about the major...
about the major turning points.
Bhatia: Before we launched, I think the first major turning point was getting
the $300,000 in funding. That was huge for us—two young kids to get that
much money. The second turning point really was when I started using it and I
told my friends and family about it and everybody who used the product (50 or
100 or so people) loved it.
Sabeer Bhatia 23
And then of course, the interesting thing was that when we finally did
launch, each of us had pagers that would send us a page every hour, so we
would know how quickly our user base was growing. It was just phenomenal—
100 people signed up last hour, 200 people this hour. Everyone knew how many
users were signing on and that was very motivating to the whole company.
Livingston: Was there ever a time when you thought you were in trouble?
Bhatia: The only time was when we had to go in for the second round of financing.
We didn’t have any money and Tim was at the Olympics in Atlanta and he
refused to fund us because we wanted a slightly higher valuation. This was what
all the other VCs were telling us, but he wanted to invest at a lower valuation.
We had only a couple of weeks worth of money left and I would not have been
able to meet the next payroll. So as soon as he came back, we literally had to
accept his terms and move on.
Livingston: Couldn’t you have argued legally that by not agreeing to a higher
valuation that they had “refused” you?
Bhatia: At that point you are stuck; you’ve got to make a decision one way or
the other and move on.
Livingston: So really the biggest challenge in the early years of Hotmail was the
funding?
Bhatia: Yeah, it was the funding. And of course then the tough part was in scaling
up to that growth. Our servers would break down and we had to worry
about scalability problems and how to add servers and make it more reliable. It
was not all smooth sailing.
Livingston: Did you ever go out of service?
Bhatia: We went out of service for a few hours sometimes and we didn’t have
proper backups, or the ability to restore things. Reliability was an issue and it
took us some time to cross the reliability curve.
Livingston: Was there ever a time when you felt you couldn’t keep up?
Bhatia: We just handled the problems as they came around: we put in a new
system, rearchitected some of the things. The engineers worked really hard,
and we kind of made it work. But even now there are times when you log into
Hotmail and it says, “Sorry, the server is down.” These are just issues when you
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