[Chapter 14: The Big Capital Sharks]
It had been a week since John Leighton arrived in Silicon Valley. These past few days, John had been killing time by thoroughly exploring the area, quite different from his last visit when he mostly stayed confined within a garage. Meanwhile, every day he met with Jerry Yang and others to discuss upcoming funding rounds, investors interested in Yahoo!, and the like.
Three days ago, the financing plan was finalized and handed over to the major investors. Now they just had to wait for responses. Days felt full and busy.
---
"Ring ring ring..."
John grabbed Zach's Motorola 8900 flip phone, a hefty brick-like device, and answered. Holding this nearly one-pound phone brought a bit of disbelief. Used to future smartphones, this one felt clunky and outdated even though it was the latest model released this year. He had bought it just a couple days ago; after all, being in Silicon Valley without a phone was a hassle.
These days, Zach was obsessed with this brand-new flip phone -- the world's first such model and a true collector's item. Using a phone like this had become a symbol of success, since it cost over a thousand dollars, and the call rates were through the roof. Average folks definitely couldn't afford this luxury.
Back home in John's previous life, such a phone would have cost tens of thousands of dollars -- absolutely top-tier.
...
"Hello, this is John Leighton. Who's calling?"
"John, this is Jerry Yang. How's it going? I'm almost done with the fun. I need you to come and participate in the financing negotiations."
"Oh? Have we gotten any solid responses yet?"
"Yes. Our initial valuation has already filtered out some smaller investors and individual backers. We're down to just a few major firms."
"Perfect. We'll need these big players to push Yahoo! to the next level. Which ones are we talking about?"
"Can't really get into specifics over the phone. They're all sending reps this afternoon. The detailed negotiations start then."
"Okay, I'll be there shortly."
After hanging up, John called Zach and together they drove off toward the Yahoo! garage.
---
When John and Zach arrived at the Yahoo! garage, everyone was still busy working. John was the only one relatively free, which partly explained why he disliked coming here. Everyone else was caught up with work; standing around looking bored just made things awkward.
"Your Highness, you're here! Any wild stories or romantic encounters in Silicon Valley?" David Filo teased as he chatted with some engineers, catching sight of John and Zach entering.
"David, watch it. I'm still underage. If you keep joking like that, I might have to report you to child protection services," John shot back.
"Whoa, Your Highness! How do I keep forgetting you're only 15? Shit! I truly believe America should have a special category for prodigies among minors. People like you don't belong with regular kids, right?"
Everyone burst out laughing. It was clear that with the financing round approaching, the Yahoo! team was in high spirits.
"John, you're here," Jerry Yang greeted warmly, standing up from his seat.
He then called over David Filo and Timothy Koogle, and they all moved into a small conference room.
---
"All right, let's get down to business. Tim, walk us through the funding details so we can finalize our plan."
"Okay. We've confirmed that this afternoon's visitors include reps from Draper Fisher Jurvetson, Intel Capital, Kleiner Perkins Caufield & Byers (KPCB), IDG, Sequoia Capital, and America Online."
"Wow, all major heavyweights and capital giants," John responded with a smile.
"Yes. I believe this funding round will make history for Silicon Valley," Tim said with a sense of awe.
It was true -- internet venture capital back then rarely involved tens or hundreds of millions like it would in the future. Investments were usually in the hundreds of thousands or low millions. That Yahoo! was preparing to raise over $100 million was genuinely groundbreaking, destined to become a Silicon Valley legend.
Everyone was pleased with the lineup of investors.
...
Draper Fisher Jurvetson (DFJ) -- John wasn't too familiar with them, but in his previous life, DFJ was a frequent name behind many companies like Tesla, SpaceX, Twitter, Hotmail, and Baido.
Intel Capital -- A strategic arm of Intel, naturally commanding huge resources in the Silicon Valley ecosystem with Intel's backing.
KPCB and Sequoia Capital -- Both founded in the 1970s, known as the "twin stars" of venture capital, showcasing their enormous strength.
IDG -- The International Data Group based in Boston, with IDG Capital considered one of the largest venture capital outfits in the U.S., backed by powerful consortia. The Boston consortium behind it had seen better days but was still a force to reckon with.
America Online (AOL) -- One of the nation's largest internet service providers, with deep pockets. Those familiar with AOL's history would be stunned. AOL was a major internet player, eventually merging with Time Warner to form AOL-Time Warner, a true corporate titan. Its founders were legendary figures in American business.
Clearly, a flood of capital was eagerly eyeing Yahoo!.
...
What John didn't realize was that all this attention from the venture capital elite was largely thanks to him. The current Yahoo! model had set the benchmark across the internet.
Competitors were revamping their platforms based on Yahoo!, and in just over a month, practically the entire internet community was watching Yahoo!.
At this point, Yahoo! was much like it was in 1996 in his previous life -- pre-IPO but with a clear revenue model. That attracted huge investors.
Back then, Jerry Yang and David Filo were still confined to a small room at Stanford, until in April '95 they secured $1 million from Sequoia Capital for 25% equity and left campus.
Later in '95, Masayoshi Son invested $2 million for 5%, and by 1996 before Yahoo!'s IPO, Son offered $100 million for a 35% stake.
Yahoo!'s valuation then paled in comparison to today's offers, showing just how far the company had come.
As for profits, back then, Yahoo! hadn't really monetized until 1996, when it began to explore revenue models.
That was why Jerry and the team dared to value Yahoo! at $500 million and why big firms still wanted in.
Even though Yahoo!'s traffic wasn't yet on par with the '96 IPO period, the user base was close.
Thinking back, Yahoo!'s valuation passed $800 million on its IPO day -- now that was impressive.
...
The team quickly planned for the afternoon meeting. Jerry Yang and Tim would lead talks, Zach would provide legal support, while John and David would offer assistance. The five of them prepared to meet the venture capitalists together.
*****
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