eBoys: The First Inside Account of Venture Capitalists at Work by Randall E. Stross

Author:Randall E. Stross [Stross, Randall E.]
Language: eng
Format: mobi, epub
Publisher: The Crown Publishing Group
Published: 2001-02-28T14:00:00+00:00

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Kevin Harvey briefed Rob Shaw on what his partners had said. Some of them, he said without mentioning names, had initially been concerned about the fact that Newwatch carried inventory, but Harvey thought they now understood why it was necessary. EBay, the blockbuster e-business that lacked inventory, had set impossible expectations for all e-commerce deals that followed.

Harvey also said—and this was hard—some partners did not think Whitcomb was fully up to the job of CEO. Shaw swallowed. It sounded to Shaw as if his old comrade in arms was saying, “Rob, if this was being brought to me by the president of Rolex North America, we’d love it. But because it’s being brought to me by you and James, we’re not sure we like it.” His friendship with Harvey had always been based on what Shaw called, with pride, “sincere straight shooting,” and so, as painful as it was to hear, it was what your best friend needed to say, delivering the hard news straight up.

Harvey also prepared Shaw for the contract negotiations ahead, if the partners voted to approve an investment. The negotiations were going to be the most awkward thing the two of us have ever been through together, Harvey said. We’re going to have to negotiate the value of the company, equity, composition of the management team, the terms. We’ll have just as plain-vanilla a contract as we can, Harvey said, cutting everything down the middle, disproportionately beneficial neither to Benchmark nor to Newwatch. Harvey would offer the fairest valuation he could determine, and they’d negotiate from there.

When Rob Shaw hung up the phone, he had already decided that there would be no negotiation about the valuation. But he worried that his partner would blow up the future talks with Benchmark. James Whitcomb thought Newwatch’s valuation was already $100 million.

“Kevin will offer us a fair value. We’re going to take his value regardless of what it is,” Shaw told Whitcomb.

“What if it’s only a million dollars?”

“If it’s a million dollars, we’re going to take a million dollars. We’re going to take his offer.”

“He’s going to start low and expect us to negotiate up.”

“You don’t understand the relationship here. The relationship is not based on playing bullshit games.” Shaw believed Kevin Harvey always did the right thing. When Styleware was sold, even though Shaw formally had not owned equity in the company, as soon as the deal was closed, Harvey paid him for the stake Harvey had orally promised him. In discussing the negotiations with Whitcomb, Shaw was unbudgeable: “The relationship is based on what is fair. He’s not going to be willing to go up or down.” After considerable arguing, Whitcomb gave in; the two agreed to take whatever the offer was.

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