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November 30, 2000

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Driving Ambition: Sabeer Bhatia
page 2

But what were 10 million subscribers worth? Was it $160 million as Microsoft said? More? Less? Bhatia polled his investors. Doug Carlisle, whose firm Menlo Ventures had pumped $1 million into Hotmail, guessed $200 million. Bhatia chided him for giving the lowest estimate and joked that he might hold out for a billion. Carlisle promised that if Bhatia made $200 million he would erect a life-size, bronze statue of him in Menlo Ventures' foyer.

Bhatia didn't know how to sell a company. But he did know how to buy onions. "In India you've got to negotiate for everything," he says. "Even buying vegetables, you've got to negotiate." When the bargaining started, Bhatia felt right at home. "They came in low with $160 million, so I came in at $700 million! And when they said: 'That's ridiculous! Are you out of your mind,' I knew it was just a ploy."

Bhatia wouldn't budge, and Microsoft's representatives kept walking out. Or rather storming. And shouting and swearing and hurling insults. But the Hotmail team had been warned of Microsoft's tactics. "It was like a record being played," says Jurvetson, "which we thought was pretty funny. It gave us a real sense of strength." That and Bhatia's unshakable faith in the product. During the negotiations, he had bumped into a British backpacker in Prague. Bhatia asked him how he kept in touch with family and friends. Hotmail, of course. Bhatia went back and told Microsoft: "If that is the brand we have built in one and a half years, imagine what it will be in 20 years. Hotmail will easily be bigger than McDonald's."

At $200 million, Doug Carlisle started looking for a sculptor. At $350 million, Hotmail's investors agreed: Sell. Bhatia returned to the table, alone, and once more said: "No." The contract was inked on Dec. 30, 1997, Bhatia's 29th birthday. The price: some three million Microsoft shares - worth $400 million at the time and twice that now. Today Hotmail users are signing up at the rate of 250,000 a day, and the firm is valued at some $6 billion. "I'm pretty sure Sabeer and Jack regret selling," says Jurvetson. "Who knows what might have been?" Bhatia shrugs: "When we sold, it was considered an outrageous amount. In hindsight, yes, we sold too low. But I don't regret it because at that time it was considered a great deal."

Fremont Business Park is a complex of low-rises as gray inside as they are out. By most reckonings, this isn't even Silicon Valley. Yet it is here that Bhatia launched Hotmail and it is here that he hopes once again to transform the Internet with Arzoo! - his latest brainchild. The company is only six weeks old, and the offices are strewn with boxes that once housed computers, monitors - and a ping pong table. "Stress relief," Bhatia explains and challenges me to a game. He's a stern competitor with a wickedly curling serve. I note that his game has taken him to third place on the office scoreboard. "Oh! That has to change," he says, starting for the board. "I'm No. 2 now."

Bhatia's office is monastic to say the least. There are no works of art, no priceless antiques, no backslapping photos of "Me and Bill." (Along with Gates, Bhatia has met Clinton at the White House. "He's such a charmer. You want to believe everything he says.") He extends his "cheapo" desk with a folding table. There is a mere sniff of luxury in the black leather swivel chair, but all staff get one of those.

In the office kitchen is a cartoon entitled: "How to form your very own Silicon Valley start-up." You shake a tree until a venture capitalist falls out and hands over a wedge of cash. Today Bhatia is a mover, not a shaker. "Venture capitalists call me up and say: 'Take my money! I don't need to know what you're doing, just take it!'" he says. Draper Fisher Jurvetson parlayed their $300,000 Hotmail investment into $180 million. No one wants to miss the sequel - including a Stanford classmate who made the mistake of not joining Hotmail in the early days.

All this despite Silicon Valley's Sophomore Jinx: get-rich-quick geniuses are doomed to spend the rest of their lives trying to duplicate their early success. Bhatia seems not to have heard of it. "Arzoo! is another big, revolutionary idea like Hotmail," he gushes. "Another 'Gosh! Why hasn't anyone thought of this before?' idea." Ever paranoid of competitors, he will say only this: "E-commerce portal . . . dramatically enhance the user experience . . . one-click buying . . . launch in November . . ." And then: "Half of all Net users could be using it within the next couple of years." Hotmail is one of the greatest Internet success stories yet. And here is Bhatia casually saying Arzoo! ("passion" in Hindi) will be twice as big. As he discusses the future over sodas and animal crackers, his enthusiasm fills the room. I see why Jurvetson describes him as "infectious, unquenchable - almost hallucinogenic."

Not that Bhatia is swept away by his own PR. "I could very well fail," he says. "The fun is trying and finding out." Yet even Arzoo! cannot keep his mind fully occupied. Bhatia is lining up a project to throw himself into once his new baby can walk unaided. He wants to wire India. Or rather wire India, create the conditions for a socio-economic revolution and lift the nation out of poverty. You can't fault the guy for aiming low.

Hotmail has sizzled in India (the seventh-largest market) and not only because the boy from Bangalore invented it. In a country where there are more than 50 people for every handset, sending e-mail is easier than using the phone. Bhatia was convinced India was ready for an Internet explosion, but how to get everybody online? His answer: a link-up with cable TV. One in four households has a tube - and almost all of them can get cable. Bhatia planned to plant an information pipeline from London to Bombay, rope in some of the country's 600,000 cable operators, and sell a cheap set-top device to turn the TV into an Internet gateway. Total cost: $200 million. Then he got wrapped up in New Delhi's red tape. "The task is not technologically difficult, physically it could be done in a couple of years," he says. "But the laws are so against you, the business practices so archaic, that when I went in, I saw it would take 10 years. That disappointed me."

But it did not deter him. Bhatia has adopted a more subtle approach. He sits on the board of an Indian firm called Homeland Networks that is collecting India-specific content for the nation's growing number of Web surfers. "We're capturing eyeballs," Bhatia explains. It is the first stab of a two-pronged offensive. First, build up a user base. Second, lobby government to put the laws in place that will foster an information revolution. Once the public is ready and the lawmakers have clicked, says Bhatia, "I'll branch into infrastructure." Bhatia recently sponsored and spoke at a conference at Stanford, inviting "all the people who can influence [Indian] policy." The message: On the World Wide Web, geography means nothing. The next Hotmail could emerge from Bangalore, not California.

Bhatia never did get a life-size bronze statue. Doug Carlisle was as good as his word: After Bhatia managed to push Microsoft above $200 million, they found a sculptor and Bhatia went for the first sitting. When he got home he called his mother to tell her all about it. "She hit the roof!" Carlisle recalls. "In India you don't get to have a sculpture or statue unless: a) you're dead, or b) you're really incredibly famous and have done something great - like Gandhi or Buddha!" There was no second sitting.

You can take the boy out of India, but you can't get him away from his family. Bhatia keeps in regular contact by phone and (of course) Hotmail. His sister, 26-year-old Sameena, will soon join him in the U.S., undecided between starting an MBA or launching her own start-up - a recruitment service to place Indian personnel in Silicon Valley. Big brother is advising the latter, "being a serial entrepreneur myself." As for his parents, they will be happy once he gets married. "My mom says: 'You're getting old, you're getting fat, you're going bald. You'd better get married or you'll run out of options,'" Bhatia laughs. The first time Balev Bhatia visited his son in the U.S. it was on a mission from his wife to find out why Bhatia was still single. He soon got his answer when he saw his son buzzing from dawn to dusk signing up thousands of Hotmail users. Little has changed.

With the house, the cars (his other auto is a Ferrari Spyder), the success and the nice-guy persona, Sabeer Bhatia is a candidate for most eligible bachelor in Silcon Valley. Many men in his position are parading a trophy wife to society balls. Isn't he tempted to join them, if only to quiet his parents' nagging? "Trophy wife?" he howls. "She'd give me a headache! Gosh, I would be tense at work all the time." Indeed, there is much to be done. Destinies to change. I ask him to explain how he plans to wire India and he lunges for the white board. "Here I'll show you! So here's India. We talk to Hughes, set up a satellite network . . ." Pen in hand Bhatia gets that gleam in his eye and I get the feeling that maybe he'll be needing that statue after all.

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