Delivering Happiness

3
Diversify
New Ventures
“Now what?”
Many of us left LinkExchange at around the same time, and we were all
trying to answer the same question. We’d just made a lot of money from the
sale of the company to Microsoft, and we were supposed to be basking in
the fruits of our labor.
But many of us didn’t have any great answers.
I thought back to my childhood fantasies. I’d wanted to work for the
CIA in a James Bond type of role, become a robot inventor, and find a place
to live with a movie theater and Taco Bell downstairs.
I no longer wanted to be a spy or a robot inventor, but living above a
movie theater still appealed to me. As luck would have it, I happened to be
driving around one day and saw that AMC was opening up a big new movie
theater complex right in the heart of San Francisco at 1000 Van Ness. There
would be fourteen different theaters, and right above the lobby of the
theaters, fifty-three brand-new lofts were about to go on sale. When I
learned that there was a Taco Bell less than two blocks away, I knew it was
a sign. This was going to be my future home.
I learned that real estate developers had actually taken over an entire city
block and combined two buildings to create this space. In addition to the
lofts and movie theaters, there was also a gym, an area designated for a
future restaurant, and some commercial space that hadn’t yet been leased
out.

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I told other ex-LinkExchangers about the space. I thought back to my
college years, when there was a core group of us who always hung out
together. We could create our own adult version of a college dorm and build
our own community. It was an opportunity for us to create our own world.
It was perfect.
One by one, our crew started moving into the lofts. Alfred ended up
living two doors down from me. By the time all of us had moved in, we
collectively owned 20 percent of the lofts in that building and controlled 40
percent of the board seats of the homeowners’ association. It was like we
were playing our own private real-life version of Monopoly. And nothing
could compare to the spontaneity and convenience of being able to stroll
over in pajamas to a friend’s place or to the movie theater.
While we were in the process of moving in to our new homes, Alfred
and I decided to start an investment fund. A friend of ours had a pet frog in
college, and she dared us to name the fund and incubator Venture Frogs.
So of course we did.
We ended up raising $27 million from ex-LinkExchange employees, and
started meeting with a lot of different companies. We decided to turn one of
the one-bedroom lofts into our office and set up a couple of computers and
phones there.
One day, I received a voice mail from a guy named Nick Swinmurn,
who said he had just started a Web site called 
shoesite.com
. His idea was to
build the Amazon of shoes and create the world’s largest shoe store online.
To me, it sounded like the poster child of bad Internet ideas. Other
companies were selling pet food and furniture online and losing large sums
of money in the process. In my mind, it seemed like there was no way
people would be willing to buy shoes online without trying them on first.
I reached over to the phone and just as I was about to delete the voice
mail, Nick threw out a few statistics: Footwear was a $40 billion industry in
the United States, and 5 percent of that was already being done by paper
mail-order catalogs. It was also the fastest-growing segment of the industry.
I did some quick math and realized that 5 percent was equal to $2
billion. It didn’t matter whether I would be willing to buy shoes without
trying them on first. What mattered was that consumers were already doing
it, and it seemed pretty reasonable to assume that Web sales would one day

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be at least as big as catalog sales. Alfred and I decided it was at least worth
a meeting.
W
e had an informal meeting with Nick in our loft. He was dressed
casually, wearing board shorts and a T-shirt. He looked like he could have
still been in college, just stopping by to chat with us during his lunch break.
We didn’t pretend we had a real office, and Nick didn’t pretend he had
much more than an idea, but it was clear that he was passionate about the
opportunity. Nick told us he had just graduated from college a few years
earlier.
Nick summarized his entire pitch in three sentences: “Footwear is a $40
billion industry in the United States, of which catalog sales make up $2
billion. It is likely that e-commerce will continue to grow. And it is likely
that people will continue to wear shoes in the foreseeable future.”
“Do you have any experience in the footwear industry?” Alfred asked.
“No, but I walked around a shoe show in Las Vegas a few months ago
and some of the people said they thought it was an interesting idea.”
“Maybe you should find someone with footwear experience,” I said.
“Yeah. That sounds like a good idea,” Nick replied.
We decided to stay in touch and agreed to set up another meeting once
Nick had found someone to join the company who had experience in the
footwear industry. I also suggested that Nick come up with another name.
Calling the Web site “Shoesite” seemed too generic, and it limited the
business from eventually expanding into other product categories.