Ruth Ann S. Basnillo                                                                                                                                6/25/2008

SYSANAL

O0A

Steve Perlman

Cofounder, WebTV

Story:

            The first WebTV prototype was built one weekend in 1995 after Steve Perlman got interested in making television interactive. Way back 1989; WebTV’s cofounder actually did a big prototype system for Apple where he had a video on the screen with images moving around. There were lots of offshoots from that work which were developed and turned into a product by Bruce Leak and his team. Perlman also worked for General Magic where he worked half-time for the said company and half-time for his own video stuff. In his last year there, General Magic got interested to do something he’s working with which they called MagicTV, making him work full time to create an interactive system for them. But due to financial difficulties, the effort for MagicTV was stopped. That’s when Perlman started to co found Catapult Entertainment with three other people in the spring of 1994. The company made a modem for Sega and Nintendo Video Games and they were able to reverse engineer four video games. The company was financially ok but not as a business. That, and his personal conflict with one f his cofounders led him to leave the startup in the spring of 1995. After having left company, he saw Netscape 1.0 and got interested with the World Wide Web and the idea of getting pages designed for PC screens to work on television screens. In three days of his round-the-clock effort, he was able to build a thin client for surfing the web, using a television display. He called up Bruce Leak to show him his stuff and the latter proposed that they form a company, and they called it WebTV. After that, they were able to attract Phil Goldman, a top-notcher developer, to work with them. Then, they went to Marvin Davis, a wealthy financer in Hollywood who earlier invested in catapult, to invest in their company again. They ended up raising $1.5 million from Marvin, and that started the company in July of 1995. They looked for an office space and went to an old BMW dealership that was vacant. They were able to convince Pac Bell, the phone company which didn’t believe at first that they were a startup using an old car dealership, to bring a T1 line and set up online services in their company. They started hiring people after Phil Goldman passed away of a heart attack. They had an exclusive contract with Sony who proposed that Sony logo will be branded to WebTV which will then be distributed through their stores. They went to raise more money and the Davises gave them $ 3 million that’s going to be in two tranches. But then, $1.5 million is not enough for the first tranche and they were just about out of money. They didn’t tell that to their employees to keep the company going on a little bit longer but they started talking to some other investors and VCs such as Paul Allen of Vulcan and Sony, and Philips. But the thing is, none of them would want to invest, until they found Jeff Brody from Brentwood Venture Capital who prepared to put in $4.5 million. They were just about to sign all the paper works until Sony decided not to proceed in deploying the product. But that didn’t hinder Jeff to invest on them. And as soon as he moved forward, Paul Allen went to them to get in and out another $4.5 million. After that, Philips came back to them for a deal. Meanwhile, they hired a consultant named Spencer tall who had a personal relationship with the CEO of Sony at the time. They told him about the decision of Sony in their company and Spencer find out a way to help them. And while working on developing WebTV due to some bugs, Perlman received a call from Spencer telling that Sony’s CTO is coming to get a demo of their product in 2 and ½ hours. That was really a disaster for them since the demo would be their big chance but they’re in a really bad stage of development. That was a for-better-or-worse scene. But against what they expected, WebTV ran perfectly and did what it was supposed to. Then after that, they also gave that demo to the president of Sony Corp. who decided that they go back to the original contract they negotiated. They received funding from several people including Microsoft and they were able to introduce the product in July of 1996. And in 1997, WebTV (now called MSNTV) was acquired by Microsoft for over $500 million.

THREE THINGS I LEARNED:

            After having read how the idea of trying to get the Internet working through a television, I learned many things such as the fact that doing a startup is like engaging into a marriage. You had to choose wisely whom you’ll partner with or else your relationship would lead to divorce. I learned from this that when you cofound something, you got to choose people that you share the same perspective with, for both of you to get along well with each other and for your company to be successful.

            The next thing I learned is to be optimistic and just see what will happen when your company’s encountering a very big problem just like what the cofounders of WebTV did. Sony once rejected deploying their product because the later taught that it will not hit, but then they were still given a second chance by sending their CTO to have a demo in the day that they were actually in a really bad stage of development. They didn’t have a choice, that’s why they just decided to roll the new build out when the CTO came and see what happened. After turning the thing on, it miraculously ran perfectly. If they surrendered at first, they won’t be able to have Sony as their product deployer, which, at the time was the number one brand in the U.S.

            Lastly, I learned that in connection to the first thing I learned, founders or leaders are really very important to the stability of a certain company. Let’s just take the cofounders of WebTV as one good example. The three were very close and worked well together for better or worse. They had a common vision and exuded stability making their employees feel stable in the company. As a result, their good projections made the company so strong that they were able to survive and end up lasting over a decade.