The only way to get involved in the internet in '95, that I could think of, was to start a company. There weren't a lot of companies to go and work for, apart from Netscape maybe one or two others, and I couldn't get a job at any of them.
What I first started to do, was I tried to get a job at Netscape at the time, but they didn't respond to me, I didn't get any reply. I guess because I didn't have a computer science degree or several years working at a software company. I mean I had a physics and economics degree, or physics and business degree from Wharton, and I was doing grad studies applied physics and materials science. For whatever reason, I didn't get a reply from Netscape. I actually tried hanging out in the lobby, but I was too shy to talk to anyone, so I'm just like standing in the lobby, it was pretty embarrassing. I was just sort of standing there trying to see if there was someone I can talk to but I just couldn’t, I was too scared to talk to anyone, so then I left.
I was writing software during that summer, and trying to make useful things happen on the internet. I wanted to be part of putting a small brick in the construction of that edifice. It wasn't really with the thought of being wealthy. I got nothing against being wealthy, but it was from a standpoint of wanting to be a part of the Internet.
It really seemed like things were going to take off, although nobody had made any money in Internet at the time. Really, no-one was making any money on the Internet. It wasn't at all clear that the Internet was going to be a big commercial thing.
I thought I guess I'm going to start a company, because I can't get a job anywhere.
I figured if we could make enough money to just get by that would be OK. Initially it was just about making money to pay the rent. Really my perspective was hopefully I can make enough money to pay the rent and buy food otherwise I would have to do my graduate program at Stanford. In America it is pretty easy to keep yourself alive, and my threshold for existing is pretty low, I figured I could be in some dingy apartment with my computer and be OK and not starve.
My brother was in Canada at the time and I said: "look I think we should try to create an Internet company" I always wanted to do something with my brother, and he always wanted to do something with me. I think Kimball is one of the nicest people I know in the world I've never in all my life see Kimball intentionally do a mean thing, so I admire him a great deal. I convinced my brother to come down from Canada, so he came down and joined me.
The Internet was also helpful because anything that has to do with software is a low capital endeavor. Software you can just write yourself. You don't need a lot of tools and equipment, so it's not capital intensive. The ability to build a company that’s software related it's much much easier. I didn't have any money. I just had a bunch of student debt. I had about $3000 and a computer, and then my brother came and joined and he had about I think $5000, and then Greg Kouri, a friend of my Mom's, came and he had $6000.
The three of us created Zip2 in the summer of 95 before Netscape had gone public.
Funny name, we thought, we don't know anything about names, so we'll get some ad agencies to suggest a bunch of options, and then Zip2 seemed kind of speedy. I don't know why the hell we chose that stupid name, and it has a digit in it. Why would you chose - it could be ZipTo, it could be ZipTwo, it could be ZipToo, so people literally spelt the name every variation - which is bad if you've got a url and you don't have the other ones. We were just incredibly stupid at the time, I think. That's the main reason for that name.
Things were pretty tough in the early going. I didn't have any money. In fact, I had negative money. I had huge student debts. I though we got to make something that's going to return money very, very quickly. There was no advertising revenue on the Internet at the time. The initial idea was to create software that could help bring the media companies online, we thought that the media industry would need help converting its content from a print media to electronic. They clearly have money, so if we could find a way to help them move their media to the internet that would be an obvious way of generating revenue. That was really the basis of Zip2.
I still had my core programming skills, so I was able to write the software needed.
In the beginning we didn't have enough money to rent an apartment and an office. The office was actually cheaper, and we thought it was probably more impressive to have an office instead of let people come to an apartment. We just got a small office in Palo Alto back when rent was not insane, it cost us like $450 a month. We slept in the office, my brother and I just got 2 futons that turned into couches during the day, with a little table, and we would have our meetings there. It would be unbeknown to the people that we slept on those. I sort of briefly had a girlfriend in that period and in order to be with me, she had to also sleep in the office. At night we would just sleep on the futon in the office and then we would walk over to the YMCA on Page Mill and El Camino to shower. You could work out as well, so I was in the best shape I've ever been. Just shower and work out and you're good to go. It's really difficult to get food in Palo Alto after 10 p.m. There was Jack in the Box and a few other options so we rotated through the Jack in the Box menu.
At the very beginning we were so hard up that we had just one computer. It would be our Web server during the day, and I would code at night. The website only worked during the day, because at night I was programming software. Seven days a week, all the time. There was an ISP on the floor below us, just like a little tiny ISP, and we drilled a hole through the floor and connected to the main cable. That gave us our internet connectivity for like a hundred bucks a month.
There were, basically, only six of us. There were myself, my brother, and Greg, and then three sales people we hired on contingency by putting an ad in a newspaper. Zip2 started off as, basically, like I said, trying to figure out how to make enough money to exist as a company, since there wasn't really any advertising money being made. In fact, the idea of advertising on the internet seemed like a ridiculous idea to people. Obviously, not so ridiculous anymore, but, at the time, it seemed like a very unlikely proposition.
We thought we could help existing companies bring their stuff online. I wrote something that allowed you to keep maps and directions on the Internet and something that allowed you to do online manipulation of content; kind of a really advanced blogging system. We started talking to small newspapers and media companies and so forth, and we started getting some interest. I mean, half of the time it'd be like: ”What’s the internet?” even in Silicon Valley.In fact, most of the venture capitalists that I talked to hadn't even heard of the internet, which sounds bizarre, on Sand Hill Road. Amazingly, when we tried to get funding for a company in, I think it was, October/November of '95, more than half of the venture capitalists did not know what the Internet was and had not used it. Yeah, they'd literally ask, isn't that something that the government and universities use? and I'd be like, uhh, for now. Most people thought that the Internet was going to be a fad. Since there weren't that many people on the Internet it wasn't very clear that there was a business, and even if the Internet became widespread nobody could make any money on it.
Occasionally, somebody would buy it and we would get a little bit of money from them. A lot of the media companies weren't even sure that they should be online, like, what's the point of that? a lot of them just didn't know what the Internet was, and even the ones that were aware of the Internet didn't have a software team, so they weren't very good at developing functionality.
Then Netscape went public in late 1995, I think it was, that changed peoples mindset a little bit. After that even a lot of venture capitalists still didn't understand it, and still hadn't used it, but somebody had made money on it, so the second time we went to get funding, everyone was interested. Even if just from the standpoint of the greater fools theory, even if those Internet companies can't make any money at least some fool is willing to pay a lot if they go public, so that got things more interested. Whether or not they knew what the Internet was they knew you could make money on the Internet somehow. When we went and talked to venture capitalists in early 96 there was a much greater interest in what we were doing. In fact the round closed in maybe about a week or so. We had just an absurdly tiny burn rate, and we also had a really tiny revenue stream, but we actually had more revenue than we had expenses. When we went and talked to VC’s we could actually say we had positive cash flow. That helps, I think.
I reluctantly started off being the CEO, not my preference actually. I think of myself more like an engineer who in order to invent the things that I want to invent and create I have to do the company as well. I was CEO for probably the first year and then after we got VC funding, the venture capitalists wanted to hire a professional CEO. At the time I thought it was a good idea, because I didn't really know what I was doing, and I figured they would hire someone who is really good and that person would increase the chances of the success of the company. That seemed like a good thing and then I could work on software and kinda product direction and that's what I like doing, so that seemed like a great thing. In retrospect I think that wasn't the best thing. The person that was hired, in my opinion, was actually not that great. I think, quite frankly, the company succeeded in spite of that person, not because of him.
Essentially Zip2 helped bring the media companies online in the early days.
We had as investors and customers: The New York Times Company, Knight Ridder, Hearst Corporation, and most of the major US print publishers. We helped, in a small way to bring those companies online. They weren't always online, people don't realize that.We ended up building quite a bit of software for the media industry; primarily, the print media industry. We were able to get them to pay us to develop software for them to bring them online, publishing stuff. It did a bunch of things it was Internet publishing, mapping, yellow Pages, white pages, calendar and various other things. We developed quite sophisticated technology actually, but it wasn't being employed super well by the media companies. We would suggest ways to use it and then it would not be used as effectively as it could be. It was very frustrating.
We build that up and then we had the opportunity to sell to Compaq in early '99. The deal was struck sort of late 98, and concluded it early 99.
Compaq had Altavista, so their thought was to combine Altavista and a bunch of other technology companies and see if that would work, which it did not. Nonetheless they were pretty nice guys and bought the company.
Zip2 was acquired by Compaq for a little over $300 million dollars in cash. That's the currency I highly recommend. I thought that was crazy why would somebody pay such a huge amount of money for this little company that we have. It actually turned out really well for them so they knew a lot more about it than I did. I made about $20-$22 million as a result of that, which was a phenomenal amount of money for me.
In fact they mailed the check, they send a check in the mail, that was kind of crazy.