[Chapter 10: The Value of Yahoo!]
From then on, John Leighton's life finally settled into a steady routine. Zach and John started living the classic "stay-at-home guy" lifestyle -- making big grocery runs to stock up on food and then spending most of their week holed up at home. Before long, nearly a whole month had passed.
It was March now, which meant it had been over a month since Yahoo's portal went online. The past month was the most spectacular one since Yahoo's launch, according to what Jerry Yang told John over the phone.
When John heard Jerry's words, he smiled faintly, thinking to himself, 'The real glory will come when Yahoo goes public.'
"Hey, John, you must be feeling better now, huh? We've been swamped here. Guess that's what you get dealing with investors -- they're all capitalists," Jerry teased over the phone.
"Wow, Jerry, now you've got time to joke with me. Looks like things are finally looking up?"
"Haha," Jerry chuckled, clearly hitting a nerve with John.
"John, it seems you've become a real strategist, like a modern-day Machiavelli. Over the past month, we've pulled in almost $500,000 in ad revenue. Man, we're finally turning a profit."
Hearing Jerry's excited voice on the other end made John genuinely happy.
...
"Alright then, Jerry, what's the real reason for this call? You aren't thinking of doling out dividends already, are you?" John teased, playing along.
"Get outta here! We've just had to invest in new servers, upgrade the network gear, and bring in some expert talent. Money's still tight, but hey, the venture capitalists are knocking on the door."
"Oh, so the VCs are coming?"
"Yeah! Several firms have reached out, and some are even talking about outright acquisition."
"Tell those acquisition folks to buzz off -- we definitely need venture capital. In the internet, timing is everything. Being one step ahead will get us ahead."
"Of course, John! Come on by the office. We'll nail down some company bylaws first, then get ready to talk serious business with the VCs. Haha..."
Jerry was clearly excited, already envisioning the bright future ahead.
"YES! YES! YES!" John shouted as he jumped up and waved his arms wildly after hanging up.
It was no surprise -- venture capitalists always had a sharp instinct. The moment they sensed Yahoo's value, they came knocking right away.
---
"Hey man, what's got you so hyped up?" Zach chuckled at John's excitement.
"Zach, haha, we made it! Yahoo just sent word -- we're about to have our first round of venture capital funding." Even though John already knew about Yahoo's success, getting the news firsthand still got him pumped.
"Wow, that's great news! Nothing could be better than this."
"Absolutely, Zach. Ready to become a millionaire -- or even a multimillionaire?!"
"Wow, John, I love you so much."
---
Meanwhile, back at the Yahoo garage, Jerry Yang was equally excited as he addressed his team.
"Guys, the Saint has agreed to meet the venture capitalists. They'll be here tomorrow. We need to get on the same page before facing the investors and financial backers. Let's all be ready."
"Yes! I knew John would say yes!" David Filo replied enthusiastically.
History tends to have momentum. In addition to the two founds, Jerry Yang, and David Filo, Timothy Koogle was also present, who was the company's general manager, responsible for internal operations -- essentially the CEO.
Tim had been brought in by Sequoia Capital to help manage the company, though this time Sequoia wasn't officially involved yet. Tim and Jerry also happened to be Stanford alumni, which perhaps explains why, even without Sequoia's formal backing at this early stage, Tim still joined Yahoo's founding team.
Currently, the company's leadership card still bore Jerry's and David's names. John Leighton had been considered an angel investor and politely declined having his name added officially.
"Speaking of 'Saint,' I'm very curious. I hope to meet him soon," Tim said with interest.
"Don't worry, Tim -- he's a sharp guy with a brilliant business mind. The profit model we're using was his idea."
"Oh wow, that's a real genius!"
Tim had been thoroughly briefed on Yahoo's revenue model since joining. Especially the concept of combining a portal with internet media -- content plus traffic plus advertising -- that was a truly innovative, almost genius idea.
So naturally, Tim was very curious about John, who had quickly earned the nickname "the Saint" around the office.
---
While Tim was musing about John, the real John was bouncing around with Zach, both of them practically buzzing with excitement.
"Zach, tomorrow we're heading to Silicon Valley. I can hardly wait!" John said eagerly.
"Okay, John, thanks," Zach replied, suddenly sober. "But you know, no one just hands out millions of dollars in company shares without blinking. Even if it's just a fraction for now."
"Hey, Zach, we're family, aren't we?"
"Of course, we're family!" Zach nodded, eyes glistening.
---
The next day around noon, when John and Zach walked down to the front of the Yahoo garage, Jerry greeted them with about a dozen team members, applauding and giving them a warm welcome.
John was touched. After only a month of involvement, he was surprisingly well-received.
Jerry then led the group -- including David and Tim -- into a meeting room for a detailed review of Yahoo's recent achievements to bring John fully up to speed. Soon the discussion turned to the upcoming venture capital round.
It was clear: the past month was the most glorious for Yahoo. Anyone online virtually had visited Yahoo's site at least once to browse news or search for content.
Basically, Yahoo had become a combination of a search engine and a portal -- that was the model that would define Yahoo going forward.
Too bad, later on, Yahoo made strategic errors by focusing too much on the portal side and neglecting search. With Google rising rapidly, Yahoo eventually faltered.
---
"Gentlemen, since we've all agreed on the venture capital round strategy, first we need to set a valuation for our own website. That will give us a baseline before meeting other investors. Who wants to start?"
"As the CEO, I'll start. Based on our current status, last month's ad revenue was $500,000. If we project that over a year and factor in internet growth, hitting $10 million in ad revenue is feasible. So, by typical market standards, our valuation shouldn't be less than $100 million," Tim asserted.
By price-to-earnings ratio, Yahoo was already a giant in the internet space.
John nodded in agreement. "Everyone, while I agree with Tim's valuation for the U.S. market, are we only going to focus on the U.S.? The internet has no borders. Our goal should be worldwide."
John stepped forward and delivered a global vision with confidence. The room went silent, then erupted in excitement.
Yes, they had all been thinking domestically, but the world market was enormous. Everyone exchanged looks of amazement, staring at the young man before them with newfound respect.
"Therefore, we first need to estimate the funding required to develop Yahoo into a worldwide entity, then raise capital accordingly.
We all know that while we have a first-mover advantage, internet advantages are fleeting. Others can build portals too.
In the U.S., we might dominate due to head start, but internationally, we'll face challenges from other countries' internet professionals.
I hope this first round of funding will provide the initial capital required to build a world-class infrastructure for Yahoo.
Our goal is to burn through cash -- relentlessly spend the funding we raise.
You could say my initial investment was angel funding. The coming round is Series A. Whether we'll have Series B depends on how smoothly things go. If all goes well, maybe next year we'll be ringing the Nasdaq bell.
Our mission is to be the first site everyone visiting the internet looks at for news and information. For content searches, they come to Yahoo.
Our site already meets the basic needs of users. Isn't that the time to aim for a higher valuation?
So, I'm putting Yahoo's valuation at $500 million. If we dominate the global internet market, shouldn't our value increase?
We are the number one internet company. We deserve the perks that come with it."
Hearing John's proposed valuation, everyone was stunned, though maybe not totally surprised after his passionate speech.
Keep in mind, Yahoo's whole team -- including John and Zach -- was fewer than 20 people.
Also, at the time, venture capital rounds were usually modest -- sometimes tens of thousands or low six-figures -- and multimillion-dollar funding rounds often involved multiple investors sharing the risk.
John's ambitious funding plan and valuation shocked them all.
If the plan succeeded, Yahoo would be making U.S. history.
Many say venture capital was tough in the early days of the internet. Startups had to grovel and beg just to get a meeting.
For example, in the previous era, Yahoo, Amazon, Google, and Facebook all faced fierce challenges raising early funding. Success wasn't as smooth as people imagined -- it only came after the companies had already gained traction.
Of course, those who invested early ended up with incredible returns.
*****
https://www.patreon.com/Sayonara816.
https://discord.gg/eKByGBSw.