The Term Sheet: A Startup Thriller Novel (7 page)

A
lthough his leg
was still giving him trouble, the wound was scabbing up rather nicely. Ever since he was a kid, he’d hated pills. Gabriel had offered to get him opium to smooth out the ride, as he’d said. But he hated even taking Tylenol. He couldn’t stand having a foggy mind. He despised being out of control. He wanted to be present and aware, even if that meant temporary discomfort.
This too shall pass,
he would repeat to himself. It always did. Sometimes he made a game out of sitting back and watching it pass. Like one day when he was twelve years old playing hide-and-seek. He loved playing hide-and-seek so much that he would hide around the house waiting for his father to get back from work. His mind fondly drifted back to those days.

“Buddy! I’m home. Where are you?” his father would say. His father, Frank Thompson, had started out as an errand boy for a construction company and worked his way up the ranks to eventually create one of the larger construction companies on the East Coast. His company built office buildings and more than a few strip malls. Things had been going great for his dad. His mom had passed away when giving birth to him, and his dad never remarried, but they were well off and relatively happy, even though they never lived a luxurious lifestyle.

But the government shutdown in 1995, after an extended fight between President Clinton and the Republican Congress over funding Medicare, created a downward spiral that hit Frank’s business hard. During the twenty-seven days that the government was shut down, almost all government services stopped. Everything from the Department of Education, Federal Parks, the Department of Energy, the Department of Transportation, to smaller departments like the National Archives and Records Administration and the Advisory Council on Historic Preservation.

In the first week, the shutdown had little effect. Like a random snow day in Portland. The snow is always gone the next day and it’s back to business as usual. But when the shutdown entered the third week, the consequences started to become more grievous.

Frank had been negotiating one of his largest deals ever. He was trying to build his first skyscraper and had invested everything into it. It was going to launch him into the big leagues. and set him up to be the next Donald Trump. Though Frank had done well for himself, the skyscraper was going to cost a hundred times more money than Frank had been able to save up. So in addition to risking his entire life savings, he had turned to banks and outside investors to put up the rest. But the location chosen for the skyscraper was a historic site, and when the Advisory Council on Historic Preservation shut down and wouldn’t return phone calls, Frank began to panic.

On the twenty-sixth day of the government shutdown, Frank’s little boy was waiting for his dad to come home, eager to surprise him again with another game of hide-and-seek. His dad had been coming home later and later recently, and seemed off balance when he did get home, but he wanted to make his father happy. He picked one of his favorite hiding spots: his dad’s closet. The slits in the closet let in enough light from the room that he wasn’t scared. He sat quietly and patiently playing his Game Boy, but his dad didn’t come home. When nighttime arrived and darkness came over the closet, the boy became drowsy and fell asleep.

He was awakened when he heard a chair scrape across the floor of his dad’s room. The lights were on in the room, so he peeked out through the slits in the door. As his eyes adjusted to the light, he saw his dad standing on a chair in the center of the room. His bladder full and eyes full of excitement, it took all his will to keep quiet. As his dad threw a rope over the ceiling fan and began tying a knot, the boy realized something wasn’t right. He wanted to call out, but his excitement had turned into terror and he couldn’t move. The boy’s legs felt warm and wet. Within a minute, his dad’s legs stopped jerking. The boy sat staring at the ground as warmth turned to coldness.

“This too shall pass,” the boy’s grandma said to him at the funeral. A few weeks later the feeling hadn’t passed, but his chronically ill, yet disproportionately generous grandma had. The boy then entered foster care and wondered if all that now had “to pass” could ever really come to an end.

Four months later, while waiting for his foster dad to pick him up after school, the boy heard a couple of girls talking as they played.

“My turn to hide,” one girl yelled. “You count to thirty.” The boy looked at them and caught himself wanting to play. He felt a sudden urge to run and hide and realized that the hurt inside him had indeed passed. He chuckled. Not at the girls or the game, but at himself. He laughed at how quickly he could adapt to the terrors of the world. He wondered what other horrors he could bear.

As he sat at his computer, he picked at the scab on his leg, curious if it would still hurt or if it would just fall off.

It still hurt.

And he liked it that way. He scanned some security newsgroups and mailing lists, checked some stocks, skimmed the
New York Times
homepage and browsed
SC Magazine
, a popular security magazine. One post in
SC
caught his eye in particular. It was a tiny news blip about a startup called Cryptobit that aimed at revolutionizing online email security. After reading about Cryptobit’s approach, he went to the homepage to sign up for the beta. He entered an email address: [email protected].

“
D
o
you think we have a chance in hell?” asked Andrew.

“Winners are the ones left standing,” said Andrea.

David and Andrew were standing in Andrea’s corner office overlooking the Willamette River explaining their traction and their recent call with the
Pitch Deck
producers. The producers had talked to David a few more times. Every time they called, they asked David all sorts of questions that seemed strange. Questions about Megan and their relationship. How long had they been dating? Did they fight a lot? What was the hardest thing they had ever overcome? They also wanted to know about David’s sister. When did she learn about the disease? How did their parents take it? The producers seemed much more interested in David’s backstory than the fledgling company.

David asked: “So how do you come up with a good investor pitch?”

“You have to remember that fundraising is first and foremost about people, not companies. It’s about people trusting other people. In fact, if you think about it, it’s actually pretty absurd that you could stand in front of these investors for just a few minutes and walk away with a check for hundreds of thousands or even millions of dollars. Out of context, that sounds pretty crazy. Right? You might even think someone who would so readily part with so much money was insane. But they aren’t crazy, they’re just trying to find people they feel they can trust.”

David started scribbling notes on a yellow legal pad. “And how do you get someone to trust you?”

“Well, let me tell you a little story, David.” Andrea pulled a chair out and signaled for David to sit down. Andrew pulled a second chair out and sat down without any provoking. “You don’t need notes for this part. The first time I started a company, I was about your age. My hair went down to my hips, and I was as bright-eyed and starry-eyed as you two are today. My idea was ahead of its time, it was the Internet of Everything. It could connect toasters with microwaves and refrigerators over Internet protocols. If I had just picked thermostats instead of toasters, I might have been Nest. But I have always loved cooking and so I focused on the kitchen first.”

“That’s a great idea, Andrea.” Andrew chuckled. “Hell, you should start that company today. How long ago was this?”

“The mid-nineties.”

“Oh. Way ahead of your time.”

“So I had a geeky friend of mine build me a prototype. It was an old a toaster with a huge 14.4 baud modem stuck on the back. We went to the only venture capitalist I knew: Frank Wilson. I told Frank why he should invest. I explained that the toaster could call the fire station if it caught on fire. I told him that it could detect the done-ness of the toast and turn off automatically. I listed all the reasons I could think of for how this toaster would change the world. Do you know what Frank told me?”

“Yes?” said Andrew. “But then he offered only half the money you wanted.”

“No. None of the money I wanted.”

“Because you didn’t have a big enough team?”

“No.”

“Then he must not have understood the technology?”

“No, Frank was an investor in Geocities and comScore. He understood technology better than most.”

“Then why?”

“He said I was too focused on the solution, not on the problem. I was so busy giving him a list of features, like reading a brochure, that I forgot to answer the basics first. Like what was the big problem with toasters today? He said I needed to study the market more. What was so frustrating about toasters that they need internet access? I had also used up forty-five minutes talking just about the toaster’s features, which left me no time to get to know him or let him get to know me. If fundraising is primarily about people trusting people, I had failed at task number one: treating the investor as a person.”

Andrew started writing that down and Andrea continued.

“You start by telling a good story. A good story always starts with a problem which then frames the solution. The more drama, the better. Bigger problems make for bigger dramas. Also, when you tell a good story, you are showing, not just telling. You can’t just say: ‘I am trustworthy, I’ll work hard for you, trust me.’ You must show them that you are trustworthy. You must show them you will work hard. This must be part of your story, woven into the tapestry almost invisibly. Investors are pattern matchers, and within those first few minutes you will need to show that you have integrity, passion, experience, knowledge, skill, leadership, and commitment. And you can’t tell them you possess any of these qualities outright.”

“That sounds impossible,” said Andrew. “Can’t we just get money on the merits of the business idea?”

“If only it were that easy, Andrew,” said Andrea with a smile. “Did you notice how I convinced you of the value of storytelling by telling you a story? Storytelling is natural. It’s human nature to communicate with stories. Did you know that nobody wrote down Homer’s epic poems, the
Odyssey
or the
Iliad
, for four hundred years? For generations the stories were passed down orally. That’s how strong good stories are at surviving and communicating. Those stories are over three thousand years old now.”

David stood up and walked over to the window. As he stared out at Mt. Hood, he thought about the old tree in Eastern Oregon. He felt equal parts scared and excited, a common duality of late. He also felt like the curtain had been pulled on something he had always taken for granted. He knew from watching TED Talks how powerful stories could be, but hadn’t made the connection to use them in his pitch.

David said: “So how do we start?”

“Start with Frank’s advice to me. Think about why you guys are doing this in the first place. What problem are you solving? Why is it a problem? For whom is it a problem? What’s the market? How big of a problem is it, really?” Andrea walked over to David and put a hand on his shoulder. “And when you think you have the answer, ask the question again. Whatever you think the reason is, whatever you think the problem is, there is a deeper reason and a deeper problem. You need to get to the root of it. Often you will have to go four or five levels deep to truly understand what you are trying to do.”

Andrew’s hand tapped impatiently on his leg. “Philosophy’s great, but how do we put together our pitch?”

“Once you understand your problem and solution, tell the best story you can about it. Make it personal. Something that incorporates the problem, the solution, and things about you that you want the sharks to know.”

“That’s it? Just tell a story?” said Andrew.

“Dude, don’t be rude. She’s trying to help us,” David said in a low voice.

“I know, but anyone could have told us to tell a story. I need more practical and hands-on advice if we’re going to stand a chance.”

Andrea just listened and smiled.

“Besides the story, there is only one more thing that’s critically important.”

At that very moment, Jenni popped her head in the door.

“Andrea, you are five minutes late for your two o’clock.”

“Sorry guys, I have to take this. Good luck and let me know if you need any more guidance. You are going to do great, I just know it.”

David and Andrew slipped out as Andrea picked up her phone and started apologizing for her tardiness. Andrew winked at David and started running to catch up with Jenni. David wandered slowly toward the elevators. As he walked by, he saw a few guys near a table playing hacky sack under a “Code Monkeys” flag. One of the guys had long dreadlocks and was wearing whitewashed skinny jeans and a vintage Burberry plaid button-up shirt. The other guy was a more common stock programmer, also lanky but with thick horn-rimmed glasses and a grey T-shirt tucked into his khakis with some kind of chimpanzee on the front promoting some startup.

How Portland,
David thought.

M
ark Baxter was dressed
in a sharp black tailored suit, crisp white shirt and skinny blue tie. When David walked up to him at Stumptown, Mark looked at him like he recognized an old friend. David felt weirdly underdressed in his jeans and white T-shirt even though nobody else in the coffee shop was dressed any more formally than he was. “Such Great Heights” by the Postal Service was playing loudly over some large speakers balanced on the edge of a small, empty, makeshift stage.

“David, you look just like your picture. Except with a killer beard. How are you? Can I buy you a coffee?” Mark smiled. David had never met anyone from Hollywood before, but he could imagine that’s what a Hollywood smile would look like.

“Sure, thanks.”

“You didn’t fill out the paperwork correctly. You know that’s really important, don’t you?”

“What part did I get wrong? It was forty pages and I got lost in it a few times.”

“This is serious business, you know.” Mark looked over at the barista. “I’ll take a half light double macchiato with room. And whatever this guy wants.” The barista looked at Mark as if to say,
This isn’t Starbucks, you know
. But she shrugged it off and gladly accepted his American Express Platinum card.

“Coffee, black. Thank you, Cindy.”

“Look David, I like you, but none of this matters if we don’t get everything lined up correctly. It was good luck I was in Portland for something else and we could meet up. But remember that just because I like you doesn’t mean you will get to see the sharks in person. I’m personally hoping you will, because you have a lot of potential. But you have to work with me on this. Okay?”

“Of course, just tell me what part I need to fix.”

“Good. Now, you say that your sister has a disease, right? How old was she when she was diagnosed?”

“I’m sorry, but what does that have to do with anything? What does it have to do with Cryptobit?”

“This is to determine backstory, David. I’ve been thinking about the name, too. What do you think of Cryptocat?”

“That name is already taken by a competitor.”

“Shit. Back to the drawing board. There’s our drinks.”

David was liking Mark less and less by the minute. It seemed like everything Mark said was a question. Mark picked up his drink and brought it to his nose like a fine wine. He closed his eyes and breathed in deeply with a smile. Then he took a tiny sip.

“Fuck. Well, it ain’t Starbucks, you know? Where do they hide the sugar in this place anyhow? So tell me more about Heather. What’s she like?”

Mark walked toward the entrance where there was a long rustic table made of old wood while David tried to keep pace.

“She’s smart and young. I don’t know. She’s my sister. What do you want to know?”

“Look, David. I’m just trying to help you. Help me help you. Did you guys get along as kids? Or was there a falling out? She’s crippled, so that couldn’t have been easy on your family. Did your dad walk out when he found out about your sister?”

“She’s not crippled, she has muscular dystrophy. Yes, it was hard on the family. But that’s not the reason my dad left. At least not the whole reason. I get it, you want to tell a good story to go with the startup pitch. But I don’t want the country to know about my sister; do we really have to talk about this?”

“It’s not the country, David, it’s the whole world.
Pitch Deck
is seen by over eight million viewers worldwide right now. We licensed the idea from Sony, who started the idea with
Panther of Money
in Japan. Later
Dragons’ Lair
was launched in the UK and Canada. Hell, there’s even a version airing in Afghanistan this spring. This show can make you an overnight success. I can make you an overnight success. The ratings are climbing through the roof right now. I know a dozen other guys who would give their left nut to tell me their sob stories, so either tell me about your sister or it’s been good knowing you.”

David was stunned. Nobody had ever talked to him this way before. He stood there silently for a minute in awe.

“You know what, Mark, I don’t think
Pitch Deck
is for us after all. I think you should go make ratings with someone else’s sob story.”

Mark threw his coffee in the trash, still mostly full.

“Suit yourself, kid.”

He walked out and was talking on his phone before he stepped out of the door.

David stayed at the counter and picked up the torn sugar packets that Mark had left on the countertop. He threw them in the trash and took a sip of his coffee. His pocket vibrated. It was a text from Andrew. David picked up the phone. Apparently he had missed a bunch of texts from Andrew.

A
ndrew Smith
: How’d it go?

Andrew Smith: Yo, what’s he like?

Andrew Smith: You are killing me, dude

Andrew Smith: Ok, fine, don’t tell me

Andrew Smith: Did he like our pitch?

Andrew Smith: I am going to assume that he is so excited that he picked up your phone and threw it on the ground

Andrew Smith: He hated it, didn’t he?

Andrew Smith: He picked up your phone and threw it on the ground when he saw the demo, right?

Andrew Smith: Just tell me! You didn’t choke, did you?

D
avid called Andrew
. He picked up immediately.

“Dude, where have you been? I’ve been sending you text messages. Have you been getting them?”

“Sorry, I had it on mute. It went horribly, the guy kept hammering on Heather. It was weird, he was obsessed or something. He didn’t ask a single thing about Cryptobit.”

“You think we should change the name? I’ve been thinking we should try to come up with a better name, like Cryptocat or something.”

“You already talked to him, didn’t you?”

“Why?”

“I thought you were going to let me talk to him first, Andrew. I thought we agreed. I’m CEO, so I should be doing fundraising.”

“We’re cofounders, aren’t we? Plus, I got us the opportunity. I wrote the email to the producer. He called me this weekend and he seemed really cool. We hit it off. He mentioned that the name sucked, and I hadn’t thought about it much, but I agree. I think we need a better name.”

“If we're cofounders, you should treat me like a cofounder. Why is this guy having strategic meetings about the future of our business with you before I am? And why aren’t you telling me the truth?”

“I don’t know what your big deal is. Stop freaking out.”

“The big deal is that I can’t trust you. You go behind my back telling strangers about my ideas without my permission. You start taking their advice over mine. I thought we were partners. I thought we were friends.”

“Chill. Out. You are taking this way out of proportion. Just tell me how the meeting went. Did he like you?”

“Sure, he liked me. He kept saying how much he liked me right up until he walked out the door. I told him we aren’t interested. We don’t need
Pitch Deck
.”

“Wait, what? You told him what now? What the fuck do you mean we're not interested? We need this, David. This was the key to our launch plan. What did you do?”

“Countless great companies have been started without help from sleazy TV shows. You think Zuckerberg needed
Pitch Deck
?”

“I hate to be the one to tell you this, David, but you are not Mark Zuckerberg or Steve Jobs. Stop acting like it. And what’s this bullshit about not making decisions without consulting each other first? When did you call me and ask me before making this decision?”

“I’m the CEO, Andrew. It was an executive decision.”

“Well, maybe you shouldn’t be CEO if this is how you’re acting. I trusted you to bring this home. This should have been an easy layup. All you had to do was nod your head and smile. They were ready to put us on the show next month. He told me that he usually didn’t guarantee placements, but that things were looking good for us. How do you fuck that up? Explain to me exactly how you can fuck up such an easy situation.”

“The guy’s a sleazeball. If you liked him so much, you should go start a company with him. Maybe you can get married in Washington and have babies.”

“I can’t believe you sometimes, David. What are you, a fourth grader?”

“Fuck you.”

“Fuck you too. I’m going to have to fix this like I fix everything else in your life when you fuck it up.”

“What are you talking about?”

“Who do you think talked Megan off the cliff when you came up with your loony jellyfish idea? She came to me bawling, telling me about how you spent so much money on the stupidest idea she had ever heard of. Another one of your executive decisions, I imagine. I had to calm her down and persuade her to give you another chance. But maybe I was wrong. Maybe you have had enough chances. Maybe it’s about time you clean up your own mess.”

“Maybe it’s time for you to keep out of other people’s business. Maybe it’s time for you to stop talking to other people’s girlfriends. Maybe it’s time for you to stop butting into other people’s startups.”

“Fine. Maybe it is.”