The $10 million Photo and other VC Stories

While on vacation I had a phone interview with Kevin Ohannessian of Fast Company who wanted a few “funding stories.”  Here are two of them. Apologies for the rambling stream of consciousness.  The original interview in Fast Company can be seen here.

Throw in the Photo and You Have a Deal
When we were trying to raise money for E.piphany, my last startup, I was negotiating with a venture capital firm called Infinity Capital. They really wanted to invest, but it was the beginning of the bubble, and I wanted (what was then) an absurd valuation. All we had were six slides, and I wanted a $10 million post-money valuation. But it was my eighth startup and my partner Ben was even more experienced: ex VC, ex Harvard Computer Science professor, genius at building products and teams. I had sat on a board of an Electronic Design Automation company with this VC, and we had gotten to know each other. So when I wanted to start a company he wanted to fund us. We had gone back and forth with them on valuation, but this was a new firm and they wanted to close a deal with us.

After about our fifth meeting I’m in their conference room. I say, “Why can’t you guys do a $10 million post money valuation?” Picking the biggest number I could think of for three founders without a product a semi-coherent idea and badly written slides. Finally they admitted, “Steve, we’re a new fund; everybody will think we are idiots if we do that.” I said, “All right. Can you do some other number close to my number?” So I stepped out of the room as they caucused, and they called me back in 10 minutes later and said, “So listen. We can do $9.99 million.” I’m trying to play poker with the deal, and one of the partners at the time was a great photographer–the firm had big prints of his on the walls. I was really in love with the one in the boardroom. So without thinking, when they made me that offer, trying to keep a straight face, I reached behind me, grabbed the photo off the wall and slammed it on the desk, and said, “If you throw this photo in, you got the deal!”

The $10 Million Photo

The look on their face was utter astonishment. I was thinking it was because I was being creative by throwing the photo in, but then I noticed that this cloud of dust was settling around me. I turn around and looked at the wall and it turned out the photo had been bolted into the drywall. And there was now a hole–I literally ripped a part of their boardroom wall off as I was accepting the offer. Without missing a beat they said, “Yes, you can have the photo. But we’re going to have to deduct $500 to repair our wall.” And I said, “Deal.” And that’s how E.piphany got its Series A.

Invest in the Team
Before we closed our Series A with Infinity, I had called on Mohr, Davidow Ventures, the firm which had funded my last company, Rocket Science. The senior partner at the time was Bill Davidow, a marketing legend and a hero of mine who had also funded other Enterprise software companies. I went in and pitched Bill the idea about how to automate the marketing domain. He gave me 15 minutes, then as politely as he could do it, walked me out the door and said, “Stupidest idea I ever heard, Steve. Enterprise software means across the Enterprise. Marketing is just one very small department.” As he was walking me out, I remember as I physically crossed the threshold of the door that: A. He was right, and B. I figured out how to solve the problem of making our product useful across the entire enterprise. So E.piphany went from a bad idea to a good idea by being thrown out by a VC who gave me advice that made the company. He has reminded me since, “Sometimes you invest in the idea, but you should always be investing in the people. If I would’ve remembered who you were, I would’ve known you would figure it out.”

(Kleiner Perkins would do the Series B round for E.piphany. After our IPO Infinity’s and Kleiner Perkins’ investment in Epiphany would be worth $1 billion dollars to each of them.)

I still have the photo.

Back from vacation soon.
Listen to the post here: Download the Podcast here

12 Responses

  1. […] Blank has a very funny story posted on his blog, about when he was raising a round of money for E.piphany from Infinity Capital. He wanted a $10MM […]

  2. Wow, Steve, awesome story. Just wondering though; What was your rationale, if any, behind taking the photo off the wall? What was the investors rationale for bidding 9.99 Million? Was it to get the psychological upper-hand? Thanks!

    • 1. I really liked the picture. Something so familiar in a state of decrepitude. Sort of defined “faded elegance” of a familiar object.

      2. I had made an issue over not going to accept anything less than a $10M valuation. They were essentially a “no name” firm whose contributions to our success were then unknown. We had offers from other VC’s at half the valuation.

      At this stage of the company my partner and I figured the calculus was about ownership. (We thought we were experienced enough to get to the Series B round without needing the rolodex a world-class VC would bring.)

      It turned out even better than we thought. Infinity had a great rolodex. They were the ones who connected us to Schwab – who turned into an important early customer.

      Kleiner Perkins did our Series B and John Doerr delivered on what we thought we needed; a “brand-name big-company CEO” who could take us from $100 million to $1 billion and looked good on an IPO roadshow. The dot-com crash ended that fantasy.

  3. Steve – That is an awesome photo. Will remember that technique next time we’re getting squeezed on valuation. 🙂

  4. I’m surprised they only charged you $500 to repair the wall.

    Great stories.

  5. Hilarious post. Might be a rookie Question – but why do you seek out what you call an “absurdly” high amount as investment? Can’t you seek out a more reasonable number with some rationale of how much it’s going to take before you are sustainable? Maybe the more you get the safer play it is for you? Is “more” always better from the founders point of view?

  6. Will put this picture on the wall of my office 🙂

  7. I’m curious. How did you make it an enterprise solution as opposed to just marketing?

    • We came up with what would eventually become CRM (Customer Relationship Management.)
      Siebel did a much better job in articulating and executing the space


  8. I love the fact that the photo was of a gas pump…

    the one place 99 9/10 has great meaning! (= $9.99M)

  9. That photo story has to be one of the best I’ve ever heard. Awesomeness.

  10. Hi Steve! I’m an entrepreneur and student here over the summer at Stanford (E145) on a scholarship from Stockholm, Sweden. Also doing a master at the Royal Institute of Technology. I have heard a lot of good things about you, both from Stanford, and from Aalto Venture Garage in Finland! On my bucket list here in Silicon Valley is to get a chance to listen to one of your talks or get the chance to meet you. Will you have any talks around the area before the 14th of August? Would be fantastic!

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