History of Famous Startups. Viaweb

locked that in.

Mon, 17 Aug 2009 06:03:33 -0700

locked that in. At that point you would think someone would be thinking,
“Wow, this is great. I’m rich. I can go buy everything I want.” But all I was
thinking was, “Thank God we didn’t fail.”
Livingston: You write a lot of essays with advice for startup founders. What is
the most important piece of advice?
Graham: What Y Combinator prints on our T-shirts: make something people
want. If you make something users want, they will be happy, and you can translate
that happiness into money. That is the basis of a startup. A startup is a company
that…

that is, real

Mon, 17 Aug 2009 06:03:33 -0700

that is, real enough that someone might actually buy us—and this made
us just pathetically eager to sell the company. We must have seemed like such
losers.
So I can understand now when founders want to sell out for a couple million.
Investors say, “No, you should wait,” but it’s easy for them to say. A million
dollars seems just overwhelmingly attractive when you have nothing. You don’t
care if it’s a good deal or not.
I also kind of regret being a zombie for several years straight. I really had no
life during Viaweb. If people are talking about…

Paul Graham 219

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Paul Graham 219
We were on the top floor; we didn’t really have a place to put a gas generator.
The first thing we tried was putting it in the office next to the server room. We
started the thing up and it sounded like the end of the world. It was the loudest
thing I have ever heard in my life. You might think the problem with starting a
gas generator inside your office would be the exhaust, but it never got to that
point. It was so terrifyingly loud. We thought, “Even to avoid our customers
calling us…

Graham: Constantly. No

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Graham: Constantly. No one ever seemed to get that the software ran on the
server. Nowadays there are so many web-based applications that you take this
for granted, but this was a year before Hotmail. We would explain to people
how the thing worked and give them a demo and they would say, “Great. Where
do I go to download it?”
After we got bought by Yahoo, a reporter who had been covering us for the
past 2 years wrote an article about the Yahoo acquisition and at the end said “It
only takes 10 minutes to download.” After covering…

chance the deal’s

Mon, 17 Aug 2009 06:03:33 -0700

chance the deal’s going to fall through. At the point where people say, “We want
to buy you,” the chances of it falling through are like 80 or 90 percent. So you
can’t let yourself believe. If someone wants to make you an offer, fine, but don’t
change your plans based on that. Just keep going.
Livingston: Looking back, what surprised you most in your experience with a
startup?
Graham: One thing that was surprising was that it actually worked. There we
were, in the summer of 1995, thinking, “We don’t know anything about business,
but we’re good programmers. Maybe…

It did, too.

Mon, 17 Aug 2009 06:03:33 -0700

It did, too. Yahoo made a lot of money from this software. When you tell
people you sold a startup to Yahoo in 1998, they get this knowing look, like you
sold someone a bag full of air for a hundred million dollars, but Viaweb was a
real money-making acquisition for them.
Livingston: What was the most surprising thing about being acquired?
Graham: For me the most surprising thing was the day the deal was going to be
announced. There was a point where I had to change our front page to read
Yahoo instead of Viaweb and then it…

a lawyer to

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a lawyer to figure out how to quit without getting sued. I was on my way out the
front door when Fred Egan grabbed me and said, “Wait, let’s see if we can fix
this.” It was pouring with rain and I was not too psyched about having to go find
a cab in that, so I went back to work while he made some phone calls. I don’t
know what he said, but I guess he convinced the investors I wasn’t bluffing.
I wasn’t, either.
We had some leverage, because the investors already had over a million dollars
in…

during which the

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during which the acquirer welched on the deal.
It turned out to be good in the end, but we had to raise our last round of
funding while this was happening. You want to raise a round of funding with an
Paul Graham 215
IP cloud over your head? It’s just impossible, because potential investors have
no way of judging how serious it is. It could be no big deal, or it could be that
this other company owns half your software.
That was the second low point—tied for lowest. Ultimately we managed to
get some bureaucrat within the big…

but nobody’s ever

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but nobody’s ever heard of. This was the point where we stopped seeming like
total underdogs and people started to know about us.
Part of the reason was that we hired a fabulous PR firm with this money,
Schwartz Communications. We told them, “When people talk about e-commerce
and they have to mention a few examples of companies, we want to be one of
the companies they mention.” The most valuable sort of press is not articles
about you, it’s when people mention you in passing as a matter of course. That’s
what you really want—whenever anybody talks about e-commerce,...

hard for us

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hard for us to boss them around.
Livingston: So now you have Fred on board and you are becoming more legitimate.
What did you do next?
Graham: Soon after we got Fred, we raised more money. I don’t remember
exactly how much—maybe $800,000. A lot more money than we ever had
before. We really shifted gears at that point. Up till then, we had been operating
out of an apartment. In the very beginning, we operated out of Robert’s
apartment. Then after we got the $100,000 in that first round from the angel
investors, we rented the apartment upstairs from…