Yesterday, TechCrunch reported the news that Yahoo! is planning to shut down Geocities. That is sad news on many levels. Geocities was the web's first community and it was my first "mega deal" when it was sold to Yahoo! in 1999 for $3.5bn (including the value of the options Yahoo! assumed). I learned a lot from that investment and I thought I'd share some of the lessons with you all this morning.

My partner at Flatiron, Jerry Colonna, who led the Geocities investment, will read this post and will surely correct all the things I get a little wrong so make sure to read the comments. I do have the benefit of having all the cap tables and investment memos still on my laptop so most of this is based on more than memory.

In the summer of 1996, Jerry and I formed Flatiron Partners. We wanted to focus exclusively on Internet investments. We quickly rounded up two $75mm commitments from SOFTBANK and Chase and by the fall we were off to the races.

Our first investment was Seth Godin's company Yoyodyne which we had both been looking at while we were at our prior firms (Jerry was at CMGI and I was at Euclid). As we were considering what next investments to make, I suggested that we each pick a company from the portfolios of our prior firms to make an investment in. I felt that we could use a couple "sure winners" and there is nothing like cherry picking a venture fund you know well to produce a sure winner.

Jerry liked that idea. I picked Multex (which went on to go public and then sell to Reuters for $250mm). Jerry picked Geocities.

David BohnettImage of David Bohnett via Wikipedia

Jerry flew out to Los Angeles where Geocities was headquartered (it was initially called Beverly Hills Internet) and talked to David Bohnett, the founder of the company. Jerry knew that the initial $2mm that David had raised from CMGI was going to run out shortly and so he proposed that Flatiron invest $8mm at a $10mm pre-money valuation.

David immediately liked the idea of having Jerry as an investor. He knew Jerry from CMGI and they had a great relationship. But he hated the idea of selling 45% of the company when he had already sold 50% of it to CMGI earlier for $2mm.

When we showed up, CMGI owned half the company and David owned less than 35%. The rest was in the hand of friends and family and options. David felt that he had made a bad deal with CMGI and wanted to fix that in the next round.

So Jerry invited David and his brother Bill out to NYC to meet with the two of us and figure it out. We went out to dinner at a place in the lobby of the Met Life Building (which I still think of as the Pan Am Building) and discussed the issue at length.

At that dinner, I proposed that we issue David 500,000 options as part of the financing which would be 10% of the company post financing. He and Bill went outside to talk it over and they came back and told us we had a deal.

So we drafted up a term sheet and sent it to David. Flatiron and our partners SOFTBANK and Chase would lead an $8mm financing at a $10mm valuation. CMGI would invest $2mm of the $8mm and we'd issue 500,000 options to David. We'd add to the employee pool as well. After the financing, Flatiron and our partners would own about 30% for our $6mm, CMGI would own about 33%, and David would own north of 20%.

David liked the proposal and he sent it to CMGI for their approval. They hated it. To this day, I'm not sure if it was the fact that a former partner, Jerry, was showing up and attempting to invest in their little secret or if it was just the financial terms. But whatever the case, they fought the idea for a while. I don't recall exactly what the delay was all about. I assume they were looking around for a better option. But finally they came to the table.

They demanded that we split the 500,000 options and give half of them to CMGI and half to David. They saw them as a sweetener for David, which they were, and wanted to participate. After a lot of back and forth, none of it pleasant, David conceded. And in the late fall of 1996, the financing closed.

Three years later, when Geocities was sold to Yahoo!, those 500,000 options I came up with over dinner in the old Pan Am Building lobby were worth $234mm. By then they had split 2 for 1 twice and David had given a bunch of them to his co-founders. CMGI still had all of theirs.

We decided to invite a couple of other VCs into the deal. I was concerned that Geocities was in LA and we were in NYC and CMGI was in Boston. I felt that we needed a local VC to "watch over the deal". The only VC I knew in LA was Harry Lambert of Innocal, who had previously been at Innoven in New Jersey. So I called up Harry and asked him to go see David. They hit it off and so we allocated $1.75mm of the deal (which we increased to $9mm) to Innocal. We also invited Intel into the deal, also allocating them $.175mm. Between Intel, Innocal, SOFTBANK's Charley Lax, and Bob Greene from Chase, we had quite a few VCs involved in that first round.

I've always felt that syndicating a deal to other VCs who can be helpful is a good idea. In the case of Geocities, we cut ourselves back by $3.5mm, which ultimately became worth $500mm, and I'd do it all over again. Intel wasn't particularly helpful as investors, but their brand was helpful to the company who used it actively. But Harry was a big help. Less than six months after we made our investment, the company was burning through cash and there were no financial controls in place. Harry showed up with his team and got things under control, fixed the financial management, and bought enough time to get another round raised.

As we were getting ready to close our initial round of financing, the November 1996 Media Metrix numbers came out. Geocites, which was growing like crazy, had made it into the top ten. I turned to Jerry (we shared an office back then) and said to him with a big smile "we are about to invest in one of the top ten internet companies in the world at a $10mm valuation." Not many people understood how big a deal that was back then, but we did.

We did not have an investment analyst on our team at that time and we needed to do a lot of work on the market and what the other home page services were and what their tools were like. Jerry called up Jason Calacanis, who I had not met at the time, and we brought him in and hired him as a consultant. He was young and smart and a wiseass. Some things don't change. Jason did all of our deep analysis on the Geocities deal. He didn't get any Geocities stock out of it, but he did get Flatiron as the advertising sponsor for the first issue of Silicon Alley Reporter out of that gig.

After Harry and his team got the finances under control, Geocities started to prepare for another round of financing. It was the summer of 1997 and the Internet investing climate was not great. We did an insider round at 4x the last round price and raised another $5mm.

But by the end of 1997 and into early 1998, things were heating up and SOFTBANK and Yahoo! had their eyes on Geocities. The two companies proposed to invest $25mm into the company at a $225mm valuation and also do a $50mm secondary purchase from the investors. All of the investors in the initial round other than CMGI and SOFTBANK participated and Flatiron and Chase sold a third of our position to SOFTBANK and Yahoo! at $15/share (post a 2/1 split so actually $30/share pre split). That was almost 10x on our purchase price in less than two years. By selling a third of our position for 10x what we paid, we locked in a 3x on the deal and still had 2/3 of our investment working for us.

When the company went public a year later and eventually sold for $120/share to Yahoo!, Jerry and Bob Greene (our partner at Chase and eventually our partner at Flatiron) asked ourselves if we had made a mistake selling a third of our position in December 1997 and January 1998. I didn't think so and I still don't. Yes, the shares we sold for $15/share would have split 2/1 once more and would have been worth $120/share in the Yahoo! sale, but I don't think you ever should regret taking a 10x gain and taking some money off the table. We did that and I don't regret it one bit.

The rest of the story is pretty well known. Around the time of the Yahoo!/SOFTBANK investment, David recruited Tom Evans to join the company as CEO. Tom took the company public in 1998 and sold it to Yahoo! in 1999. Tom did not join Yahoo! and went on to build and run several very successful public companies. David made a bundle in the sale of Geocities, turned his energies to other interests for a number of years, but is now back in the saddle as the founder of another internet startup in LA.

And Jerry, Bob, and I went on to exit from dozens of internet deals in 1998, 1999, and 2000 before the market blew up and Flatiron stopped making investments in the summer of 2000. Between all the big exits we had in Flatiron and a number I've had since, you might think that Geocities is just another deal. But for me, it was the first rocket ship ride I had in the venture business and it will always have a special place in my head and heart because of that.

I learned a lot from that deal. I learned that the Internet is all about people expressing themselves on pages they own and control. I learned that a business deal made over dinner and a handshake can turn into hundreds of millions of dollars, I learned that good partners are worth every penny of returns you give up to get them, and I learned that selling too soon is not too painful as long as you don't sell too much. And most of all I learned that you can make 100 times your investment every once in a while. And when you do, it's something special.

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Comments (Archived):

  1. Shafqat

    Fantastic eulogy Fred – I think everyone in the business has fond memories of Geocities.For me, that was the place where I first learned how to code (“HTM what?”), and believe it or not, the first website I ever saw graphically was also Geocities. I was on Lynx before that. It was also the first time I made money on the internet – I had a link to on my Hootie and Blowfish fan site. Yes, embarrassing but these are golden memories. Back in 1997, I was making a ton of money (for a teenager) from referrals.That was then – now I’m building web businesses for a living, so I guess I owe it to Geocities for getting me hooked.

  2. Jerry

    Nothing to correct buddy. Just adding that YOU taught me an enormous amount of things in that deal…from great ideas like the 500K option deal sweetner to the ethics of how to conduct oneself.Folks who read Fred’s blog should know from the above story what a brilliant and high integrity investor he is.

    1. fredwilson

      Well that’s being modest Jerry but then as I said in the post, some things don’t change

      1. Jerry

        It’s worth noting all the positive responses to this post…it seems like people really benefit from hearing the details on stories like this. I think it’s one of the things you do best in this blog.

        1. David Semeria

          The best part is Bill and David popping outside for a quick talk and then coming back and shaking hands with you both.It’s really heartening that both sides would accept a deal (at least in principle) and agree to it without the usual recourse to counsel.I’ve always thought the business guys should do the deal first, and let the lawyers sort out the details later.

          1. fredwilson

            Well Bill is a lawyer and damned good one. He was also David’s brother and an investor in the company. That’s what you want in a lawyer I think

          2. David Semeria

            I’ve got nothing against lawyers – but it’s the handshake that counts.

        2. fredwilson

          I’d like to do more of it but it takes a lot of inspiration to get me to do it. Shutting down geocities was plenty of inspiration

          1. kidmercury

            bad news always provides the best inspiration 🙂

          2. fredwilson

            Sadly that’s true

  3. Eric

    Great story Fred. Not surprising that you remember all of the details of such a big win. Wonder what the next 100x opportunity will look like.

    1. fredwilson

      I’ve got my eyes on a few suspects in our portfolio but I don’t want to jinx them

  4. RacerRick

    Great story. What an amazing time.

  5. David Semeria

    An inspirational post Fred, well done.

  6. DonRyan

    What a terrific story Fred. Thanks for sharing it.

  7. Darren Herman

    Thank you for sharing Fred. Love these types of stories.

  8. Dorian Benkoil

    Great post. Any chance you’d want to share some of those cap tables or investment memos?

    1. fredwilson

      I thought about posting the initial cap table but it felt a bit too private. Even after 13 years

      1. Eric Marcoullier

        Regardless, even this level of insight is wonderful. Thanks for writing the details up. I wish there were more of these case studies available.

  9. Sahar Sarid

    “I learned a lot from that deal. I learned that the Internet is all about people expressing themselves on pages they own and control. I learned that a business deal made over dinner and a handshake can turn into hundreds of millions of dollars, I learned that good partners are worth every penny of returns you give up to get them, and I learned that selling too soon is not too painful as long as you don’t sell too much. And most of all I learned that you can make 100 times your investment every once in a while. And when you do, it’s something special.”Well said, why Facebook, Myspace, and others are growing so fast.Good read overall, thanks for sharing.Sahar SaridCo founder, – Social Auction Platform

  10. Andrew Payne

    Great story!I’m going to be a little bit unfair: I know you wrote this as an investment story, but it’s also an example of a mind-set challenge in venture these days (e.g. sometimes a disproportionate focus on deal terms vs the work of creating a valuable company). I’m sure you didn’t mean it that way; it would be great to hear the (equally detailed) story about building the business.

    1. fredwilson

      Well we will need david bohnett to tell that story. VCs have a front row seat but its the entrepreneurs who build companiesAt best, the VC is a consigliere and a recruiter and a strategy advisor and investment bankerBut we don’t start and run businesses.

      1. JLM

        VCs are “enablers” — and that’s a good thang!

        1. fredwilson

          My wife tells me I do the same thing with my kids

    2. Cayce Pollard

      Surely the story is that the business didn’t matter: it was just a question of a finding a greater fool (as economists call it).

      1. fredwilson

        Geocities was the beginning of social and media and could have been myspace, facebook, and a host of other companies if it was managed properlyI’m not suggesting it was worth $3.5bn back then.But the greater fool was the company that didn’t understand what it was buying

        1. Jon Knight

          Well said.

        2. Greg Solovyev

          It seems to be a trend with them. Somehow they manage to buy many great startups with great ideas and products, but then these startups stop evolving. Flickr’s falling behind Picasa, Zimbra isn’t beating MS Exchange. By the time, Y! Mail switched to Oddpost’s new interface, GMail has already out of beta. Inktomi, Overture, Altavista, and Alltheweb altogether never caught up with Google. Anyone remember Bloomba? Will IndexTools beat Google analytics? Where’s Maven Networks now? Couldn’t HotJobs combined with Geocities and yahoo profiles be what LinkedIn is now? Just sad…

  11. leeschneider

    Great article Fred. One of the best I’ve read on your blog. I always loved when people would find one of my Geocities sites years after I had created it and thought it to be dead. Always gave me a good chuckle. And congrats on the deal (although nearly 10 years too late).

  12. Jonathan Glick

    Fantastic story, Fred. Very helpful.

  13. john bolger

    yahoo announced the news yesterday. in retrospect, it’s clear this was a poor decision. i won’t say they got swindled but geocities offered very little value – surely nothing near the price paid. i see no reason to applaud that deal. it represented the excess of the dotcom days. hopefully, we’re a bit saner nowadays. maybe

    1. fredwilson

      See my comment to the prior email. Wrong price, right idea, terrible management

  14. ErikSchwartz

    From the acquiring companies side what I learned in this deal was:Buying reach is a fool’s game.Some inventory is really hard monetize.Making big acquisitions on fuzzy integration plans is fraught with peril.

    1. fredwilson

      When yahoo did not work hard to keep tom post deal I knew it was time to sell all of my yahoo that I got from yoyodyne and geocitiesOne of the best moves I ever made.Tom was and is a tremendous leader and exec and would have helped yahoo immensely at that timeHe could have run yahoo better than tim, jeff, terry, or dan

      1. ErikSchwartz

        There was a lot of hubris at Y! then,That, Geocities, and BCST were what let me know the whole thing was going to come crashing down.Leaving Y! and selling all my stock (except one share, now split) at the end of 1999 was the best move I ever made.Todd Wagner could have also helped Y! enormously.

  15. Jack Barber

    2 questions:1. Are there any fiduciary issues associated with offering a 500k option “sweetener” like this to the founder? (fiduciary might not be the exact right term here but hopefully you’ll know what I mean)2. I guess prev investors + common is always vulnerable to getting screwed with each new round of financing. And they do get screwed unless they have leverage not to.I understand David’s in this case — you needed him to do the deal, and at least for a time to continue to lead the company twds exit / success.What was CMGI’s leverage in this instance?

    1. Jack Barber

      re #2 above — sorry I didn’t read more carefully — I assume their leverage was simply majority (or plurality) control…

    2. fredwilson

      They could block the deal

  16. Soso Sazesh

    This was really an insightful post. Thanks for sharing all that info.

  17. Jason

    Great timing for the article considering that the internet today is in a similar era… things are about to BOOM!

  18. Bennett

    Your statement “it was the first rocket ship ride I had in the venture business and it will always have a special place in my head and heart” pretty much sums up my experience from the PR side. Along with FreeLoader, Geocities stands out as a landmark client in my career.

    1. fredwilson

      Freeloader was the launch rocket and we hit escape velocity with geocities

  19. tanomsak

    Great read, any very entertaining, Thanks for sharing

  20. JLM

    Great story and highlights the use of case studies as terrific educational tools and thought pieces. There is so much context to the story that it provides a keen insight into how important people, timing, temperment, creativity and luck are in business.It would be interesting to take that case study and distill it into several “rules” for business. I see many such useful observations. The cumulative impact is the difference between a single and a grand slam.”America does business with its friends. If you want to go into business with somebody, make sure you CAN be friends.”

    1. fredwilson

      Luck is certainly a big part of it

      1. Marc

        I learned somewhere else (fighting on a ring) that luck is what happen when you work hard, make the right decisions and implement well when the time as come. Then, sometimes, you can be lucky. But I am certain that you know that already 🙂

        1. fredwilson

          Yes I do. But I also know that luck has played a big part in my career

    2. mpreston

      GeoCities brings back interesting memories. I was 14 at the time, and someone I know ended up posting a list of “top cute girls” at our middle school in Palo Alto on a GeoCities page. It took months for the administration to figure out what GeoCities was, but when they did, it was a big deal. A PTA meeting was called, and everyone was up in arms about this “Internet thing” and whether it was “bad for our kids.” I think GeoCities was the first time people (even here in Palo Alto) started to really understand the inherent democratic power of the Interwebs.

  21. Jeff Hilimire

    Love the history on Geocities, Fred. It was Geocities that originally got me into the internet and subsequently led me to create a digital agency back in 1998, which I successfully sold to a private equity group in March of 2008. And that led me to recently co-found a technology accelerator fund in Atlanta (Shotput Ventures) similar to YC.So I have a lot of fond memories of Geocities and it certainly had a huge impact on my life. Glad to hear you were a part of that.

    1. fredwilson

      As were you. Geocities like blogging, disqus, twitter, etc was nothing more than the people who built stuff on it

  22. Joe Lazarus

    Great story. I never used Geocities, but it’s sort of sad to me that it just faded away and is now gone for good. Most surprising to me was that Geocities still gets 11M uniques a month. That’s a lot of traffic for a bunch of useless pages of animated gifs.

    1. Vaibhav Domkundwar

      Joe, I wonder what the cost of running Geocities was and why it could not have been put on a backburner – didn’t look like they were developing it anyway. There’s so much they could have done with that property. A MySpace for businesses perhaps.

  23. Vaibhav Domkundwar

    Great post, Fred and one of the best and most inspiring ones on this blog.

  24. Laurent Kretz

    Amazing post, so inspiring….Amongst what you learned, anything you applied specifically to the other exits “from dozens of internet deals in 1998, 1999, and 2000” ?

    1. fredwilson

      I didn’t really start applying most of these lessons until the early part of this decade.1999 and 2000 were a blur unfortunately

  25. Aaron Klein

    Fred, not trying to be too schmaltzy, but it seems like you have a really different and unique view of working with entrepreneurs. Almost all of the VCs I’ve talked to are more like CMGI: only looking out for #1. Care less that the founder will end up with token ownership. No clue that building and incentivizing the right team is the key to success.So just a point of encouragement: I’d do a VC deal with your firm any day of the week because of how you treat entrepreneurs. Of course, your main focus has to be generating a return for your fund, but you get it that the two are not mutually exclusive. That’s rare, frankly.

    1. fredwilson

      My motto is be greedy for your career but never greedy on any one deal. I think the two are mutually exclusive

      1. McLarty

        My uncle always says “You have to leave something on the table, for the next guy”……words have done me nor him no harm, so far.

      2. Aaron Klein

        That’s the part of greed that is good. Well put.

  26. Jon Wu

    Why was Geocities a good investment? It was never profitable and was eventually shut down.

    1. fredwilson

      It should have been massively profitableIt generated huge pageviews and was not expensive to operate

      1. MParekh

        Great trip down memory lane, Fred. Both Geocities and Multex are good memories, replete with good lessons.

        1. fredwilson

          IndeedI’m involved with isaak and his team again in a company called infongen

    2. deancollins

      Yes I thought the same thing.It’s funny how times change/look at twitter pre rev etc and how they are accepted.I was at an event today where Albert Wenger said he pretty much wouldn’t fund any “ad banner” only revenue companies……. Isn’t that what Geocities was all about revenue wise?Cheers,Dean

    3. grishick

      Geocities is the prototype of today’s social networks and blogging websites. It could have been hugely successful, had Yahoo! managed it right.

  27. Mike Su

    Great post. Of course, with so many of your posts Fred, they get me thinking about some other tangential but related topics.I’m trying to think of a major acquisition (+$1b) where the acquirer actually got real long term value out of it. And I can’t. Small purchases of IP and technology seem to generally make sense. But the probability of a large (and by definition political) organization to absorb another major entity, understand their strategy, and weave it into the DNA of the new combined entity is slim to none. And yet our entire system is incentivized to make these deals happen time and time again. Everyone wins except the long term shareholder.The acquiring company, usually a leader in a particular space, is under tremendous pressure to keep their revenue chart going up and to the right. It’s so impossible to do this organically once you reach a certain scale. So they look to acquisitions to help paint the “story”.The acquiree must either aspire to become *that* company, where they are 10,000 people strong, public company under pressure to grow quarter by quarter, or they can cash out nicely and let someone else worry about it. If you’re an entrepreneur, you really don’t want to become *that* company, that’s why you started a company in the first place.So the acquirer buys a great up and coming company, the founders cash out, the acquirers can’t hold onto the founders because they’ve made enough money and can’t stand sticking around pushing power point slides and fighting turf wars. So the acquirer loses the few people in the company who actually understand the business. The stock price of the combined entity continue to rise for a few quarters, maybe even a few years, on the momentum of the existing product sets. But eventually 1~2 years down the line, the code gets bloated, only incremental features are added, nobody wants to be the one to take a big risk and jeopardize the existing revenue streams, so it kinda just chugs along. All the original talent from the startup have left since they’ve made some money, and hate working at a big company, and the culture they had is no longer there. So it goes until some other startup comes along and catches them sleeping. By then the acquired product has sat on a shelf for so long and is no longer sexy, and the stock plunges back down. CEO gets fired…so on and so forth. Entrepreneur is sad because their baby got butchered, and drowns their sorrows in a gulfstream jet on a trip to France. Does the story go any other way?Given the financial incentives that are currently in place for all parties involved, there is little reason to do this otherwise. So it all makes sense on a micro, 2-5 year horizon level for everyone involved. But for someone who wants to build something of value that lasts for a generation, it makes zero sense. But does anyone really do that anymore? Would anyone even be able to keep their job in this environment if they set out to build something that lasts for a generation? This is such a fundamental problem that touches on so many aspects of how we got to where we are today as a country.

    1. vadadean

      It looks like the Google-YouTube deal will be a +$1BB deal with long term value to the acquirer. Further evidence of the management chasm between Google and Yahoo.

      1. Mike Su

        The jury is still out on the YT acquisition. GOOG is paying through the nose for bandwidth costs and it’s not yet making a huge revenue impact relative to the purchase price. Time will tell.However, what the YT acquisition has going for it is that it was a very young company, so it hardly had time to establish culture, one of the most difficult aspects of an acquisition that is often the most overlooked aspect.Also, remember, circa 1999, Yahoo was Google. Before Larry and Sergey, it was Jerry and David (and of course before them was Bill and Paul). I’m rooting for Google to buck the trend, but it’s a very very hard to focus on the long term when the CEO has to march off the plank and up to the speakerphone quarter after quarter and show results.

        1. vadadean

          Yep, the jury is still out. However, unlike Yahoo!, Google is very aware they are in the knowledge and organization business (nod to Jeff Jarvis). From this perch they are in the best position to harvest the attention value and community value within YouTube. I fully intend to help them.

    2. fredwilson

      Its part of the reason I want to see a secondary market emerge so companies can stay independent and still generate some liquidity for founders and investorsAll your points are right and its a huge issueBut there are examples of where it works. Cisco, for example, has gotten huge returns on many of its big money acquisitions

    3. Will

      “But for someone who wants to build something of value that lasts for a generation, it makes zero sense. But does anyone really do that anymore? Would anyone even be able to keep their job in this environment if they set out to build something that lasts for a generation? “I think Wikipedia will very likely last for generations, and it’s a company designed to last for generations. It has over 2 million articles and continues to balloon with every waking moment. There are no serious competitors. I don’t see another user-generated encyclopedia EVER coming along and knocking Wikipedia off its throne because it’s lead is so magnanimous. I won’t be even marginally surprised if Wikipedia is around in 2109 and still viewed as the preeminent source of reliable information.That said, Wikipedia and Google may be the only two Internet companies with a high probably of lasting over 100 years, and perhaps that’s sad.If I was forced to pick a third Internet company with a chance of being around in 2019, I would pick Mahalo Answers for one simple reason. For whatever reason, people will always need to ask questions and get immediate answers from other real people. Yahoo Answers has been the market leader in the U.S. since it’s inception, and Wiki Answers etc. have barely carved into it’s market share. But Mahalo Answers will because it’s the cleverest of these answer services by design. Once it overtakes Y! Answers, it could very likely retain its lead for generations and generations.

  28. Nick O'Neill

    When’s the book coming out? This surely makes for a great chapter in it!

  29. Joseph Sunga

    This was a great article. I love how you are so open with a lot of things and are willing to share it with the public. Thanks a lot for the insight. Cheers!

  30. Ari Weinberg

    Time to pull down my Geocities page. Hasn’t been touched in 10 years.

  31. JayR

    That deal also holds a special place in my head and heart as well. It was the first investment where I represented Flatiron. It was all downhill after that … 😉

    1. fredwilson

      Your killing me Jay.

  32. Prokofy

    I desperately wanted to like and use Geocities and was so thrilled with it at first when it came out because I thought it was going to be *the* way to provide an outlet for comic strips I made and a club I had founded with other people making stories with the Sims. But it was so frustrating to try to get it to work, I eventually left it for where the tools were loads easier to use. I kept my geocities page up forever because I associated it with an epic struggle to try to get a page to do something that failed for me but which had enormous amounts of time and energy in it. I can still see those little boxes before me now…I agree Geocities was crossing a threshold into social media land. In the end, for me and groups I worked with, tripod and lycos plus zing (remember zing,com, unlimited photo storage for life?) simply were easier to use.I am curious again about the glue that makes the people in these venture capitalist collectives stick together, i.e. what gets you to lay your money down next to the other guy’s, sounds like you have to war an awful lot over the splits, sounds like very hard work.Also, it’s good that you’re no longer associated in business with J.P. Morgan Chase, which these days runs what amounts to little more than a payday loan mill with their outrageous fees and practices.

  33. pallian

    I’m a web developer today thanks to Geocities. I wish I still had my first geocities webpage today.

  34. Kevin Cimring

    Hi Fred, jewels like this make your blog my #1read on the Internet. I agree with Nick O Neill who suggests you write a book.I’m only sorry I never took your advice to buy Google at sub-$300 :)Thanks for a consistently great blog – hugely valauable as I make my way through the start-up world here in Silicon Valley.Kind regardsKevin

    1. fredwilson

      Thanks for the nice words Kevin.

  35. Jonathan

    great post. educational. even inspiring. i’ll be share to visit you when/if i’m ready to pitch my company for funding.

  36. Pang Chan Yip

    Hi,May i know if google’s business model can be considered as Freemium? If not, may I know if there’s any name to their business model?Thanks!

  37. iPosit

    Awesome article, Fred! Love that you take the time to compose these blog posts. You’re a true thought leader & pioneer regarding transparency & openness in business. I’ve been reading your blog for years & will continue to do so.I’m not that familiar with Tom Evans and his previous companies, so I’ll have to do some research there to learn more. Sounds like he’s a very talented CEO as you speak very highly of him.Also, I’d actually love to read a similar article like this, except charting your investment in Seth Godin’s Yoyodyne. I find it interesting that you were involved in that one too.Keep up the great work,Charlie

    1. fredwilson

      The yoyodyne story is a good one. I’ll have to take some time to do that. There’s a lot of lessons there too

  38. Aruni S. Gunasegaram

    I enjoyed this post. These kinds of stories reinforce the relationship aspect of any business. No matter how much people try to automate things and how much we rely on virtual connections, there is no replacement for face to face, human to human connections to make things happen.

  39. Steven Kane

    i forgot that yahoo already owned a chunk of geocities before they acquired the companyhard to tell from your post, but looks like they owned 20% ?if so, actual acquisition cost was $2.8 billion ($3.5 billion X 80%)?

    1. fredwilson

      I think it was 10%, Softbank and yahoo! Together owned something like 25%

  40. Gianluca Dettori

    Great post!!g.

  41. Armand Aguillon

    Great post Fred! I came across your article from a twitter link.I work for a Private Equity company in Australia and although VC is a little different (but still a type of PE), the way you did the deals (over dinner and a handshake) was quite remarkable. And I believe a lot of deals were done that way back in the internet days… I’m not sure if deals are still done today like they used to (especially at these times).Nevertheless, I enjoy your post and I have saved this site as one of my favorites. Thank you Fred.

    1. fredwilson

      Just to be clear, we did “paper over” the deal

  42. George Nimeh

    Great post Fred. Another beauty. The transparency and history make for a great read.While I’m sure he’d say something like, “I got a lot of great experience and an ad partner for my new mag” I’m sure Jason Calacanis quietly burns from not getting any Geocities equity from his involvement in the deal. At the time, there were very few people who understood the players and the market. And you needed that info, which I’m sure was incredibly valuable in the process.I know he’s learned a ton about the VC/investment side of the biz since then (and has obviously done well as a result), but I can’t help think that you knew what this young lad was contributing to the process, but you were more than happy not to have him reap any of the rewards.Looking back, do you think that was fair?@iboy

    1. fredwilson

      I believe we paid him for his time

      1. jasoncalacanis

        At the time Acme Ventures–aka Flatiron–was paying $1,000 to come in for lunch twice a month and talk about the internet. I was a 24 year old kid from Brooklyn starting up his own magazine, getting tons of attention, had a killer 3/4 black leather jacket, was going to all the right parties, eating at Nobu and was dating a Germany eight years my senior.No one in New York City had it better than me as far as I could tell–no one.I told everyone on the planet I read business plans for Flatiron Partners in order to get meetings, emails and subscriptions and advertisements for Silicon Alley Reporter. Also, the home run of Geocities forever burned in my mind the value of stock options… good lesson to learn at that age frankly.I didn’t grow up rich and I didn’t even understand what venture capital was. Fred and Jerry explained to me what a limited party was, a term sheet, and even a business plan. They taught me the ropes even after I stopped reading business plans for them.Additionally, Fred and Jerry have championed my cause for over a decade. Jerry gave me tons of advice on Weblogs, Inc. and Fred met with me for hours when I was coming up with the idea for (he even angel invested which he didn’t need to do and I didn’t need to take since we were oversubscribed–but we did because we’re friends and we’ve been in this so long together).I’m certain they weren’t throwing stock options at everyone helping them out so there are no hard feelings–in fact he opposite. Jerry and Fred gave me some of the my first critical chances…. which I took, resold, flipped and exaggerated into the career I’ve got now.Fred’s been an older brother to me for 15 years and I’d have a hard time thinking of anyone else who’s gone to bat for me more times.Also, I never have to the pick the up the check when we eat expensive sushi.Finally, it’s never too late. If Fred can’t live with the guilt he can donate the 100 shares he would have given to me to some amazing cause of his choosing. :-)Peace and love for the old skool,jcal

        1. fredwilson

          That’s 400 shares (two 2/1 splits) times $120, so it had better be a good cause Jason!

        2. George Nimeh

          Jason, an inspired reply and wonderful incentive for others to build strong and valuable relationships that endure. Everyone knows you always had a ton of drive, but determination alone never would have done it, imho. It was your ability to see the opportunity of instances like this and take ’em for all they were worth. And lucky for you Fred and Jerry weren’t the type to pay you on the day and forget about you the next.As for Fred, Jerry and the Flatiron crew, it certainly would seem that they got a very good deal at the time, but that they’ve also paid it back in more ways than cash or shares. Once again, their way of doing business should serve as a model in more ways than one.Hat tip to all of you. Respect.I’m inspired, once again. :-)@iboy

  43. lisa witz

    I enjoyed your article. I was an employee at GeoCities during all this and it’s so interesting to read about it from your perspective – I was sad, too, upon hearing that Yahoo is shutting it down but it’s a great chapter in internet history.

    1. fredwilson

      What did you do at geocities?

  44. Harry Lambert

    Fred-You give me and colleagues too much credit here, and I can only echo Jerry’s observations below ,and thank you guys again for the chance to work with you on this very interesting and most successful deal. I had been frustrated previously in another fund, when I had been unsuccessful in selling parners on investing in Multex,both when you had first done that deal at Euclid, and later.GeoCities was a fasinating deal from many angles. David Bohnett was no doubt the Father of Community, and his passion for the deal jump-started and maintained the growth ride, wild for that era. He was, and remains, a true internet visionary. John Rezner, our technology point man was making it up as we went along, and did so very successfully. In retrospect it’s easy to forget his contribution, but I believe he presided over the greatest,fastest growth the web had seen to that time, with very little to guide him.The Board and Shareholder dynamics leading up to the IPO, and later the deal with Yahoo, were at times bordering on the bizarre, with many different “points of view” advanced at every turn, and each critical juncture. But at the end of the day things came together in a deal that I believe was good for all involved at GeoCities. All’s well that ends well!A great post, Fred.

    1. fredwilson

      Hi HarryThanks so much for stopping by and leaving your thoughtsI am sure you are right about John. I did not have the benefit of working with him directly but he clearly was dealing with hypergrowth before a lot of people knew how to manage thatAnd the board/investor dynamics were certainly interesting

  45. Eddie D

    Having been at Yahoo! during this acquisition (as well as Bcst, Launch; pry the best $12M Y! ever spent! etc….) it’s clear we were 10+ years ahead of our time in not being able to monetize social media. Yes, it brought scale, but other than that, we never figured out an efficient way to package the best and cleanest of the content into meaningful brand campaigns. Reminder that we had no “adsense” monetization effort at the time (pre Overture days), had let search slumber, and were all about big-ass brand campaigns. Looking back, it’s not surprising we weren’t able to effectively integration and monetize under the model that existed.But, I will say Lisa and her cohorts were a blast to party with and brought endless fun to the old school sales conferences!

  46. Ed

    Wonderful article! I got my start on the net setting up a Geocities homepage in ’95. It had lots of animated gifs and a hardwood background since I was into basketball. Now I’m a marketing manager for a fairly large Nordic online property.

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