Mickey and Murray Kaplan were an upper-class New York Jewish couple whose Depression-era mindset had slowly evolved into an unlikely blend of political liberalism and a deference toward those with more money than they had. Art lovers without truly deep pockets, they had parlayed my mother’s unerring eye for promising young artists and my father’s obsession with bargains into a respectable collection of modern art. Drawn to the competitive and all-consuming Manhattan social scene, they trundled their four children off to different private schools. My siblings and I were free to take lessons in anything we showed an aptitude for, and encouraged to compete with one another for grades and honors. Predictably, we went our own ways, making separate friends and adopting different values.
Like many of their acquaintances, my parents spent winter holidays in Palm Beach, Florida, an insular enclave of face-lifts and hearing aids where the most frequent social gathering was the funeral. New York Jews must be descended in part from migratory birds, for as their children leave the nest, year by year they lengthen their winter visits south until they never return north. My parents eventually crated up their art collection and swapped their luxury co-op on the East Side for a spacious classic-revival home near the quiet north end of Palm Beach Island.
Arriving at the airline gate to pick them up, I noticed that my mother looked younger than I had remembered her. I couldn’t be sure if this was a natural condition or the result of some airborne cosmetic miracle. My mother, a walking testament to the wonders of modern medicine, looked about the same at age sixty-four as she had at forty. My father, in contrast, looked all of his eighty years, but inexplicably had the rugged good looks of a seaman, though he hated boats.
We waited for what seemed like hours at the baggage carousel. Although they were coming for only three days, they brought two enormous suitcases plus four carry-ons.
“Jesus, what’s in this thing?” I said, straining to lift my mother’s case over the lip of the carousel.
“She brought her workout weights,” my father quipped.
As we pulled out of the parking lot, they got down to the purpose of their visit—giving me the dreaded parental third degree: Is it always so cold here? Are all the highways so clean? Do you always dress this way? How come you’re wearing a sweater and not a coat? How much stock do you own? Are you selling too much to the investors? When can we see the product? How much will it cost? Why does it take so long to build? What will happen if you can’t pay the financing back? Where do you park? Why don’t you buy a new car? Do you need any money? Are you hungry? Are you cold? When we arrived at the condo, they went to wash up, so I got a brief break from the interrogation.
Before unpacking, my mother headed for the refrigerator. Though my parents were reasonably trim, they seemed to eat as often as newborns. At first I thought she was hungry. Then I thought she was checking to see what I kept there. It turned out that she was making a deposit. Whenever they traveled, she brought along a variety of items in small plastic bags: carrot and celery sticks, lurid orange cracker sandwiches filled with processed cheese, some crumbled cookies, and slices of apple that had long since oxidized to a purplish brown.
“Why do you bring this stuff?” I asked.
“You never know when you need food. Your father gets hungry. I traveled all through Europe with a bag of food. In Russia, I took enough on the train to feed the Russian army. Fortunately, the Russian army was on the train, but when I tried to feed them, they wouldn’t take any. I think they thought I was trying to poison them.” Wise move, I said to myself.
The next morning we visited my office. After a tour, a show-and-tell, and some introductions, my mother wanted to make a copy of a recent article in a trade paper that contained a picture of me. “Mother, someone is using the copier. How about if I do it later?”
“Can’t you just kick ’em off?”
“No, they’re doing real work.”
“But you’re the boss. They have to do what you say.”
“That’s not the way things are anymore.”
The office manager, who had overheard the conversation, came to my rescue. “I’ll take care of it.”
“Thanks.” I handed it off. My mother went with her, happy to have a fresh face to put questions to. This gave me a few minutes alone with my father.
“I can’t believe you quit a real job to go do this. They’ll skin you alive if you can’t pay the money back.” He spoke in an urgent whisper, leaning in as though to warn me.
“Look, it’s really OK, Dad. I’m not going to starve. This isn’t the rag trade.” “Rag trade” was the slang term for the New York garment industry, where my father got his only real business experience.
“You mean they didn’t make you sign for everything?” He was referring to the practice of personally guaranteeing a business loan, as he had been required to do each season to finance his inventory, before his business went sour.
I laughed unintentionally as I realized just how much things had changed since his time. Back then, starting a business meant risking everything—your savings, your house, your self-respect. You were the business, and if it failed, all was lost. But today, the distinction between the business and the individual is much stronger. The individual is legally insulated from personal disaster, a circumstance that encourages risky projects like GO. I wondered briefly if I would have had the nerve to start the company forty years ago.
He turned his attention to office security. “I notice that people came in before you did this morning,” he said.
“Yep, the place is open pretty much twenty-four hours. We have a kitchen and a bunch of futons in case people want to sleep.”
“Do your partners watch the workers when you aren’t here? Can you trust them?”
“Look,” I explained, “everyone is a partner. Everyone’s got stock. They all keep their own hours. If they steal something, they’re stealing from themselves.” He looked totally confused. “Think of it like partners in a law firm.”
This was better. Now he merely looked skeptical. He changed the topic to my personal life. “It looks like you’re having some problems with your girlfriend.”
He was right. “It’s hard on her. I have to work all the time, sometimes seven days a week. She loves to go out, to get away, but we can’t plan anything.” He put his hand on my shoulder reassuringly as I spoke. “The project’s on a tight schedule, and I just can’t take any vacation until we get the prototype running. When I come home I’m exhausted, and she wants to party.” I was starting to feel sorry for myself.
“I know, it’s a real problem,” he said sympathetically. “When you’re in the middle of something, it always seems very important. It’s hard to take time for personal matters, to take a deep breath and enjoy the human side of life, to build meaningful relationships with your friends, to learn to really listen.”
“Yeah, I know. And it’s driving her away.”
He gazed out the window as he collected his thoughts. Then he spoke. “You’ve just got to explain to her that work comes first.”
I couldn’t believe he was serious, but he was.
“Look, women come and go,” he explained, “but in business you’re playing for keeps.”
When we left for the airport three days later, my mother collected her plastic bags from the fridge and put them back into her purse. We got to the airport a full forty-five minutes before flight time—long before any self-respecting business traveler would consider arriving. As the gate attendant called their row, my father turned to me and said, “You know, your mother and I are very proud of you, no matter what happens. We know you’ll be all right eventually. Always remember one thing. You got a good education, and that’s the key. They can take away your money, they can take away your business, they can take away your house, but they can’t take away your brain.”
Over the years, he often said this when we parted—right before handing me a wad of bills from his wallet.
By early 1988, the office had taken
on the feeling of a city hospital after an air raid. It seemed as though we’d uncover a new and more dreadful problem every day.
It turned out that flat-panel displays couldn’t withstand the pressure of writing on them with a pen. Protecting them with a separate sheet of glass made the electronic ink appear disconnected from the tip of the pen, particularly if you moved your head to different viewing angles. The glassy surface was so smooth that writing on it felt like roller-skating on ice. If we etched the surface to add some resistance, it muddied an already hazy image.
We confronted equally daunting obstacles with the software. There had to be no perceptible delay between the time when the pen touched the screen and the electronic ink appeared. This meant circumventing the normally sluggish input-output processes and writing our own. The available pen sensors would go out of alignment at the edges of the sensing area, so we wrote correction routines. However, these had to be specially calibrated to each individual prototype, and even on a single unit the calibration would drift as the electronics warmed up. And worst of all, the handwriting recognition was awful.
It seemed as if we spent all of our time solving problems that had little to do with the goals of the project. Each day, the engineers would go home to nightmares about millimeters of pen-sensing distance, white-to-black pixel transition times, and dropped software interrupts.
A sense of panic set in. We had promised the backers a working demo by the end of June, but were wasting months on things that we had taken for granted in our schedules. I called a meeting with Robert and Kevin. They shuffled into my office with fear in their eyes, like schoolboys summoned without explanation to the principal’s office. But they knew what the problem was.
“Look, guys, let’s face it. We’re heading for trouble,” I said. “So why don’t we approach this differently? Let’s redefine the problem as one that we can solve. For June, we can rig up a stationary demo so that the ink always appears under the pen tip. We can downplay the importance of handwriting by showing off how we can manipulate electronic ink and graphics.”
On the whiteboard in my office, we did a quick inventory of what was shaping up well and what wasn’t. We then reset the goals of the promised demo to showcase the good stuff. As if by divine providence, Mike Ouye stuck his head in the door. He looked relieved to find the three of us together.
“I’ve got something you should see.”
He led us to his cubicle without saying a word. When we arrived, the entire staff was standing around solemnly, like ushers at a wedding waiting for the service to start. They parted to let the three of us stand by Mike’s computer. On the screen was some text—the opening paragraphs of Jack Kerouac’s On the Road. Mike handed me his electronic pen. “Try it,” he said.
I carefully drew an X over the word “hitchhiking.” It disappeared instantly, and the surrounding text closed up the gap. “Son of a bitch,” Robert said. Then I tapped on the word “highway” and dragged it several lines down. Like magic, the paragraph reformatted itself to reflect the new order of the words.
I was speechless. For almost a year, these actions had existed only in our minds. Now there they were, and they were beautiful. It was like imagining how it would feel to fly and then getting the chance to actually do it. The feeling of immediacy and simplicity that we had speculated about was right there on the desk for anyone to experience. And it worked.
Our earlier panic turned into a growing sense of urgency. From that point on, the office was almost never empty. People would work around the clock, sleeping on futons and eating takeout from Doggy Diner. In the remaining months before the June deadline we managed to cobble together enough of a demo to convince even the most hardened skeptics of the potential of pen computing—except for one serious remaining problem: the handwriting recognition was abysmal. I felt personally responsible, because in principle this was my area of expertise. I had worked closely with Todd Agulnick and Mike Ouye on our recognition algorithms. And now there was less than a week to go before we were to demonstrate the results of our labor to the board of directors.
“I notice that everyone writes the same thing,” Todd said. ‘“Four score and seven years ago.’ Then they try their name. Maybe we should just figure out a way to distinguish these and a few other key phrases.”
It was a sign of our desperation that we momentarily considered something this ridiculous, but we were so concerned that no idea was rejected out of hand. Meanwhile, Mike was trying to track down some last-minute glitches in the pen-sensing software. He wrote a program to plot the pen position immediately on a graph whenever it moved. We watched the screen.
“What’s that?” Todd asked, pointing to a sudden spike in the graph.
“Dunno,” Mike said. “Seems to happen sometimes.”
We looked at one another and instantly realized what the problem was. “Mike, you asshole,” Todd yelled. “Those are bad points coming from the pen sensor!”
“Holy shit, you’re right.”
The pen sensor was occasionally reporting wildly incorrect positions for the pen. In the middle of a smooth, continuous stroke, it would indicate that the pen had skipped to some remote spot on the screen, then mysteriously reappeared near its original position. This would screw up the recognition process, which was lacking any common sense about pen motion, and so would try to interpret this abrupt movement as part of the writing.
It was a simple matter to screen out such points in the software, since they were physically impossible movements and easy to identify. To everyone’s delight, the recognition improved dramatically. We all took turns marveling at the software’s newfound ability to recognize our words written in block letters, though it was still far from perfect. Then we put the demo to bed and went home to do the same.
4
The Financing
IN BUSINESS, as in life, major passages are steeped in customs and rituals. There is, however, one significant difference: religious rites express the emotions of the participants, while business deals obscure them. This is not because business is devoid of powerful feelings—on the contrary, it is driven by them—but because the dominant sentiments are greed and fear rather than love and joy.
Venture capitalists are masters of procrastination. Their standard practice is to keep all options open until the last possible moment, often abandoning some hapless entrepreneur at the altar after months of reassurances that there is just one final question to answer before they will invest. The VCs know that time is on their side: the less money a venture has, the more desperate it will be to make a deal. They stand on the sidelines with their hands in their pockets, like bystanders afraid to get involved, while small companies slowly bleed away their precious remaining cash. This is why frustrated entrepreneurs sometimes refer to VCs as vulture capitalists.
The second and third rounds of financing are often the hardest. Although everyone involved would like to think that the process is rational, in practice it is as subjective as buying a house: it’s tough to pony up big bucks unless you are really fired up about something, and after all, who knows what it is really worth? But the first-round backers have stolen the excitement of finding a new, virginal deal, and the euphoria of cashing out may yet be years away. As a result, trying to corral investors for an intermediate round is like herding cats.
First the current investors have to commit themselves to participating in the new round. This shows that they remain convinced of the merits of the venture. However, they cannot credibly set the price, because they are usually interested in “writing up” the value of their portfolio to improve the rate of return they can report to their own investors. Therefore the price must be established by a new investor, called the lead. The lead is responsible for negotiating terms with the company. Then, in order to spread the risk—and give the lead investors confidence that they aren’t going to look like fools if the company goes bust—the deal is syndicated to the other interested parties that the company has been courting.
In
order to consummate a deal, the company must repeatedly perform the dance of a thousand veils. Potential investors must be independently enticed, coddled, and reassured by the company, which has to hold out a realistic threat that the deal may go down without them. The trick is to get each investor to “soft circle”—venture capital talk for conditional approval of the deal—and only then to introduce him to the other investors. If the introduction is made too early, the assembled group of waiting investors gets restless and colludes to bring the price of the deal down. If the introduction is too late, a lone investor may conclude that no others are interested, and therefore lose interest himself. The VCs are always trying to wheedle out of you who else is interested; you’re always trying to keep the parties separated until the right moment.
By the time of the demo to the board of directors in mid-July, we had already cannibalized most of our conference rooms for offices and labs, so the meeting had to be held in a small corner room originally intended as a storage closet. The space was dominated by a large diagonal steel girder, painted burnt orange to forestall rust. This tasteful architectural detail was supposed to keep the floors from collapsing in case of an earthquake. But in that event, the turn-of-the-century red-brick façade would likely fall away, converting the structure into a full-scale living doll house. As a show of respect for the board members, our office manager put a small plastic vase holding three daisies and a paper plate of fudge brownies in the middle of the narrow, folding conference table. She stood guard against hungry poachers until the meeting got started.
I sat at one end of the table, surrounded by stacks of handouts describing our progress and financial condition. Since I was trying to diet, I pushed the plate of brownies just out of reach, to reduce temptation. John Doerr and Vinod Khosla sat on one side, Robert and Kevin on the other. Mitchell Kapor was the last to enter. He wedged his chair into place between the door and the girder. He stared longingly at the plate of brownies, then slid them away from himself, back toward my end of the table.
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