl. I said, “So, Mr. Spitz, what do you think?” and he replied, “Well, one of my investment advisors told me I should meet with you, but I don’t really understand this stuff. I don’t think I’m interested.” Another tire kicker.
The same Bear Stearns advisor introduced me to a group of angels lead by a couple of young guys, Brian and Michael. They said they represented a syndicate that could invest a significant sum in Nikean, but when I pressed, they admitted that they were really looking at making a $10,000 investment. Still, they were investors, and I started going through all of their due diligence requests.
By this time in early February 1998, I was living in the office, sleeping in a sleeping bag hidden behind a desk. Most of the staff had left after my decision about payroll deductions, but that was probably for the best. I had to make a trip to Denver to meet with Four Lights and get the latest update to the X-1 software, but my credit card was declined when I returned to the airport and tried to buy a ticket home to San Diego. With no easy solution at hand, I eventually stood up in the departure lounge and asked loudly, “Is anybody here willing to buy me a ticket to San Diego? I’ll give you a check for 50 percent more than the price. My credit card just got declined.” Nobody lifted their head in interest, although I got a couple of strange looks from passersby. I said, “Okay, I’ll make it double the fare,” and holding up my cell phone, I added, “and you can call my bank manager to confirm that the funds are there!” I knew that I’d taken out another cash advance and put it in my bank account the previous day to allow a supplier check to clear, and it was probably still there.
This time a couple of people looked at me, and I walked over to one large guy in a suit who said, “Give me the phone. What’s the number?” He spoke to my bank manager, who confirmed that I had $10,000 in the account, and the amount I was promising to pay was only $2,000. The guy nodded into the phone, hung up, and then said, “Come with me,” as we walked to a ticket counter.
He bought me my $1,000 ticket, I gave him a check for $2,000, and we waited for our plane to arrive. I meant to pay him—I really did. But I had no idea what checks were outstanding and what the forecast was for my cash balance, and his check bounced. I felt horrible about that when I got the notice from my bank, and I went out of my way to send him a bank draft for the $2,000, plus another $500 for the bounce aggravation. It was money taken from another credit card cash ad
vance, but I knew I’d pay back the credit card company at some point. I still had boundless energy, and I’d always found a way to get things done through hard work and ingenuity. I was sure I’d make it through this hurdle as well.
I didn’t make it through the hurdle. On February 27, 1998, I woke up in my sleeping bag in my office, looked at my watch, and realized it was noon. I had slept in. For the first time in five months, I didn’t feel like getting out of bed, and I realized it was all over.
“I had everything going for me, why wouldn’t the stupid VCs fund me?” I asked my friend Roman.
“Look,” he said, “they’re successful people, so they’re not stupid. Maybe they just make it intentionally difficult so that only the most persistent or talented entrepreneurs can get money out of them. Maybe they’ve found out that’s the best way to figure out who’s going to succeed with a startup.” I realized he was telling me I wasn’t persistent or talented enough, but I also realized that he was probably right.
When I took inventory, I owed just under $500,000 to credit card companies, my PR agency, my design firm, and various consultants—on top of $150,000 I’d raised as investment from friends and angels a few thousand at a time. Everyone I knew believed I’d succeed, right up until I didn’t.
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From Novatel’s $80 million IPO documentation in November 2000:
San Diego-based Novatel Wireless (NVTL: Research, Estimates) provides wireless data modems and software for handheld computing devices as well as for portable personal computers.
Novatel is the latest IPO that seeks to tap into the market for products that allow easy web access from anywhere. In September, OmniSky Corp., an Internet wireless-service provider, rose 47 percent in its debut. Novatel develops the hardware and software that allows wireless connections and designed the first products for Palm Inc.’s line.
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