Our Story to Now:I had persuaded Silicon Valley that Furboy was the next computing platform. Now I had to convince Wall Street that he was not a toy, he only looked like one. (Click variously for Chapter 1, Chapter 2, and Chapter 3 of my saga.)
Furboys were in such great demand that eBay went down every time a new Furboy was posted. The growing pains were enormous, and the public markets were begging for our listing. No room for error here, everything must be cautiously strategized. Too bad I had no time to think of everything.
We were done upgrading the installed base of Furby/Game Boy hybrids. It was time to move on to Version 3.0 and manufacture new Furboys ourselves from scratch. We licensed the entire Guangdong province in China for production and paid a modest licensing fee to both Hasbro and Nintendo, despite my legal beagles at Wilson Sonsini telling me I could do it without paying any fees. In a strange twist, Gary Reback of WS was hired by unnamed companies to call for congressional hearings into our future potential monopoly. This guy moves fast. But we move faster. It's funny, Nintendo is a company that has specialized in playing cards for over 100 years, and I tried to explain to their president, Mr. Yamauchi, that I hold all the good cards, and he holds a few worthless ones, but that I could bring new life to his drab franchise.
Legal fees were Furboy.com's single largest expense. I needed more capital and the only prudent move, of course, was to go public. Bankers were calling, but at first, they just didn't get it, not the size and scale and magnitude of this thing. But they got it quickly enough, because they are paid to get it or pretend to get it. I suggested that we would have 100 million Furboys in circulation quite soon, so they began to trip over themselves suggesting various ways to get to multi-hundred-million- and billion-dollar valuations.
My math was simpler: At $1,000 per user (cable is valued at $4,000 per subscriber) times 100 million forward users, the value is $100 billion.
The IPO would raise money, but it would also allow me to go out and buy things I needed, like the Guangdong province (if only it was publicly traded). But seriously, I would fold in Hasbro and Nintendo and I was thinking of perhaps DreamWorks as well, to do the animated film and milk all the ancillary rights. I got some of these ideas from Steve Jobs, who used to get it, but he kept going on and on about his desire for imported Italian marble for the new Pixar headquarters and the emptiness of the brick they ended up with, weird for a guy who supposedly gets everything.
So the parade of bankers began. They have a different manual than the VCs, but they all read out of the same book. Prestige, analyst coverage, aftermarket support, global M & A, tech conferences, the hot IPOs they could get me shares of, the list drooled on. My thought was, the first guy to look me in the eye and say they wanted my business because if I made a lot of money, they would make a lot of money. Call it like it is.
No one did, but the parade began, and each firm tried to differentiate any way they could. Frank Quattrone bought everyone at First Boston a Furboy, but he low-balled me on valuation, apparently the first time he has ever done that. Just the thought of all these Furboys jabbering away on traders' desks made me chuckle. Morgan Stanley sent the Queen Mary. She offered to write a book on Internet Furboys. Goldman Sachs passed because they thought Microsoft would be offended. Bill Hambrecht offered an open IPO, but he couldn't guarantee $1,000 on the open. (I set Furby.com up with 25 million shares, of which 20 percent or less would be sold to the public.)
I was strongly considering backing into a shell. A few day-trader friends offered advice on how to get this thing to go from $10 to $1,000 almost overnight, therefore guaranteeing me an interview on CNBC's Squawk Box, where I could then launch the company. I think Haines, Kernan, and Faber will all eventually be replaced by Furboys!
I wanted the stock at $1,000 for a few reasons. First, it would make me the first Internet company with a $1,000 stock (kiss my Graham and Dodd, Warren Buffet, why should you be the only one with a high stock?). Second, I could keep announcing stock splits every time I wanted the stock to go up.
With an IPO strategy, actually a BIS (back into shell) strategy in place, all these wacky strategic discussions began, probably because all these guys wanted a piece of me so they could say at cocktail parties that they were in Furboy.com when it was still private.
Microsoft called first and had just that day announced Windows FE. They would give me a billion dollars to use it as the operating system for Furboys. I e-mailed the WinFE code to one of my open-source guys, and he opened my eyes. It was just Windows CE with C removed and an F in its place. Bill just doesn't get it.
Bob Pittman of America Online called next. He asked me to give him $500 million. Standard procedure, he said. Steve Case was having fun extorting money from Internet companies. Besides, the money was already in the projections he gave to Gerry Levin to get the Time Warner deal done. In exchange I could meet Bugs Bunny.
I really needed Internet access for all these Furboys, so I was tempted. But then I realized they had 20 million subscribers, and 18 million of them are teen-age girls. Because I would soon have 100 million Furboys in circulation, he needed me more than I needed him. Plus, five different companies from NetZero to Juno (does Juno mean zero in Latin?) were offering me free Internet access, hard to turn down. Rather than say no, I gave Pittman a callback number that was always busy. When they figured out we went elsewhere, henchman Ted "my naysayers are bogeymen" Leonsis phlegmed about this being their Chechnya. Hey, Bob, tell Steve he just doesn't get it, and tell Ted to quit trying so hard.
In the midst of this, FURB was public—1,215 bid, 1,250 ask. They slated Furboy for the cover of Business Week, Time, and People magazines, the first triad since Secretariat. Jeff Bezos was Man of the Year in '99, but man overboard in 2000.
After a CNBC appearance, all the sleepy guys called. AT&T offered me free Internet access. C. Michael Armstrong said we could share the monopoly together. Of course, he had competitors and I didn't, so who was kidding whom. The New York Times, NTT, and Reuters said they wanted a meeting and could I come to their headquarters.
Nike called, they heard about us when we locked up all of Guangdong. This would be interesting, so I called back. They wanted to drop their "Just Do It" slogan and cross-promote the slogan of Furboy.com: "They Just Don't Get It." Ah, finally someone who gets it.
And then the funniest thing happened. The Nasdaq got wacky. Something about Microsoft's lawsuit, and quarter-point rate increases, and the bloom going off the tech stocks, and who knows what. My stock, FURB, kept slipping, which was quite embarrassing, since I had split it a bunch of times to keep it near 1,000. I had just sat though the Business Week photo shoot. The stock dropped below $750, and I panicked. I put a call into Sandy Weill and arranged a credit line at Citibank, off my AAdvantage Visa card actually, and started buying back shares. I bought and bought but the stock slipped below $500, and Sandy kept increasing my credit limit. I just couldn't get the stock to go up before the magazine came out.
Then I saw a clip on CNN that every Furboy sitting on the desks of America Online users had exploded, spraying green and orange Gatorade over everything. Matt Drudge was right. I tried to get Carmack at id on the phone. The Quake folks said he was out breaking Ferrari land-speed records. I found out later that he had shorted a million shares between $1,000 and $250 and was laughing hysterically. FURB traded to $90 in the aftermarket. I tried to unload as much as I could, but Schwab.com only executed 200 shares. By noon the next day, the stock was $14, and margin calls wiped out most investors. By the end of the week, three-quarters of all Furboys had detonated, the stock was $5, I owed Sandy Weill $400 million from the buyback (I got to keep the miles), which was just about my equity on my 80 million shares, so I sent him my certificate.
Can't wait to do my next startup.