When we were trying to raise money for E.piphany, my last startup, I was negotiating with a venture capital firm called Infinity Capital. They really wanted to invest, but it was the beginning of the bubble, and I wanted (what was then) an absurd valuation. All we had were six slides, and I wanted a $10 million post-money valuation. But it was my eighth startup and my partner Ben was even more experienced. So when I wanted to start a company, Infinity wanted to fund us. We had gone back and forth with them on valuation, but this was a new firm and they wanted to close a deal with us.
Finally they admitted, "Steve, we're a new fund. Everybody will think we are idiots if we do that." I said, "All right. Can you do some other number close to my number?" So I stepped out of the room as they caucused, and they called me back in 10 minutes later and said, "So, listen. We can do $9.99 million." I'm trying to play poker with the deal, and one of the partners at the time was a great photographer - the firm had big prints of his on the walls. I was really in love with the one in the boardroom. So, without thinking, when they made me that offer, trying to keep a straight face, I reached behind me, grabbed the photo off the wall and slammed it on the desk, and said, "If you throw this photo in, you got the deal!"
The $10 Million Photo
Invest in the Team
Before we closed our Series A with Infinity, I had called on Mohr, Davidow Ventures, the firm which had funded my last company, Rocket Science. The senior partner at the time was Bill Davidow, a marketing legend and a hero of mine who had also funded other Enterprise software companies. I went in and pitched Bill the idea about how to automate the marketing domain. He gave me 15 minutes, then as politely as he could do it, walked me out the door and said, "Stupidest idea I ever heard, Steve. Enterprise software means across the Enterprise. Marketing is just one very small department."
(Kleiner Perkins would do the Series B round for E.piphany. After our IPO, Infinity's and Kleiner Perkins' investment in Epiphany would be worth $1 billion dollars to each of them.)
I still have the photo.