A $3 million seed evaporates over a coup — and a founder walks out of Steve Jobs's favorite dining room with no money and a plan
Doug Ayer's ultimatum at Il Fornaio — hand operational control to Louis Woodhill or lose the financing — met the shortest negotiation in this record: 'I decline your offer.' The walk back to Steiner Street, the three co-founders' reactions, and the dialing-for-dollars campaign that ended in two competing Series A term sheets.
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With Larry's backing and an unpaid eight-person team working out of my Steiner Street house, Bill Draper offered a $3 million term sheet to lead our seed round. Doug Ayer, running a $300 million Stamford-based fund called International Capital Partners, carved out $1 million of that round — pitched as bringing ‘East Coast deep pockets,’ but really buying his way into top-tier West Coast credibility alongside Sonsini and Draper. I also brought in a $250,000 syndicate of friends and professional references, including Darby Williams.
Then came the creeping mandates. Doug pushed me to take on an operating partner. Jim Woodhill, who had just been ousted from his own company, suggested his brother, Louis. Louis flew out and stayed at my house. He had no software background — he did synthetic fuels in Texas — and the cultural dissonance was immediate: we were talking about the new Star Trek series, and he called it ‘totally unrealistic’ because the ship had a female captain. I pointed out they were in a weightless environment in the 25th century. ‘It just is,’ he replied.
The Woodhill brothers liked shock humor. At a due-diligence dinner at Bix — the legendary supper club tucked into Gold Street in Jackson Square — we were at my favorite table on the lower level, my co-founder Richie Saville next to me, totally deaf in one ear from a rugby collision. Mid-dinner, Louis dropped a punchline across the table: ‘AIDS in Africa is not the problem. It's the solution.’ I wasn't personally freaking out — I'm not easily offended, and knew he was a Texan trying to get a reaction — but I knew that kind of joke was a massive deal risk in San Francisco. I physically walked around the table and gave him the pragmatic read: you shouldn't tell jokes like that when you're trying to close a round in a town you don't know.
Despite the friction, I offered Louis the COO role and 5% of the company, quietly hoping he would decline. He accepted — and the takeover attempt began. He suggested renaming the company ‘Mission Critical Software’ using rights from his old venture, and pitched moving the operation to Houston. The breaking point came when I overheard him on the phone through the walk-in closet in my bedroom, demanding 10% equity and operational control, stating I wasn't ready to run the company. Smelling an impending intervention, I went straight to Larry Sonsini and asked if WSGR would stay in if the institutional money fell out. Larry said: ‘Absolutely.’
That night I had a scheduled dinner with Doug Ayer, Bill Draper, and the Woodhills at Il Fornaio at the Garden Court on Cowper Street in downtown Palo Alto — the epicenter of tech power-dining and one of Steve Jobs's go-to spots. Doug delivered the ultimatum: accept the new operational control for Louis, or they would withdraw their financing. ‘Okay, well, thank you very much,’ I told them. ‘I decline your offer, so we're going to move forward without you.’ I got up and left.
I drove the forty minutes back to Steiner Street, where Richie Saville, Corinne Martinez, and Tom Noyes were waiting. ‘Good news,’ I told them. ‘We're cowboys again. Louis is out, the money's out. I'm calling my buddy Russ Deleon at Morrison & Foerster, and we're going to start dialing for dollars on our own first close.’ Corinne looked shocked. Richie just said, ‘Great.’ Tom Noyes started laughing and said, ‘I always knew you were crazy.’
We executed that first close on the $250,000 syndicate. Shortly after, Russ Deleon quit his job at MoFo to officially join us as in-house counsel, and led a relentless dialing-for-dollars campaign while we hunted for a Series A lead. Russ was a formidable operator in the trenches with us — years later, he and his wife, my good friend Ruth Parasol, would co-found PartyGaming, ride the internet boom to become online poker billionaires, and relocate to Europe.
Because of that momentum, we eventually secured two competing Series A term sheets: one from Benchmark Capital — a TVI spin-out led by Val Vaden, my former boss at Tesseract who had orchestrated their $52M sale to Ceridian — and another, on superior terms, from Bill Hambrecht at H&Q Ventures.
An ultimatum in Steve Jobs's favorite dining room, answered in nine words; a forty-minute drive home to three co-founders and a phone; and the ending the blueprint predicted — investor competition regenerated from a $250,000 base until two term sheets were on the table. All art, no science, and the art held.
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The record holds one fact and says so
Open →In the graphThe venture pioneer who would have led Evolve's seed; the record holds him at both dinners
Open →In the graphThe synthetic-fuels Texan whose COO stint lasted from a Bix punchline to an Il Fornaio ultimatum
Open →In the graphOne of Hare's oldest friends and the second patron in this record — whose Capitol Hill house held a future Senator and a future Speaker
Open →In the graphOne young entrepreneur a year. Thirty minutes.
Open →In the graphOne of Hare's best friends: Evolve's VP of International Business Development in London, then an investor twice over — once completed, once pulled back for a rainforest
Open →In the graphPartyGaming co-founder, and a truly good friend — by the author's own recorded criterion
Open →In the graphEvolve co-founder; beside Hare at Bix; unflappable at Steiner Street
Open →In the graphOf the Steiner Street founding team, present for the cowboys-again announcement
Open →In the graphOf the Steiner Street founding team; the verdict the record most enjoys
Open →In the graphHarvard then Stanford, Tesseract, Benchmark — and a game of chicken with a city bus
Open →In the graphThe H&Q venture legend, one of Evolve's two competing Series A offers
Open →In the graphOf the $250,000 syndicate that made Evolve cowboys again
Open →In the graphThe unpaid eight-person team, the overheard coup, and the room where 'cowboys again' was announced
Open →In the graphThe Jackson Square legend — lower-level table near the bathroom — where Louis Woodhill tested San Francisco's limits
Open →In the graphThe Cowper Street epicenter of tech power-dining, where Doug Ayer's ultimatum met 'I decline your offer'
Open →In the graphThe company of the vignette cycle: Draper's term sheet, the Woodhill coup, the walkout, and two Series A term sheets from a $250k base
Open →In the graphConsilient Architect — the node this graph was seeded from
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