How To Start An Internet Company In Your Dorm Room And Make $580 Million
How To Start An Internet Company In Your Dorm Room And Make $580 Million

  
  
  


  
    
      
    
    
    
    
    
    
      
      
          
      
      
                  
      
      
      

  
    
          
          
    
        
    



  

        
        
        
          
        
          
        
    
              
                    
        
                      
                            
                        
                            
                            
                              
                              
                                  
                                      
                                      
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                                  Bo Peabody in 1994, age 21.
                                  
                          
                          
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                        Mark Zuckerberg is the latest and most famous American entrepreneur to launch a fantastically successful company from his dorm room.But the tradition goes back a while.Before Mark Zuckerberg, for example, there were Bill Gates and Michael Dell. And there was a Reed dropout named Steve Jobs.In fact, the dorm-room to board-room path is so well established by now that aspiring moguls who are still in school have plenty of precedent just to go for it. That's what another early Internet entrepreneur did in the mid-1990s, when the industry was just getting going.  And his story should serve as inspiration for not only other budding dorm-room entrepreneurs, but the older kind as well.In 1991, a freshman at Williams College, Bo Peabody, had an idea.He  would build an "online service" offering practical advice to college  students.There wasn't an "Internet" in those days, at least not  one that  normal people had heard of. There wasn't even an "America Online," which   wouldn't get going in earnest for another couple of years. There was   mostly Prodigy and Compuserve and a few other early online services that   people dialed into with 1200-baud dial-tone modems.Because  there wasn't an Internet, building an online service meant  actually  building part of a physical network, so that was a key part of the  early idea.  But to build a network, Bo needed $10 million. And that was a big sum for a college freshman to raise, especially in 1991, when the venture capital ecosystem was a lot less developed than it is today. So Bo incorporated his company, kept working on his business plan, and kept doing his homework. He even signed up a seed investor. Then, eventually, the Mosaic browser arrived. And Bo's capital requirements suddenly dropped from $10 million to $1 million. So he kept at it.Then, in the summer of 1995, a year after Bo graduated, Netscape went public, and the modern commercial Internet era was born.Marc  Andreessen and other early Internet entrepreneurs became  deca-and  centimillionaires overnight, and, soon, venture capitalists began  funding any  Internet plan with a pulse.  As the market surged higher, the stocks of the early net companies flashed like neon signs for 7 hours a day--"RICHES, RICHES, RICHES"--and soon, thousands of  companies, public  and private, were joining the digital gold rush.Among them was Bo's company, which he was still working on with a classmate from  Williams. Shortly after  Netscape's IPO, Bo  raised $3 million from a suddenly jazzed New Enterprise Associates.  Two years later,  having amassed more than 1 million users for a product  that looked  nothing like his original vision, he sold Tripod to  Lycos, for $58  million in stock.  Over the next two years, while Bo's stock was "locked up," the value of it  increased 10-fold.  Then in 1999, Bo sold almost every share he had, and  invested the  proceeds in bonds and real-estate.(Those who were around in those  days will remember what happened  next: The stock of Lycos and other  many other dotcoms plunged ~99%. The  price of houses and bonds,  meanwhile, went through the roof.)(Bo's "take" on the Tripod sale and Lycos appreciation, by the way, was considerably less than the $580 million Tripod's stock was worth at the peak. Like many first-time entrepreneurs, Bo didn't end up owning much of his company at the time it was sold.)So, what's the question Bo has been asked ever since then?"Were you lucky or smart?"Bo's  a thoughtful guy, so he wrote a whole book about that question: LUCKY OR SMART? Secrets To An Entrepreneurial Life. The book is  also about how Bo and some college friends started a company in their  dorm  room and helped kick off the social-media and personal-publishing revolution. Now a serial entrepreneur and a partner at New York-based venture capital firm Village Ventures, Bo has been kind enough to  let us print the whole book for you. He has also handed over a bunch of documents and photos from the early Tripod days that provide a quick visual tour of the company's history.  We'll be running a chapter a week of the book  for the next several weeks. LUCKY OR SMART is part "How To," part memoir, and part philosophy.  We're starting today with the  Introduction.Since selling Tripod, Bo has founded  six other companies, including  Village Ventures, where he's  now a managing partner together with his co-founder Matt Harris.  If you don't  want to wait to read the whole thing, you can buy Bo's book right  here (there's a Kindle  version, too).In the meantime, using Bo's Tripod memorabilia, we've put together a little tutorial...
                      
                    
                        
                                
                                    
                                
                                  
                                      
                                        Summer vacation coming up? Time to write your business plan. Just like the "TRIPOD: Preliminary Business Plan," from August 1992. Note that it's only two pages. And printed on a dot-matrix printer. Put your name on top (Bo Peabody and Brett Hershey were Tripod's co-founders). And add the name of your economics professor.
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        After you write your business plan, time to incorporate. Here's Tripod's Certificate of Incorporation, dated September 19, 1992.
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        After you incorporate, you'll need a budget. Here's Tripod's first 9-month budget, dated October, 1992. This company's going to need $125,000!
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        So, it's time to find a seed investor. For Tripod, it was Peter Wilmott, who's on the board of Williams. He'll lend the company $25,000, convertible into a 9% stake. He'll also help Tripod raise the other $100,000. (Giving up ~30% of the company for $125,000. Ouch!)
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        Yippee! You're in business!
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                        
                                              
                                                Bo Peabody in 1994, age 21.
                                                  
                                            The Business Insider
                                          
                                        
                                              
                                            
                                        
                                  
                                      
                                      
                                    
                                
                                
                                  
                                      
                                        So it's time for business cards. But dorm names as addresses don't sound so, well, professional. So just use your economics professor's home address.
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        Of course, it's still 1992, and there's no Internet yet. And if you're Tripod, you need $10 million to build a network. Which isn't forthcoming. So keep doing your schoolwork until Marc Andreessen builds Mosaic, and the commercial Internet is born. Now write a pamphlet telling potential investors what the Internet is.
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        And collect lists of names of people who might want to sign up for your service. By hand. On paper. 
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        Then, finally, Netscape goes public, and everyone and their brother want to fund Internet companies. Your Williams economics professor, Dick Sabot, knows someone at NEA. NEA hears the word "Internet" and starts hyperventilating. And suddenly Tripod has $3 million to spend. So it's time for an office in Manhattan...
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        And REAL business cards.  (Oh, by the way, your co-founder, Brett Hershey, has decided he wants to go into the movie business. So he's moved to LA. So you're now the company's only president!)
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        You have money and offices now. So you'd better start building a product.  Here's the first Tripod web site, mapped.  (The company has already "pivoted," by the way).
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        A year later, in 1996, you have hundreds of thousands of users. So it's time for a redesign. Here's the state-of-the-art, 1996.
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        And, come to think of it, "President" sounds kind of schlumpy, so go ahead and make yourself CEO.
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        And get a cooler business card.
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        And another cooler business card.
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        And it's gold rush time, so it's time to hit the conference circuit. Head for Amsterdam, for example. That's you, in the middle (mop top). And that's a young Steven Berlin Johnson of Feed on the left. And Carl Steadman of Suck.com. And proto-blogger Justin Hall.
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        Everyone's writing about you now. Because you're young. And you're an Internet entrepreneur. And you say "dude" at lot. So it's time for some book deals!
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        And it's late 1997. And the industry is really starting to crank. And Lycos comes along and offers you $58 million for your company. So, of course, you take it. Hello, Mr. Independently Wealthy! (On paper). Hello, Mr. Vice President!
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        And here's your invitation to the closing dinner for your deal, the one that made you rich. On paper...
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        Of course, you can't sell your Lycos stock, because you're locked up. Meanwhile, other Internet companies, like Geocities, are going public. And their stocks are going nuts!
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
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                                        YES! Your CEO, Bob Davis, sells Lycos to a Spanish telephone company at the peak of the market for ~$7 billion! You did it! 
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
                                                  
                                                
                                            
                                        
                                  
                                      
                                      
                                    
                                
                                
                                  
                                
                                    
                                
                                  
                                      
                                        Of course, now you know the question everyone's going to ask you for the rest of your life: "Are you lucky or smart?" And that's a good question, actually. So maybe you should write a book about that...
                                      
                                  
                                  
                                        
                                        
                                        
                                              
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                        
                                            
                                                
                                                  
                                                
                                            
                                        
                                  
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