The Hard Thing About Hard Things, page 2
To make matters more complicated, my second daughter, Mariah, had been diagnosed with autism, which made working at a startup a terrible burden for our family, as I needed to spend more time at home.
One very hot day my father came over for a visit. We could not afford air-conditioning, and all three children were crying as my father and I sat there sweating in the 105-degree heat.
My father turned to me and said, “Son, do you know what’s cheap?”
Since I had absolutely no idea what he was talking about, I replied, “No, what?”
“Flowers. Flowers are really cheap. But do you know what’s expensive?” he asked.
Again, I replied, “No, what?”
He said, “Divorce.”
Something about that joke, which was not really a joke, made me realize that I had run out of time. Up until that point, I had not really made any serious choices. I felt like I had unlimited bandwidth and could do everything in life that I wanted to do simultaneously. But his joke made it suddenly clear that by continuing on the course I was on, I might lose my family. By doing everything, I would fail at the most important thing. It was the first time that I forced myself to look at the world through priorities that were not purely my own. I thought that I could pursue my career, all my interests, and build my family. More important, I always thought about myself first. When you are part of a family or part of a group, that kind of thinking can get you into trouble, and I was in deep trouble. In my mind, I was confident that I was a good person and not selfish, but my actions said otherwise. I had to stop being a boy and become a man. I had to put first things first. I had to consider the people who I cared about most before considering myself.
I decided to quit NetLabs the next day. I found a job at Lotus Development that would allow me to get my home life straightened out. I stopped thinking about myself and focused on what was best for my family. I started being the person that I wanted to be.
NETSCAPE
One day while working at Lotus, one of my coworkers showed me a new product called Mosaic, which was developed by some students at the University of Illinois. Mosaic was essentially a graphical interface to the Internet—a technology formerly only used by scientists and researchers. It amazed me. It was so obviously the future, and I was so obviously wasting my time working on anything but the Internet.
Several months later, I read about a company called Netscape, which had been cofounded by former Silicon Graphics founder Jim Clark and Mosaic inventor Marc Andreessen. I instantly decided that I should interview for a job there. I called a friend who worked at Netscape and asked if he could get me an interview with the company. He obliged and I was on my way.
During the first interviews, I met everyone on the product management team. I thought the meetings went well, but when I arrived home that evening Felicia was in tears. The Netscape recruiter had called me to give me some tips, and Felicia had answered. (This was before the days of pervasive cell phones.) The recruiter informed her that it would be unlikely I’d get the job, because the group was looking for candidates with Stanford or Harvard MBAs. Felicia suggested that maybe I could go back to school. Given that we had three children, she knew this was unrealistic, hence the tears. I explained that recruiters were not hiring managers, and that they might consider me despite my lack of proper business schooling.
The next day the hiring manager called back to let me know that they wanted me to interview with cofounder and Chief Technical Officer Marc Andreessen. He was twenty-two years old at the time.
In retrospect, it’s easy to think both the Web browser and the Internet were inevitable, but without Marc’s work, it is likely that we would be living in a very different world. At the time most people believed only scientists and researchers would use the Internet. The Internet was thought to be too arcane, insecure, and slow to meet real business needs. Even after the introduction of Mosaic, the world’s first browser, almost nobody thought the Internet would be significant beyond the scientific community—least of all the most important technology industry leaders, who were busy building proprietary alternatives. The overwhelming favorites to dominate the race to become the so-called Information Superhighway were competing proprietary technologies from industry powerhouses such as Oracle and Microsoft. Their stories captured the imagination of the business press. This was not so illogical, since most companies didn’t even run TCP/IP (the software foundation for the Internet)—they ran proprietary networking protocols such as AppleTalk, NetBIOS, and SNA. As late as November 1995, Bill Gates wrote a book titled The Road Ahead, in which he predicted that the Information Superhighway—a network connecting all businesses and consumers in a world of frictionless commerce—would be the logical successor to the Internet and would rule the future. Gates later went back and changed references from the Information Superhighway to the Internet, but that was not his original vision.
The implications of this proprietary vision were not good for business or for consumers. In the minds of visionaries like Bill Gates and Larry Ellison, the corporations that owned the Information Superhighway would tax every transaction by charging a “vigorish,” as Microsoft’s then–chief technology officer, Nathan Myhrvold, referred to it.
It’s difficult to overstate the momentum that the proprietary Information Superhighway carried. After Mosaic, even Marc and his cofounder, Jim Clark, originally planned a business for video distribution to run on top of the proprietary Information Superhighway, not the Internet. It wasn’t until deep into the planning process that they decided that by improving the browser to make it secure, more functional, and easier to use, they could make the Internet the network of the future. And that became the mission of Netscape—a mission that they would gloriously accomplish.
Interviewing with Marc was like no other job interview I’d ever had. Gone were questions about my résumé, my career progression, and my work habits. He replaced them with a dizzying inquiry into the history of email, collaboration software, and what the future might hold. I was an expert in the topic, because I’d spent the last several years working on the leading products in the category, but I was shocked by how much a twenty-two-year-old kid knew about the history of the computer business. I’d met many really smart young people in my career, but never a young technology historian. Marc’s intellect and instincts took me aback, but beyond Marc’s historical knowledge, his insights about technologies such as replication were incisive and on point. After the interview, I phoned my brother and told him that I’d just interviewed with Marc Andreessen, and I thought that he might be the smartest person I’d ever met.
A week later, I got the job. I was thrilled. I didn’t really care what the offer was. I knew that Marc and Netscape would change the world, and I wanted to be part of it. I could not wait to get started.
Once at Netscape, I was put in charge of their Enterprise Web Server product line. The line consisted of two products: the regular Web server, which listed for $1,200, and the secure Web server (a Web server that included the then brand-new security protocol invented by Netscape called SSL, Secure Sockets Layer) for $5,000. At the time that I joined, we had two engineers working on the Web servers: Rob McCool, who had invented the NCSA Web server, and his twin brother, Mike McCool.
By the time Netscape went public in August 1995, we had grown the Web server team to about nine engineers. The Netscape initial public offering (IPO) was both spectacular and historic. The stock initially priced at $14 per share, but a last-minute decision doubled the initial offering to $28 per share. It spiked to $75—nearly a record for a first-day gain—and closed at $58, giving Netscape a market value of nearly $3 billion on the day of the IPO. More than that, the IPO was an earthquake in the business world. As my friend and investment banker Frank Quattrone said at the time, “No one wanted to tell their grandchildren that they missed out on this one.”
The deal changed everything. Microsoft had been in business for more than a decade before its IPO; we’d been alive for sixteen months. Companies began to get defined as “new economy” or as “old economy.” And the new economy was winning. The New York Times called the Netscape IPO “world-shaking.”
But there was a crack in our armor: Microsoft announced that it would be bundling its browser, Internet Explorer, with its upcoming breakthrough operating system release, Windows 95—for free. This posed a huge problem to Netscape, because nearly all of our revenue came from browser sales, and Microsoft controlled more than 90 percent of operating systems. Our answer to investors: We would make our money on Web servers.
Two months later, we got our hands on an early release of Microsoft’s upcoming Web server Internet Information Server (IIS). We deconstructed IIS and found that it had every feature that we had—including the security in our high-end product—and was five times faster. Uh-oh. I figured that we had about five months before Microsoft released IIS to solve the problem or else we would be toast. In the “old economy,” product cycles typically took eighteen months to complete, so this was an exceptionally short time frame even in the “new economy.” So I went to see our department head, Mike Homer.
With the possible exception of Marc, Mike Homer was the most significant creative force behind Netscape. More important, the worse a situation became, the stronger Mike would get. During particularly brutal competitive attacks, most executives would run from the press. Mike, on the other hand, was always front and center. When Microsoft unveiled its famous “embrace and extend” strategy—a dramatic pivot to attack Netscape—Mike took every phone call, sometimes even talking to two reporters at once with a phone in each hand. He was the ultimate warrior.
Mike and I spent the next several months developing a comprehensive answer to Microsoft’s threat. If they were going to give our products away, then we were going to offer a dirt-cheap, open alternative to the highly expensive and proprietary Microsoft BackOffice product line. To do so, we acquired two companies, which provided us with a competitive alternative to Microsoft Exchange. We then cut a landmark deal with the database company Informix to provide us unlimited relational database access through the Web for $50 a copy, which was literally hundreds of times less than Microsoft charged. Once we assembled the entire package, Mike named it Netscape SuiteSpot, as it would be the “suite” that displaced Microsoft’s BackOffice. We lined everything up for a major launch on March 5, 1996, in New York.
Then, just two weeks before the launch, Marc, without telling Mike or me, revealed the entire strategy to the publication Computer Reseller News. I was livid. I immediately sent him a short email:
To: Marc Andreessen
Cc: Mike Homer
From: Ben Horowitz
Subject : Launch
I guess we’re not going to wait until the 5th to launch the strategy.
— Ben
Within fifteen minutes, I received the following reply.
To: Ben Horowitz
Cc: Mike Homer, Jim Barksdale (CEO), Jim Clark (Chairman)
From: Marc Andreessen
Subject: Re: Launch
Apparently you do not understand how serious the situation is. We are getting killed killed killed out there. Our current product is radically worse than the competition. We’ve had nothing to say for months. As a result, we’ve lost over $3B in market capitalization. We are now in danger of losing the entire company and it’s all server product management’s fault.
Next time do the fucking interview yourself.
Fuck you,
Marc
I received this email the same day that Marc appeared barefoot and sitting on a throne on the cover of Time magazine. When I first saw the cover, I felt thrilled. I had never met anyone in my life who had been on the cover of Time. Then I felt sick. I brought both the magazine and the email home to Felicia to get a second opinion. I was very worried. I was twenty-nine years old, had a wife and three children, and needed my job. She looked at the email and the magazine cover and said, “You need to start looking for a job right away.”
In the end, I didn’t get fired and over the next two years, SuiteSpot grew from nothing to a $400 million a year business. More shocking, Marc and I eventually became friends; we’ve been friends and business partners ever since.
People often ask me how we’ve managed to work effectively across three companies over eighteen years. Most business relationships either become too tense to tolerate or not tense enough to be productive after a while. Either people challenge each other to the point where they don’t like each other or they become complacent about each other’s feedback and no longer benefit from the relationship. With Marc and me, even after eighteen years, he upsets me almost every day by finding something wrong in my thinking, and I do the same for him. It works.
STARTING A COMPANY
At the end of 1998 and under immense pressure from Microsoft, which used the full force of its operating system monopoly to subsidize free products in every category in which Netscape competed, we sold the company to America Online (AOL). In the short term, this was a big victory for Microsoft since it had driven its biggest threat into the arms of a far less threatening competitor. In the long term, however, Netscape inflicted irreparable damage on Microsoft’s stronghold on the computing industry: our work moved developers from Win32 API, Microsoft’s proprietary platform, to the Internet. Someone writing new functionality for computers no longer wrote for Microsoft’s proprietary platform. Instead, they wrote to the Internet and World Wide Web’s standard interfaces. Once Microsoft lost its grip on developers, it became only a matter of time before it lost its monopoly on operating systems. Along the way, Netscape invented many of the foundational technologies of the modern Internet, including JavaScript, SSL, and cookies.
Once inside AOL, I was assigned to run the e-commerce platform and Marc became the chief technology officer. After a few months, it became apparent to both of us that AOL saw itself as more of a media company than a technology company. Technology enabled great new media projects, but the strategy was a media strategy and the top executive, Bob Pittman, was a genius media executive. Media companies focused on things like creating great stories whereas technology companies focused on creating a better way of doing things. We began to think about new ideas and about forming a new company.
In the process, we added two other potential cofounders to the discussion. Dr. Timothy Howes was coinventor of the Lightweight Directory Access Protocol (LDAP), a masterful simplification of its byzantine X.500 predecessor. We hired Tim into Netscape in 1996 and together we successfully made LDAP the Internet directory standard. To this day, if a program is interested in information about a person, it accesses that information via LDAP. The fourth member of our team was In Sik Rhee, who had cofounded an application server company called Kiva Systems, which Netscape had acquired. He had been acting as CTO of the e-commerce division that I ran and, in particular, worked closely with the partner companies in making sure that they could handle the AOL scale.
As we discussed ideas, In Sik complained that every time we tried to connect an AOL partner on the AOL e-commerce platform, the partner’s site would crash, because it couldn’t handle the traffic load. Deploying software to scale to millions of users was totally different from making it work for thousands. And it was extremely complicated.
Hmm, there ought to be a company that does all that for them.
As we expanded the idea, we landed on the concept of a computing cloud. The term cloud had been used previously in the telecommunications industry to describe the smart cloud that handled all the complexity of routing, billing, and the like, so that one could plug a dumb device into the smart cloud and get all the smart functionality for free. We thought the same concept was needed in computing, so that software developers wouldn’t have to worry about security, scaling, and disaster recovery. And if you are going to build a cloud, it should be big and loud, and that’s how Loudcloud was born. Interestingly, the most lasting remnant of Loudcloud is the name itself, as the word cloud hadn’t been previously used to describe a computing platform.
We incorporated the company and set out to raise money. It was 1999.
— CHAPTER 2 —
“I WILL SURVIVE”
“Did you think I’d crumble?
Did you think I’d lay down and die?
Oh no, not I
I will survive.”
—GLORIA GAYNOR, “I WILL SURVIVE”
Coming off the success of Netscape, Marc knew all the top venture capitalists in Silicon Valley, so we needed no introductions. Unfortunately for us, Kleiner Perkins, the firm that backed Netscape, had already funded a potentially competitive company. We spoke to all the other top-tier firms and decided to go with Andy Rachleff of Benchmark Capital.
If I had to describe Andy with one word, it would be gentleman. Smart, refined, and gracious, Andy was a brilliant abstract thinker who could encapsulate complex strategies into pithy sentences with ease. Benchmark would invest $15 million at a pre-money valuation (the value of the company before the cash goes into the company treasury) of $45 million. In addition, Marc would invest $6 million, bringing the total value of the company including its cash to $66 million, and would serve as our “full-time chairman of the board.” Tim Howes would be our chief technology officer. I would be CEO. Loudcloud was two months old.
The valuation and the size of the funding were signs of the times and created an imperative to get big and capture the market before similarly well-funded competitors could. Andy said to me, “Ben, think about how you might run the business if capital were free.”
