Draper and Jurvetson relented; they called back two days later to accept their 15 percent. On the day they launched, July 4, , the pair wore beepers on their hips to flash the number of subscribers every hour.
The product spread like the Ebola virus, each email being, in effect, an advertisement to its recipient for the service. Sabeer received a second round of financing from Doug Carlisle at Menlo Ventures. It was six months before the first tiny competition appeared. It was nearly a year before Four11's RocketMail was launched. When Microsoft came bidding in the fall of , they came as a small army. Six at a time, they flew down from Redmond and sat in Hotmail's small conference room across the table from Sabeer.
They offered a figure, something that would have put tens of millions of dollars in Sabeer's pocket. Sabeer rejected it, and they stormed out. A week later they were back, and every other week thereafter for two months. They flew him up to Redmond to meet Gates and have a little get-friendly conversation. At that point, it's easy to see it all as funny money - when you've got a week to think about it, it's hard to really see the difference between 50 million and 60 million.
Are you really going to risk losing the deal for another 10 million? Two stories floated around Hotmail as the talks went on. The first was that in AOL's early days, Steve Case had spurned a buyout offer from Bill Gates and gone on to grow it into a multibillion-dollar valuation.
Sabeer took a straw poll among his investors to see what price they might be able to anticipate. Privately, Sabeer had half-jokingly been saying he wanted a billion dollars, so he challenged Carlisle's figure: "You don't think we can get more than that? Carlisle laughed and rolled his eyes.
You've blown it! But Sabeer knew those were only tactical outbursts. As a kid in Bangalore, he had watched family servants haggling over groceries at the bazaar.
He knew every trick. At the bazaar, vendors would counter a low offer by saying, "Oh, I'm sorry, is that all you can pay? You must be very poor. I want to give you a few rupees out of my own pocket so you have enough money to pay. Tensions rose as Microsoft piled cash on the table. Carlisle took to saying, "It's statue time! This negotiating squad seemed to have deep knowledge about RocketMail, Hotmail's competitor, and it was possible that Microsoft was negotiating to buy RocketMail as an alternative.
Or maybe they just wanted to scare Sabeer, to make him think Bill had another option. Sabeer, who had the go-ahead from his board and his management team to negotiate the deal himself, stood firm: no sale.
Several times, Microsoft's negotiators stormed out. Even with the talks secret, Hotmail's employees twice pressured Sabeer to accept the most recent offer and guarantee their security. Sabeer's venture capitalists, who stood to realize gigantic returns on their investments, urged caution. But negotiating alone allowed Sabeer to present a unified front; it prevented Microsoft from taking Jack Smith to dinner and saying, "Jack, you've got a wife and a kid - c'mon, they'll be set for life.
Why don't you wait until you're big enough to buy Microsoft, rather than them buying you. Now he really was alone. For just email? Who is this kid, and how the hell did he do it? On New Year's Eve , the deal was announced. Throughout the Valley, the gut reaction was shock: No way was the company worth so much. Who the hell was this kid Sabeer Bhatia, and how the hell did he do it? A year later that price looks cheap, particularly considering that Hotmail has more than tripled in size since it was purchased.
Everyone around Sabeer Bhatia thinks he has proven himself a unique individual. What set Sabeer apart from the hundreds of entrepreneurs I've met is the gargantuan size of his dream. Even before he had a product, before he had any money behind him, he was completely convinced that he was going to build a major company that would be worth hundreds of millions of dollars.
He had an unrelenting conviction that he was not just going to build a run-of-the-mill Silicon Valley company. But over time I realized, by golly, he was probably going to pull it off. These people have every confidence that if Sabeer were not here in Silicon Valley, he would be leading people somewhere.
But Sabeer believes he's damn lucky to live in this place and time. Two year-old guys who had no experience with consumer products, who had never started a company, who had never managed anybody, who had no experience even in software - Jack and I were hardware engineers.
All we had was the idea. We didn't have a prototype or even a dummied graphical interface. I just sketched on his whiteboard. Not the case where he comes from. In India, Sabeer's mom worked her entire career at the Central Bank; his father spent 10 years as a captain in the army, then became a manager in several public-sector hierarchies. That was what life offered him. In India, kids like Sabeer grow up assuming that starting a company is impossible unless you're superhuman.
Too much corruption and political risk undermine investor confidence in new ventures. In India, ecommerce is actually illegal because of the Indian Telegraph Act, which forbids using telecommunications for profit. An law? Can you believe it?
But Sabeer got swept up in the decade's fever: You haven't lived until you've gone solo. After a few years in the Valley, Sabeer discovered that the really successful businessmen were just ordinary guys - smart, but not unusually so. If they could do it, he could, too. And every day, at every turn, he got someone to buy into his vision.
The first 12 Hotmail employees signed on entirely for stock, forgoing salary - not very common in the Valley, where the unemployment rate is nil.
Now think again of Sabeer's simple apartment in Bayside Village's plasticized neighborhood. See it in its psychological light: a reminder that he is the same person he always was, that he hasn't lost himself, that his values are in the right place.
At night he sits at home, reading the industry trade magazines, trying to digest the chaotic splendor of the Internet. That's his pipeline of strategic info. Just magazines, the same magazines you can buy.
Available on any newsstand. Sabeer even talks about Bill Gates, ordinary guy. He's human," Sabeer says. I remember meeting him the first time up in Redmond. I was nervous, and I spoke for too long. Then Bill started asking questions. They were normal strategy questions, the same things I'd been asked by investors all along. Doug Carlisle is holding true to his word about the bronze statue - a bust has been commissioned by an artist in Los Angeles. It's such an odd thing - celebratory of the individual rather than the company or the Internet.
But Carlisle commonly offers his entrepreneurs such gifts when they reach milestones - a Porsche Carrera, say, or "If you make that, I'm going to kiss your shoes. If anyone deserves it, I guess Sabeer does, but doesn't it make him uncomfortable? My hope is that, just as I was given inspiration at those brown-bag lunches in Terman Auditorium, when entrepreneurs come into this most prestigious address on Sand Hill Road, it will give them inspiration.
As of this writing, Hotmail has employees, and it is one subdivision in a Microsoft superdivision called Web Essentials. Sabeer now reports to someone who reports to billg, and he flies to Redmond almost every week. His task as he has always seen it - getting his employees to believe that this company is theirs - is now a changed proposition. It's a harder story to tell, more complex to buy in to. After all, it still has million users.
I managed to track Bhatia down while he was traveling in New York this week. And it turns out the entrepreneur is totally at peace with the decision. Bhatia left Microsoft not long after the acquisition, and said he was no longer in contact with the company or people working on Hotmail. He did say he was glad users would be able to keep their hotmail. Indeed, he still uses his original one as his main email.
But he also switched over to the new Outlook interface several months ago, and said it was a huge improvement. Bhatia has also moved on. The company is based in Mountain View and has employees.
Microsoft returns with more break dancing in Surface Pro ad. Gmail is target of new Microsoft privacy campaign against Google. Follow me on Twitter obrien. Strike at Kaiser Permanente averted two days before deadline. Stocks close higher, but indexes still end week in the red.
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