In Through the Out Doerr  

Chapter 2 of Furboy: Inside the greatest Silicon Valley startup (3-6 months).

Our Story to Now:In Chapter 1 (click here to read it), I crossed my son’s Furby with his Game Boy and, thanks to a splash of life-giving Gatorade, I created the first intelligent computer-human interface. All I needed now was a business plan.

I started making Furboys in the living room. No one in California runs a startup out of the garage—garages are for storing boxes because we have no basements. I could buy all the Furbys and Game Boys I needed, but the cabling was a pain, requiring 10 minutes each. eToys happily sold Furbys and Game Boys to me below cost to drive traffic (figure that one out). Amazon out eToyed eToys, offering free shipping for new customers. Thanks to Critical “Does David Hayden think he’s Don King?” Path, I found a way to create new Amazon customer accounts as fast as I could create new e-mail accounts. After writing a little code, I got the whole process down to under two seconds.

But my Visa NextCard was at the limit, so it was time to talk to the venture vultures. Maybe they do have some value. I set up a breakfast with Mr. Supposedly Gets It, Tim Draper at Late for the Train. He was late, ordering muslix or something when he finally arrived. He already knew what I was doing, told me 17 times before the bowl was served how he invented viral networking at Hotmail and that I should sell 40 percent of my company to a Draper Fischer affiliate in Austin, Texas (it was their turn, apparently), for $300,000. Affiliate? Did someone say, McDonald’s? I applied for a Yahoo! Visa card instead.

A bulb finally lit. Everyone already owns a Furby or a Game Boy—Hasbro shipped 500,000 Furbys in the first week of December 1998 and about 10 million in all of 1999. Game Boy has 50 million happy users and 100 million fed-up parents. I decided to set this thing up so people could upgrade their own stuff and just buy a service off the Web.

And what a service it was. I also wrote a neat application so that if you’re out of the room and someone talks about you, the Furboy calls you up and summarizes. I caught my wife complaining about me leaving my clothes in multiple piles. Next I synchronized Furboy with Microsoft Outlook, so it knows what I am doing and when and issues appointment reminders. Because it listens to all my conversations, it knows I can’t stand Larry Ellison. So, instead of just reminding me that I have a 10 a.m. meeting at Oracle, it snidely asks me why I bother with those cultist psychopaths. Teaching Furboy cynicism was not easy, but that became its best feature.

What started as a way to impress my child suddenly took on a global reach! This was the ultimate internetworked, productivity enhancing, small form-factor, mobile personal digital sidekick.

This was going to take some real money to run. I met a friend for breakfast at Buck’s in Woodside, where it’s said that 90 percent of all venture deals are closed. My friend is a civilian—he works in the construction biz—so we mostly talked about the 49ers. But I let it drop that I had stumbled upon an artificial intelligence breakthrough. By the time I got back to the office, I had three, count ‘em three, phone messages from Steve Jurvetson, Tim Draper’s partner at Draper Fisher Jurvetson (see how I figured this one out?). I think Jurvetson paid off the guy behind the cash register, got my credit card receipt, and had one of his hacker friends do a reverse look up on my Visa number. Since I had already blown these guys off, I didn’t return the call, but it turned out that Steve was already telling people he was investing in my company, so the phone calls and e-mails really started pouring in. The fabled Stewart Alsop of NEA, Gary Reischel at Softbank, Brody and Breyer, Yang and Fong, Hoag and Baloff, Blitzen and Prancer.

One by one I started meeting with them. It is clear that the venture capital movement is a clever transfer of wealth from the public to Stuttgart or Munich via VCs, as they all drive Mercedes S classes or Beemer 750s. There must be some VC manual because they all said the same thing: Not just money—a partnership, help you build a team, long history, can I show you all our portfolio companies that have gone public, blah, blah, blech.

John Doerr kept calling. I met with the Dockers commercial at Benchmark Capital. This David Beirne (no relation to the Talking Heads guy, too bad) kept going on how he could get me a CEO. Dropped Meg Whitman’s name a couple of times. Didn’t he know we already had a world class CEO (me!). Count them out. I then met Moritz at Sequoia. I got over the Oxford accent and the “I discovered Yahoo!” thing. I had heard he insisted on Yahooey as their name, but was vetoed, so he lost his chance to fund the next Yahoo! when he told me he didn’t like the name Furboy. Gave me some alternatives but it turns out he personally overpaid for the URLs for kaboom.com, zam.com, and yabbadabbadoo.com and was looking for someone to use them.

Bill Gross from idealab! stopped by. He claimed that he thought up the Furboy idea in his sleep, but then forgot until I reminded him of it.

I met all three of Bill Gates’ ex-girlfriends who now pretend to be venture capitalists. Each one told me they are desperate to fund the next Microsoft. Desperate indeed.

Garage.com looked like a reasonable option for raising money. Use the Internet to fund the Internet. Met with some guy, actually I think his name was Guy. He said he had years of experience marketing useless toys, since he was the Apple Mac evangelist. I forgave him for the slip, but when he not so subtly boasted that Garage.com would be worth more than all the companies they actually funded, I moved on.

Roger McNamee wrote a guitar solo, which he then auditioned for me and claimed was somehow about me. He’s got a record contract, working for the MCA or someone. He just gets it a little too much.

The folks at Gatorade, whose sales went up 72 percent, sent me a sideline pass to every NFL game so I could dump icy liquid on the coach of my choice. They wanted to invest, but I was considering making my own Furboy branded sport drink. I tried with sugar, salt, and red dye No. 2 but gave up.

I ended up taking $5 million for 5 percent of the company from a guy named Meriwether at Long-Term Capital. He was from far away and wouldn’t bother me, I liked his long-term focus (hence the name, right?), and he had some unique way to hedge his investment with baht futures or some such thing.

The money went into development and not even all that much of it. I published the specs and our source code on one of the Linux message boards, and sure enough, these open source guys spat out new RCs (release candidates) on an almost hourly basis. Did I spend anything on advertising? Are you kidding? Who needs to build a brand when you are the love child of the two biggest consumer brands? And I didn’t need anyone else’s permission, Fur and Boy are rather common words, so Furboy (copyright, trademark, patent pending) was mine, all mine.

Though completely exhausted by six months of being an entrepreneur, I was ready for anything. Success, and I mean really big success, was in my sights.

Next Wednesday at 10 a.m.

Chapter 3: Furboy Scales to New Heights

Putting an IP leash on Furboy … taking calls from Eisner and Diller and Allen and Murdoch … Explosive rumors!