saw our growth from hundreds to thousands to tens of thousands, and that’s
when they said, “Even we ourselves cannot get these kinds of registrations on
our website. We should do email.” So they decided to do email and that’s how
they came up with Rocketmail.
Livingston: Were you pissed?
Bhatia: They are also funded by Draper Fisher Jurvetson. So Draper was seeing
two of its own companies create two different email systems.
We felt bad that they had done it, but we couldn’t go to Draper and say anything.
It was a decision that the company took, that’s what DFJ told us, and we
were pissed at them, but at that time we knew we had to not share too much
information with DFJ as well.
Livingston: So you didn’t have a showdown with Rocketmail?
Bhatia: We just scrapped our partnership and decided, “OK, competition is
competition.”
Sabeer Bhatia 25
Livingston: Then you started to get into talks with Microsoft?
Bhatia: Talks with Microsoft started after our first anniversary, which was July
1997. In August or so, Microsoft contacted us and said, “Wow, this is really big.
Do you really have 7 million subscribers?” They knew that we were growing
and they wanted to find out how we provided email to 7 million subscribers
because they were having a hard time providing email to just 2.5 million MSN
customers. So we began talking of a partnership deal and that’s how we started
talking to each other.
We worked out a detailed business plan about how we would provide email
to their subscribers, and then they said they wanted a tighter relationship
between us and their company—that they wanted to invest in our company. So
they looked at our business plan and saw very quickly that we wanted to be
more than just an email company. We wanted to incorporate all of the other
functions as well, such as personalized news and those kinds of things.
We wanted to be a portal at that point in time. So that’s when they came to
us—they wanted to be a portal as well—and they said, “We cannot have one of
our providers of email be a competitor of ours, so have you thought of an acquisition?”
And I said, “I really haven’t thought of an acquisition, but at the right
price I can think of anything.”
Livingston: Tell me about the negotiation process.
Bhatia: They called us to meet with Bill on October 13, 1997, and we were
shown the Microsoft campus, headquarters, the whole works. We were taken to
Bill’s office, met with him, and then we were taken to a room with a gigantic
table, and there were about 15 Microsoft negotiators sitting on the other side:

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