12

Speechless

Both Goldman Sachs and Morgan Stanley were excited to visit Pixar’s offices in Point Richmond. These would be show-and-tell meetings. No discussion of risks; just a tour of Pixar—their first chance to peek under the covers. We scheduled the meetings soon after the initial gatherings with Quattrone and Martin.

It was almost impossible for anyone to visit Pixar without coming away completely mesmerized. The rundown and humble nature of our offices, across the street from the oil refinery, belied the artistic wizardry within, turning any visit into a feast of surprises. We made certain to put our best foot forward with the two investment banks. First to visit was Quattrone from Morgan Stanley. He brought along a couple of the junior bankers from his office.

We began with a short talk in the conference room near Ed’s and my offices, a small, windowless space with a conference table in the middle and a whiteboard at one end, near the door. Steve, Ed, and I were present for this meeting. Steve began with a quick overview of Pixar’s history, an update on Toy Story’s production, and our vision for the company.

“Now we’d love to give you a tour,” Steve wrapped up.

“Great,” Quattrone responded. “Just what we’ve been looking forward to.”

We began in a nearby office where there were two engineers working on 3-D exoskeleton models for Pixar’s next film, A Bug’s Life. The office was unremarkable, like any you might see in Silicon Valley, although you wouldn’t often find engineers working on digital models of bug shells.

Then we meandered past a hallway where Quattrone and his team got their first glimpse of something film related. It was a small room with a large, high table in the middle and a shelf around the sides. On the table and shelf were clay models of Toy Story’s characters. These models, usually about a foot high, were used to develop film characters, and eventually to help digitize them into 3-D computer models.

“Wow!” Quattrone marveled. “These are exquisite. So this is how you first develop the look of a character?”

“Yes,” Ed explained. “It is the first time we see them in 3-D. These are the models we use to build the computerized versions you’ll see soon.”

“They’re extraordinary,” Quattrone said. “They belong in a museum!”

We were off to a good start, and we were just warming up.

Then we visited the group who created the artistic renderings of the film’s scenes and backgrounds—explorations of color, lighting, mood, and style. There, we showed off the renderings of different scenes in Toy Story: Andy’s room, the final chase sequence, the aliens in the vending machine.

“This is incredible,” Quattrone said. “I had no idea this level of artistry was happening here.”

Next up was the storyboard room where we wandered through the thousands of white cards that depicted every detail of the film. Quattrone could hardly believe that we’d have to draw around twenty-five thousand of them before a film’s story was finalized.

Then we walked over to the animators’ area that had so impressed me when I first visited. We had arranged a visit with one of the animators who demonstrated the painstaking process of bringing the characters to life on their large computer monitors, one tiny movement at a time, all perfectly timed to the film’s dialogue track.

For the grand finale, we took Quattrone and his team to the screening room where they laughed at the goofiness of the old couches and then sat down for a screening. We showed them Pixar’s short films and a segment from the beginning of Toy Story, just as I had seen when I first came to Pixar.

“What do you think?” Steve asked Quattrone when it was over.

“I’m speechless,” Quattrone said. “Really. I had no idea what was going on here. This is truly amazing. You have to see it to really get it. We’d have to make sure investors can somehow see this too.”

A very good sign.

A few days later, Eff Martin from Goldman Sachs visited. We took him through the same experience.

“This is fantastic!” Martin beamed at the end of the screening. “I love that this is happening right here, away from Hollywood. It is so exciting. Thank you for showing us. I want to get my Hollywood counterparts involved.”

Those were the magic words we wanted to hear. The next step with both Goldman Sachs and Morgan Stanley was to speak to their industry experts in Hollywood. That’s where we would get down to the nitty-gritty of Pixar’s business.

These visits had gone so well I was beginning to think maybe Steve was right. Perhaps both Goldman Sachs and Morgan Stanley would be so enthusiastic about wanting to be part of Pixar’s IPO that they would do it together. That would be an incredible coup, almost unprecedented in the start-up world. If we had to choose between them, though, I wasn’t sure which way we would go.

“What do you think?” I asked Steve. “Any preference?”

“I’m torn,” said Steve. “I like Frank Quattrone, and he’s done a lot of important deals. Eff is also great.”

“My thoughts too,” I said. “I also want to meet their entertainment industry experts. That might sway us.”

I looked forward to that opportunity.

We heard from Martin of Goldman Sachs first. A few days after the visit to Pixar he called Steve and asked to meet us at Steve’s offices at NeXT. I stopped by there on my way up to Pixar, and we met in a conference room.

“I talked to my Hollywood counterparts,” Martin said. “We love Pixar. It’s a fantastic story, really fantastic, and we want to be part of it.”

This is exactly what we wanted to hear.

“Our concern is the timing,” Martin went on. “The length of the Disney contract injects a lot of uncertainty about when you’ll be able to earn more of the profits from your films. We’re thinking it would be better to wait until there is more visibility into increasing your profits, and then take it public. That would give you a much better chance. How does that sound to you?”

It sounded terrible. Goldman Sachs didn’t want to take the risk that it might take years until Disney would renegotiate or until we could talk to other studios. But we needed to raise capital in anticipation of that renegotiation. This was a thinly veiled “no.” Steve was shocked.

“I don’t think you get it at all,” he protested. “We can’t wait that long.”

“I hear your frustration,” Martin tried to empathize, “but right now there’s just too much risk. We think it’s better to wait.”

After Martin left, Steve seemed dumbfounded.

“They just didn’t get it,” was all he had to say.

But it was okay. We needed only one lead investment bank. Morgan Stanley had taken Apple public and perhaps it was fitting that they do another Steve Jobs IPO. Quattrone had promised to get back to Steve quickly, and it was just a couple more days before he did. But he didn’t ask for a meeting, as Martin had done. He just picked up the phone and called. Steve contacted me right away with the news.

“I spoke to Frank Quattrone,” he started.

“Great!” I said. “What are the next steps?”

“None,” Steve replied. “They’re not interested.”

A rare silence on the phone.

This was a huge blow. I wasn’t sure what to say. Steve didn’t sound like he was in the mood to talk.

“Did he say why?” I asked.

“Something about the risks of blockbuster films and their unpredictability.”

That is all I got from Steve.

In one instant, Steve’s dreams of an iconic IPO had been dashed. There would be no Goldman Sachs. No Morgan Stanley. Just like that, the gatekeepers had closed the gate.