Sabeer Bhatia and Jack Smith were two 26 year olds. Sabeer was a confident Indian who commanded certainty with his every word. Jack was a focused engineer who believed that he could make anything work. They came to Draper Fisher Jurvetson through Dev Purkayastha, a fellow VC from Idanta Ventures, who told John Fisher that he liked these two young guys, but their company was too young for Idanta to fund. Jack and Sabeer’s original plan was not particularly exciting to us, but Steve Jurvetson, seeing a couple of strong co-founders asked if they had another idea. Well, they came forth with an unusual idea to give people web-based email. It would be so inexpensive to provide that they wanted to give it away for free! We were all stoked about this company because it was so novel, but we had no idea how the company would ultimately make money by providing free email for everyone.
Their messaging was clear. Free everything. In addition to providing free email, their offices were on Freedom Blvd in Fremont, California. And they launched their product on Independence Day.
Steve Jurvetson and I were sitting in the first Hotmail board meeting, when Jack said, “It is up.” He meant that Hotmail had just launched free web-based email. After a short demo, I asked, “How are you going to market this amazing product?” Sabeer answered, “We will put billboards on Highway 101, and get TV ads.”
I responded that with the funding we provided, about $150,000, they could get about a nanosecond of TV time and a postage stamp on a billboard for a day. But before he had a chance to respond, I asked, “Hey, can’t you just send an e-mail to everyone on the internet?” At that time, the internet was mostly visited only by academics and military personnel, but I figured that audience could be early customers. Jack responded that sending out a blast e-mail would be “spam,” and that was against the spirit of the internet.
Then I thought, “Words spread. If I send emails to my friends, then they send emails to their friends, and them to their friends, and eventually we reach everyone.” So I kept at it. I said, “You are giving this away for free.
What if you put a message at the bottom of everyone’s emails that says, ‘P.S. I love you. Get your free email at Hotmail.’ It will go from one user to the next. From me to you to your friends and to their friends.” It reminded me of the Tupperware case we studied at business school, where anyone who wanted to buy Tupperware would have to throw a Tupperware party, making the customers …