Finally one day she got calls from angry French Connection members who said the service was down. Poer drove out to the office, only to find the computers were gone. She figured Cohen had arranged for someone to steal them to cover for the service’s failure. In fact, Cohen accused Poer of trying to take over the business, running him out and putting it in her name. So he dispatched a trio of associates to get into the office, and get his computers back. “I authorized the repossession from incarceration,” as he later put it during a deposition, and moved to the offices of a friend. When asked if she was relieved it was over, later by a court, she replied “I couldn’t care less.” She was filing for divorce, her time with Cohen was done. She said she could never trust anyone again now that she had been through the ringer with him.
Many who knew Cohen described him as a loner. Bonnie Hite, an acquaintance of Cohen’s who bought a used computer from him in the mid-1980s, recalled the many times he offered to help her with her system—not as a way of making a move on her, but simply because it seemed like he wanted companionship. “Steve was kind of the lonely soul,” she would recall, “he had no place to go really.” With every day behind bars, his golden years running The Club seemed to fade. He was just a forty-three-year-old man, divorced again, with nothing to his name—nothing, that is, except the French Connection.
As he waited for his release in late 1994, he lay in bed at night imagining how he would bring it back to life, and reclaim his throne. Three and a half years is a long time behind bars, but it’s even longer in the fast-moving world of technology, he knew, and he feared being left behind. Sometimes he would hustle some phone time to call people on the outside and find out what was new.
Among those he called was Steve Grande. Grande was an engineer who took the more traditional path, with graduate studies in computer science at Boston University. In the early 1980s, he owned a company that sold timeshares on mainframe computers, and had bought software from Cohen to run on his machines, and they had remained friends. Like Cohen, he was among the early pioneers online, and ran a large BBS called Liberty—initially for fellow libertarians to talk politics, but later dedicated to their greater interest: computer games.
When he found out that Cohen was running the French Connection, he blanched at the sexual content, but found common ground in shop talk: technical issues, marketing, billing. Grande kept Cohen at arm’s length when he’d start bragging about his sexual conquests or his Rolls-Royce. But whenever the French Connection ran into technical problems, Cohen would call him for advice. Cohen seemed like a real gearhead to Grande, a guy who always had random computer and phone equipment in his garage when needed. Grande was surprised when, on one occasion, he drove out to Cohen’s house to get some parts, and found this otherwise disheveled guy chomping on a cigar and living in a mansion in a gated community. Cohen seemed to love any nitty-gritty technical thing, Grande marveled. They both shared an interest in locks, and spent days taking mail order lock-picking courses, tearing apart locks and putting them back together.
Like Hite, Grande and his wife, Barbara Cepinko, took pity on Cohen. They let him store his computer in the office of the temp agency Cepinko owned, Midcom, for the time being. Grande took his occasional calls from prison. There was something about staying up on the new advances that kept Cohen engaged, and encouraged. The world was always moving ahead, and he wanted to be right there with it the moment he was free. “So,” he would ask Grande, “what’s going on in the computer world?”
CHAPTER 4
MATCHED
For Kremen, the key to success in business was about serving an essential human need. In his career, he would invest in more than fifty companies specifically according to the Hierarchy of Needs described by psychologist Abraham Maslow in his seminal 1943 paper on motivational theory.
To find happiness, Maslow wrote, a person must meet five primary needs, which he represents as levels of a pyramid. First come physiological needs: food, water, warmth, sex. Next is safety: security of property, health, employment, and so on. The third is love/belonging, such as friendship, family, and intimacy. Then there’s esteem—confidence, achievement, respect—and, finally, self-actualization, in the form of morality, creativity, spontaneity, and, at last, acceptance. Building businesses that fulfilled these needs for others was the key to success, Kremen believed. “The closer you are to Maslow’s Hierarchy of Needs,” he said, “the better you do.”
That’s what Kremen thought one day in business school. Love and sex were right up there on the hierarchy of needs, and, even better, they were big business too. It was early 1993, and Kremen, rumpled and red-eyed, was leafing through a towering stack of periodicals inside the Stanford Business Library. He was researching his latest epiphany: that he could use this new technology, specifically email and email attachments, to build a new kind of business online.
There was no time to waste. Kremen could feel the pressure of his impending thirtieth birthday upon him. Being in Silicon Valley during this time didn’t make it any easier. He was part of a small group in the community buzzing over the release of Mosaic, software that radically transformed how the internet could be navigated. Developed at the University of Illinois Urbana-Champaign, Mosaic was among the first browsing software for what was being called the world wide web. Once downloaded, it allowed someone to view the web as a series of interconnected pages with links from one to the other. For Kremen and other early adopters, it signaled the dawn of a friendlier, potentially more mainstream online experience.
The competition to exploit the burgeoning new world online was everywhere, the sleek MBAs angling to be the masters of the computer age. He had to make something of his life, his education; prove himself to his mother, Harriett, show her that he could amount to something, become the success he was always destined to be. And, of course, maybe he could meet the love of his life too—a woman who would do what sometimes it felt like his mother never did: love him unconditionally. He knew that he was no different than anyone. Everyone wanted love and connection. All it took was someone who cared enough to bring it to them.
He could be that person. This could be just the ticket. The market for dating, he learned, was already huge, and growing. More than fifty million people in the country were single, and, as the coveted twenty-five- to forty-nine-year-old demographic, they spent plenty of cash, an estimated $3 billion, on the two primary means of finding each other: personal ads and dating services. And, Kremen noted, it was new technology that made this possible in the first place. It had happened in the 1980s with the advent of voicemail, which allowed people to leave messages for each other when they answered personal ads in newspapers. There were nearly two thousand publications offering personal ads, which, at around $120 a pop, were contributing as much as 40 percent of the publications’ total revenues.
It wasn’t just the newspapers that were making cash from love connections. The 900 numbers, the pay-per-call party lines that began with the 900 prefix, were charging upward of $2 per minute for people who could leave and respond to messages for each other. They were also seeking out dating services, matchmaking companies such as Great Expectations. Customers would go into facilities and record a video of themselves, describing themselves and their ideal partners, and then search through the existing videos—at an annual membership cost of $2,000. Kremen also found what he called “Fiddler on the Roof” matchmakers, professional love gurus—at a price of $10,000 per match.
But, as Kremen knew from his own experience with personal ads and 900 numbers, the business of love was seriously flawed. The newspaper ads, limited to around thirty words, gave people little room to express themselves, let alone any way to share photos and voice messages. He thought about all the times he’d answered ads expecting to meet, say, the statuesque blonde described in the paper—only to find anything but, in reality. Even worse, searching through the ads was time-consuming and inefficient. The dating services were just as frustrating, requiring someone to physically g
o into an office, and subject him- or herself to the embarrassment of telling one’s heart’s desires to a stranger.
As he walked across the Stanford campus, past the coeds coming and going to class, he thought about how the computer revolution was going to bring them together in ways they couldn’t conceive. His key insight was this: the internet of the future wasn’t just about connecting with information, its real power was in connecting people with each other. He could use a computer to store all the information of the daters, building detailed profiles based on how they filled out questionnaires. The ads could stay there in the database for as long as needed, allowing someone to search, anywhere, anytime, for a potential match. Billing and processing could all be done privately, with anonymous email addresses maintaining discretion. With real photos, there’d be no more guessing if someone really looked like Halle Berry or Brad Pitt. And if someone found what they liked, they didn’t have to wait for days or weeks to hear a response, they could get matched in seconds.
And, Kremen realized, online matchmaking could just be the start of an empire. Classified ads, including personals, represented a whopping 40 percent of revenues for the newspaper business. He could take the entire model of classified ads and move them to the nascent internet. Personals would just be the start, then he could create an online service for everything and anything someone might be seeking: jobs, apartments, motorcycles, anything. Holy crap, he thought, stopping in his tracks. This dating service could be the proof-of-concept for online classifieds. Electronic Matchmaker would be its name.
But there was one big problem, he was broke. With $50,000 in debt for student loans, there was every reason for him to just take the easy route. Classmates from Stanford were out working at big firms such as McKinsey and First Boston, moving into giant homes in Palo Alto, and driving their Porsches and Ferraris. But, just as he wasn’t cut out for Goldman Sachs, he knew he wasn’t going to be happy with that life either. He didn’t care whether he fit in or not, he never really did after all. But he wanted fulfillment, happiness, love, like anyone. He was willing to risk everything to try to make it happen. Kremen sold his stock in Los Altos Technologies, pocketing $25,000, and took out $2,500 on his credit card. But to make this dream a reality, he’d have to convince others that his idea wasn’t crazy, and to join his crusade to build the love machine.
* * *
Peng Ong, an industrious artificial intelligence researcher from Cambridge, Massachusetts, was attending a seminar for young entrepreneurs at Stanford, when he saw someone stand out from the crowd: a wild-eyed, wild-haired portly young guy with a nasally Chicago accent, Gary Kremen. Kremen was in a group talking about his experience at Los Altos Technologies and struck Ong as just the kind of outlandish visionary he might learn something from that day.
He was right. As Kremen spoke rapidly about his plans for an online classified company, Ong perked up at the idea of, as he put it, “technology meets relationships.” With his experience in programming, he could provide Kremen the technical side of the start-up. He struck a deal to become Kremen’s cofounder and chief technical officer of the company they now called Electric Classifieds, taking 10 percent of the ownership. Living in an apartment in a drug-infested part of San Francisco on Cole Street, Kremen subsisted on two burritos a day as he began bringing Electric Classifieds to life.
The first thing he had to do was raise money, which meant writing a business proposal. “ROMANCE—LOVE—SEX—MARRIAGE AND RELATIONSHIPS,” he typed at his PC in the summer of 1994, “American business has long understood that people knock the doors down for dignified and effective services that fulfill these most powerful human needs. People everywhere have met partners at bars, at sports fields, at work, from friends and through personal classified advertising. Electric Classifieds, Inc. (ECI) has identified a significant opportunity to fulfill these needs more effectively and rapidly using the ‘Information Superhighway,’ ” he wrote, referring to the nickname of the internet at the time.
With more and more people joining nascent online services, such as America Online, CompuServe, and Prodigy, and the demand for dating, he projected that Electric Classifieds would become a $50 million company in less than five years. To make it happen, he would need $2 million, and an initial investment of $300,000 to develop and roll out Electronic Matchmaker, the dating service on ECI.
Making stacks of copies of his proposal at a nearby Kinko’s, he sent the business plan around town. He’d call his friends from Stanford, one by one, and ask, “You know any rich people who make investments?” There were plenty of skeptics. Even around the Stanford community, the potential of online dating—let alone online commerce at all—didn’t register. Some would give Kremen a name, and he’d follow up as best he could, calling the switchboard of the company, asking for the person. “Hey, my name is Gary Kremen,” he’d say, “we should talk about this really cool thing I’m working on.”
Many of the recipients weren’t even using email yet, and simply tossed his proposal in the trash. But there was one important person who found it intriguing: Ron Posner. A Harvard MBA with a math degree, Posner had already established himself as one of Silicon Valley’s most prescient angel investors and CEOs, having led high-profile consolidations in the computer security business. To Posner, Kremen wasn’t crazy at all; he was a visionary who stood out for his indefatigable belief in himself and his ideas. He thought Kremen’s idea for online dating was, as he later put it, “just off the wall enough to succeed.” Kremen helped stoke his interest by suggesting, with some exaggeration, that other big guns in town were intrigued too. Posner was in—for $50,000.
The investment from Posner was just the “social proof,” as Kremen put it, that Kremen needed to get others interested. He’d go around town pitching the company, and dropping Posner’s name. If someone else showed even a glimmer of interest, Kremen would monopolize that too, dropping that person’s name to other potential investors. And so on. It was a process of “ham and egging,” as he called it, piling on names to establish credibility. When need be, he appealed to a potential investor’s personal interest in meeting that special someone. “Hey,” he’d say, “I’ll get you a date!”
Kremen had no interest in dressing up for his pitches. He’d just wake up, grab clothes from a pile in the corner, maybe eat a bit of toothpaste from a tube to freshen up, then show up to meet with guys in Armani suits. He’d make the rounds in his stained T-shirt and ratty jeans. No matter, with Posner’s vote of confidence, people were taking a more active interest in him, and in what he was creating. He found himself getting wined and dined by potential investors. By early 1994, Kremen had raised $200,000—which got the attention of others who wanted a piece of the action.
One night, he was being courted by a potential investor over dinner at the home of Vinod Khosla, cofounder of Sun Microsystems. “This is one of the best business plans I’ve ever seen,” Kremen was told. But there was just one problem: Kremen’s inexperience. There was still an old boys’ club in Silicon Valley, and the money guys wanted one of their own in control. “Gary,” the investor said, “we like you, we’re interested in funding this, in fact, we want to fund this—but we want you to have a professional CEO, someone who has done this before in a big way.”
Kremen wasn’t so sure he wanted any suits in his company, but agreed to go out to an airfield in Palo Alto to meet a potential CEO. Kremen wondered why the airfield, when he saw a small prop plane—and its pilot, the CEO. But something seemed amiss. Half of the man’s body was paralyzed from a recent stroke. Kremen wasn’t a big flier, and this just made his anxiety even worse as he climbed into the passenger seat while the CEO took the controls.
As they flew over the Valley, the CEO carried on about his accomplishments, bragging in a way that rubbed Kremen wrong. Between the guy’s arrogance and the erratic flying, he walked away from the experience with an even greater resolve to do his own thing—even if that meant turning away a fortune. “Fuck this shit,” Kremen said
to himself. “I’m gonna be the boss.” His instinct proved right, when he found a smaller investment firm, Canaan Partners, that was willing not only to let him be his own CEO—but invest $1.7 million. Kremen was in the money.
* * *
With the seven-figure investment, Kremen needed a place to set up shop. At the time, the internet start-up culture in San Francisco seemed almost nonexistent. So when Kremen looked for an office, he felt like he had become a pioneer for real. And if no one else was there with him yet, so be it, he knew it was only a matter of time before others joined in. He found a dingy basement office, with windows just poking up over the sidewalk, in a burgeoning section of San Francisco known as South Park, an area south of Market Street that surrounded the namesake park, known for drug dealers. The only other businesses Kremen saw in the area were Chinese tailors, and a printing company. He worked around the clock, eating cold burritos and sleeping on the floor.
One day he and the engineer he’d hired, Kevin Kunzelman, who had recently dropped out of the PhD computer science program at Cornell, were hanging out in the basement offices, smoking a joint and cranking the Dead, when Kremen had a vision: the Old West. “In 1804, where would you go first? Think about it,” he said, pausing wide-eyed to take a hit, filling his lungs with the smoke, choking back a cough, then exhaling like the dragon he felt he was riding at the moment. “Do you go up to the hills?” he went on. “A lot of people went up to them, the mountains, start logging, and that turned out to be worth very much. That’s where the money was, but maybe the smart people got that land at the bottom of the Golden Gate Bridge. There are pioneers, and there are settlers. I’m going to be the settler.”
The Players Ball Page 5