American History 1988
Chapter 193 - 187: The Charm of Trading

Chapter 193: Chapter 187: The Charm of Trading

"It’s different, Dean," Durell’s eyes took on a profound expression.

KeyPoint Ventures had the capability to invest 6 million dollars in AOL, but they couldn’t give that money to Go Company?

Honestly, even though Dean had been in contact with the VC industry for a long time, he still didn’t quite understand what Durell was saying.

Seeing his puzzled look, Durell had to further explain, "KeyPoint Ventures is already the lead investor in Go Company."

"And then?" Dean spread his hands, not understanding why the lead couldn’t continue to follow on with additional investments.

"It’s a bit complicated..." Durell rubbed his chin with his wrinkled palm, "It involves the game rules of the VC industry."

"At least I need to figure out what’s going on?" Dean glanced at the materials on AOL and Go Company beside him, "My gut tells me there is some difference between them."

"Alright, let’s start from the beginning then." Today was Durell’s day off, so he had plenty of time to talk to Dean about the origin of Go Company’s concept.

According to Durell, the idea for Go Company’s handwriting notebook came from a serendipitous moment during an airport business trip by Mitch Kapor and Jerry Kaplan.

One was a founder of Lotus software, and the other was a Lotus software engineer, who had also been an assistant professor at Stanford.

On his private plane, Mitch Kapor habitually took out his portable Compaq 386 computer, about the size of a small sewing machine.

"I need to update my notes," Kapur said as he looked at the stack of yellow Post-its and the sheets of paper torn from his notebook that he had taken out from his pocket.

He had a head of thick hair and a relaxed, beach-style demeanor. Before founding the Lotus company, he had been a music show host, a stand-up comedian.

Kapur complained to Jerry Kaplan, hating the sewing machine-sized portable computer.

"I wish there were some way I could just get this stuff into the computer without having to keep all these papers."

Kaplan replied that there was such a method, if computers became light and small enough for people to carry around, then perhaps it could be done.

Then the two, with their imaginations piqued, began to discuss the feasibility of this idea.

A computer’s disk drive weighs about 900 grams, batteries add a few hundred grams more, and display screens and glass are heavy as well.

Even though each technological advancement could reduce the computer’s size, the biggest challenge was the keyboard.

Considering people needed over 60 keys to input information on a keyboard, there was limited possibility to make it much smaller.

Suddenly, an inspiration struck Jerry Kaplan, "What if you didn’t have to type the text, but could write directly on the screen using some kind of stylus?"

This was the initial inspiration for Go Company’s handwriting notebook, and Kapur and Kaplan, as if they had an epiphany, were fascinated by the idea and were even moved to tears.

They then decided to turn the enlightenment about the portable computer into a business.

Kapur and Kaplan met with many VCs, but most of them were noncommittal until they found Durell.

As one of the most representative impromptu investors in Silicon Valley, Durell favored such out-of-the-box ideas.

Just like when he invested in Byte Company, whether it was Go Company or Teams software.

Their ideas were unique, with no similar competitors in the market.

KeyPoint Ventures’ investment direction was to support truly revolutionary startups because these companies could potentially give birth to entirely new industries.

So it was no surprise that Durell was impressed by this sleek, chic handwriting notebook.

In the end, KeyPoint Ventures and Kapur pooled together 1.5 million dollars to take a one-third stake in Go Company.

Go Company was founded in ’87, and a year later, there was no progress with the development of the handwriting notebook.

Selling an idea to investors is one thing, but achieving the goal is quite another.

When Go Company was established, all they had were ideas in their heads, nothing else.

It turned out, turning the idea into a tangible prototype was more difficult than they had anticipated.

Go Company was facing a cash shortage before they even completed their engineering prototype.

Then they had to continue looking for investors, but to make their idea more persuasive.

Kapur and Durell decided to add an investment of 500,000 dollars to make a demo prototype first.

In the second half of ’88, some founders of Go Company took the demo prototype to Microsoft to see Bill Gates.

They demonstrated Go Company’s handwriting notebook to Bill Gates, hoping to convince Microsoft to develop a companion operating system for this handwriting computer.

But that was an extremely foolish decision, they didn’t understand Bill Gates at all.

Gates didn’t reject them nor did he agree to them; he proposed to learn more about the product.

Then Gates repeatedly sent many executives to Go Company to gather information, and half a year later, Microsoft announced they were developing their own handwriting notebook computer.

Yes, Microsoft had once again stolen someone else’s idea; it was their usual modus operandi.

This was a profound lesson for Go Company, and also the reason Durell hated Microsoft.

From that event onward, John Duerr became a leading figure of the "anti-Microsoft alliance."

Now Go Company had an additional competitor, but the innovation had to continue.

With Durell’s introduction, Go Company secured another round of funding from different investors.

After stumbles and struggles for over a year, the handwriting notebook made some progress, but it was limited.

But there was that old problem again, they were out of money.

To raise funds, Durell’s address book was almost flipped to the last page.

Durell’s KeyPoint Ventures was not without money; on the contrary, its fund pool amounted to several hundred million dollars.

But a qualified venture partner would never bet too much on a single company, not even an improvisational investor like Durell.

The word "risk" is foremost in venture capital, and when reaping profits, venture capitalists are accustomed to sharing the risks among several companies.

Durell could actively raise funds for Go Company, but KeyPoint Ventures’ investment limit had to have a threshold.

When a startup’s concept has not yet been proven by the market, this ratio usually does not exceed one-third.

While Durell was trying to raise funds for Go Company, he happened to take an interest in Byte Company.

Its concept excited Durell just as Go Company’s handwriting notebook had initially.

When Durell burst into Dean’s office, it was during Byte Company’s second round of financing, where he encountered his old rival, Valentine.

It was clear Valentine had set his sights on Byte Company early, and after understanding its financial statements, Durell could understand Valentine’s determination to win.

The company’s concept was as wild and imaginative as Go Company’s, but it was much more mature.

Go Company’s concept was still at the prototype stage, but Byte Company’s Teams software was already selling quite well.

In other words, Teams had been market-proven, but the handwriting notebook computer had not.

As a venture capitalist, Durell keenly seized this business opportunity and did not hesitate to compete with Valentine for investing shares.

As the two argued to a standstill, Dean gestured that Byte Company needed to consider, and both he and Valentine had no choice but to exit Dean’s office.

However, surprisingly, outside Byte Company, Valentine found him.

"John, talk to me, what will it take for you to give up competing with Sequoia Capital for this funding round?"

Durell had not planned to pay attention to his old rival, but then he thought of Go Company.

"If Sequoia Capital invests in Go Company, then KeyPoint Ventures will give up the lead investor position in Byte Company."

That was the condition Durell put forward, and Valentine agreed.

Sequoia Capital gained a 15% stake in Byte Company’s second round of financing in exchange for a 2 million dollar investment in Go Company.

Dean had been puzzled at first, how the two fiercely competitive men suddenly came to such a tacit agreement on Byte Company’s valuation at 70 million dollars?

In fact, behind this was business, an exchange of interests.

However, Sequoia Capital’s 2 million dollars did not sustain Go Company for long, and now they were out of money again.

"Dean, KeyPoint Ventures can’t fund Go Company indefinitely, we need to attract more venture capital.

If you get involved, I’m confident I can get more people interested in Go Company."

KeyPoint Ventures wasn’t something Durell could decide on his own, he had to be accountable to the real investors behind him.

"Durell, I’m amazed by Go Company’s concept, but it requires strong technical support to realize its vision.

If I may ask bluntly, how far has Go Company’s product development progressed?"

Dean didn’t doubt the creativity of the handwriting notebook, but it was too advanced; he had no confidence in the technology of the current era.

"We’ve completed the development of the Penpoint operating system, and IBM has agreed to purchase the licensing rights to it.

We’ve also developed most of the hardware features, and now we’re working on further optimizing them together."

Although Durell spoke with confidence, Dean only understood another implication.

That was, Go Company had not yet developed a substantial product, which necessarily meant they had encountered insurmountable problems.

For a company that specializes in high-tech products, facing technical difficulties is a fatal weakness.

Until this problem is overcome, investing in such a company carries extremely high risk, even if its concept is captivating.

"Durell, tell me the truth. I indeed made some money in the stock market, but I’ve reinvested it back into the market.

This something Valentine can testify to; I had just come from seeing him before coming to you."

Does Dean have money in his account? Of course, he does!

Counting the stock market earnings from the Internet and the extra rent collecting company in Ohio, Dean’s cash assets are about 16 million dollars.

Of that, 12 million was invested in the stock market, with the remaining few million kept on hand for emergencies.

But Dean would not invest in Go Company, nor would he use this money to help AOL expand its scale.

It was his own money, and Dean never gambled without absolute certainty.

"All right, Dean, you don’t have to invest in Go Company, but you have to do me a favor!

In exchange, I’ll introduce you to venture capital firms that are truly interested in network services."

Durell proposed his terms; venture capitalist always present something that makes your heart race.