Amazon.com IPO skyrockets
Silencing any doubts about its chances on the public market, Amazon.com (AMZN) ended the day $54 million richer as its long-awaited initial public offering soared 30 percent above its opening price . . . The IPO raised $54 million for Amazon, giving the company a market value of $438 million . . .
CNET News.com - May 15, 1997
Businesses Find the Web a Friendly Mall
For all the hype over online commerce, cyberspace has yet
to prove the retailing miracle many hoped it would be . . . What’s missing? The answers seem to be everything . . . value, a great experience and added convenience . . . But business- to-business is another story . . . Forrester Research Inc. predicts business-to-business trade online will swell to more than $65 billion by 2000 from about $600 million in 1996 . . .
Investor’s Business Daily - May 19, 1997
When Jack made good on his promise to connect us with potential investors, we scrambled to produce a short business plan and slide presentation. The business plan would be sent to several angels...
Within a month, our first meeting was set up. Jack gave Jeff and me directions to a house in the upscale community of Los Altos Hills. This meeting was going to be a bit unconventional. Most first presentations and discussions were held in conference rooms. Meeting on neutral ground kept meetings from getting too personal. This kept the potential investor shielded from personal feelings that might get him or her suckered into an otherwise irrational investment.
Jeff picked me up on a cloudy morning. We followed the directions into the hills, up winding roads, and parked next to a locked gateway. We stepped out of the car and caught a glimpse of a large house over the gate. Shrouded by trees, the estate had been designed to evoke among visitors, in equal measure, feelings of insecurity and importance. It worked.
Jeff and I looked at each other with trepidation and pleasure, then pressed the intercom button adjacent to the gate. Although the place looked empty, we were quickly buzzed in. As we walked toward the house along a path across a large expanse of lawn, a glance to our right revealed a small collection of pristine luxury and collectors’ cars in the driveway.
The house was formal, but not quite classical, not quite opulent. A casually dressed man who looked to be in his fifties greeted us at the door. Our first glance inside the house revealed a marbled entry containing a full-size suit of armor and an elegant spiraling staircase. The man introduced himself as Shawn.
His carefree manner, long hair and casual attire provided him with an intriguing aura of conscious success and well-tailored rebelliousness. Jack had told us that Shawn had made more than a hundred million from the sale of his software company some years back. He was retired, but active in helping companies get off the ground. When I later asked him why he continued to invest in small companies he told me, “You can only play so much golf, you know.”
Here was a man who had taken on IBM in his day — and won. He deferred to no one. With practiced skill, this all came across within minutes of greeting us.
He guided us through an elaborate, art nouveau archway into a formal living room. Seated within the darkened room, in somewhat more formal attire, was Wally. A successful heart surgeon, Wally, in addition to being an angel investor, was a director and vice president at a medical device company. In contrast to Shawn’s more assertive manner, Wally was calm, studied and modest.
Seated across from them around a dark wooden coffee table, Jeff and I nervously, but confidently, introduced ourselves. When I proudly indicated that I was an architect, their eyes widened eagerly. Wally said, “You’re a software architect?”
Software architects are the men and women who design how everything in a program is going to work together, a very important role.
When I answered proudly, “No, I’m a real architect... as in buildings,” Wally was visibly disappointed. I didn’t know until then that architecture was not a desirable background for an entrepreneur to have. Those with artistic temperaments tend to be far more wedded to their ideals than their pocketbooks. Investors wanted their investments protected by founders driven by the fame of fortune.
In future discussions, when my background was being presented by one set of investors to another, my management experience was emphasized and my architecture license was minimized or not mentioned at all.
Jeff and I demonstrated our software and discussed our plans. Wally and Shawn both seemed impressed. Wally asked many good questions. We became increasingly comfortable as we realized that we were able to answer them competently.
Shawn asked many questions too. Many, many questions. He dug in every nook and cranny, questioning everything he heard. He was on a mission to find our biggest flaw. It didn’t take long for him to find it. “You guys are clearly not salesmen. How could you sell this on a big scale?” After all, investors would only put money into a company that had big potential.
We could tell that our responses were too vague for Shawn. He didn’t understand how, in spite of its substantial market size, we would get a large amount of money out of the healthcare industry.
Wally was more optimistic. With his background in the hospital business, he knew that once we had a solid grip on this conservative industry the growth potential was huge. He was more comfortable with our loose ends than Shawn was.
The meeting went on for several hours. Before we left, Shawn gave us a tour of the house. He pointed out the rooms that he and his wife had recently remodeled. He wasn’t sure how they would take advantage of the upgrades, since this was the least used of their houses. But he was sure that they’d figure out something to do with it.
Wally and Shawn indicated that they would discuss Neoforma with each other and a few friends in the industry.
Two weeks later, Jack let us know that Wally and Shawn were interested in investing in Neoforma. We were thrilled. Because of their expression of interest, we began thinking about ways to accelerate our growth by putting more money into our website development. We thought that, since the first investors we spoke with were so interested, it would not be long before these or other investors put some money in us. We felt comfortable spending money a bit less conservatively.
Wally and Shawn were especially concerned about what customers really thought of what we were doing. Wally set us up to present our business ideas to a group of purchasing managers at a local hospital — so they could directly gauge customer interest. The presentation went very well. But it was only a single group at a small hospital.
Wally also wanted to know how we would be received by larger buyers, so he picked up the phone and called the persons responsible for acquiring equipment for the largest hospital system in the country. (He was a well-known doctor after all.)
Wally set up an appointment for the following month. I flew across the country to their headquarters with Jeff and Shawn. We presented our current and future software to the two key people responsible for selecting equipment for the entire hospital system. That meeting went quite well too.
Jeff and I had discussed it and agreed that if this meeting went well, it would probably only take a few weeks to finalize the funding. But to our surprise, instead of proceeding to financial term sheets, Shawn continued to ask us for more details — longer-term financial projections, a more detailed business plan, more sources for market size evaluation. And his language was becoming increasingly cautious.
Then his inquiries suddenly stopped. He had told Jack that he thought we needed far more money to pull this thing off than we were asking for. He said that he wasn’t sure if he was ready to invest in us. He had to think about it.
After weeks of waiting for a firmer answer, we found out that he was traveling. In fact, he wouldn’t be around much for a few months. He said that he’d keep thinking about us and maybe we could connect when he returned to the area.
When Shawn disappeared without a firm yes or no, Wally became more hesitant. Investors seldom want to invest alone. Knowing that others are willing to take the same astronomical risks is the best indication that the risk is worthwhile.
But Wally did continue to meet with us, sometimes alone, sometimes with someone else from the healthcare industry. At the beginning of each meeting he would be cautious and skeptical, but by the end he would be enthusiastic again.
Jack had trouble getting other investors to meet with us. For various reasons, he just couldn’t get us in front of many investors. The couple of meetings we did have were unproductive.
Having made the decision to pursue funding, we were getting a bit nervous, but we were so charged-up by the great stuff we were doing that we knew the funding issue would work itself out. In the meantime, we’d figure out a way to bridge the money gap with our own money, and maybe some family money. Just for a little while.