Consilient, 1999–2001
The company Hare renamed in order to reach E. O. Wilson. It reached about a hundred people with revenue from Intel, BP and AIG, and was ended by two contractual mechanisms — one he designed and one he agreed to.
This is Hare's own company and his own worst year, told against himself.
He proposed the uncapped convertible note. He agreed to the silver bullet clause without pushing back, because the people asking were his mentors and he had reasoned through when it could realistically be used. He was wrong, and he lost the company he had renamed in order to reach E. O. Wilson.
Everything structural in the architecture descends from that year. The transitional signing authority he holds today is narrow, expires on deployment, and cannot distribute value to its holder — which is a direct answer to a clause he signed in 1999 and could not survive in 2001.
This is where the architecture's central design principle was learned at first hand. Both instruments that ended the company were agreed to in good faith, by people acting reasonably, and they still produced the outcome. That is why the QPN removes discretionary levers rather than trusting whoever holds them.
The company was ended by two mechanisms. He designed one and agreed to the other, both from a position of strength, both against people he trusted. Nobody imposed either. That is the whole argument for structural rather than contractual enforcement, and he learned it at his own expense.
The trail exists so that people who were there can reconstruct their own memories, recognize what they helped incubate, and add to or correct the record — or forward the few pages that belong to someone they know.
He proposed the uncapped convertible note himself, from confidence, to let the market set a price.
He agreed to the silver bullet without pushback, because mentors asked for it and he had reasoned through when it could realistically be used.
Together they gave his investors a structural reason to want the company worth less, and the power to install someone who would deliver that.
BP's proposed $10m crowdsourcing investment is the Accelerator model, twenty-five years early, and it did not survive the change of management.
While I was on sabbatical for nine months, my former Evolve CTO Erik Freed built InfoCanvas — Sitelets, small portable agents running in a browser or inside HTML mail, derived from Evolve's asynchronous, loosely coupled object persistence architecture. A narrow application of a broad idea.
I returned, blocked an attempted transaction by the Evolve principals, and agreed a fifty-fifty arrangement with Freed on the basis that I would handle the money. Then I remade InfoCanvas into my own vision — the original Evolve thesis, not the ServiceSphere pivot — having just read Consilience and spent time at the Santa Fe Institute. I renamed it to reach Wilson.
I held half of something I would have to rebuild, and knew it needed an enormous amount of capital because it was decades early.
Before that: while he was away, Evolve's management and venture investors attempted to exploit a convertible instrument he had put in place to execute a cram-down, structured so that he could not block it. He blocked it anyway.
He told his old mentors. Their response was that they would back him, with the assessment that he was the smartest student they had seen in forty years — which they then repeated around the valley, to John Morgridge, to Ray Lane, to Lord John Browne. The investors he had beaten spent the following period trash-talking him, because people do not enjoy losing.
Oak Hill was, in 1999, a side venture of a ten-billion-dollar fund dabbling in venture because that was where the money was. Beautiful offices in the Quadrus complex directly below NEA, and no reputation at all — not Kleiner, not Benchmark, not August, not NEA, not Menlo. Nobodies, with a couple of Nobel laureates attached.
After a conventional Series A we could not agree a valuation for the next round. So I proposed the instrument myself: a straight convertible note with no cap. Let the market set the price. These were finance people who believed in markets, and I was confident I could beat any number a negotiation would produce.
What I did not price was the second-order consequence. A holder of an uncapped note with no floor, plus participation rights and anti-dilution, is better off at a lower valuation. I had handed my investors a structural reason to want my company worth less.
What Oak Hill asked for was the right to replace him as chief executive, for cause or none, at their discretion — voting his shares and board seat in favor, so it required the vote but determined the outcome. He would ascend to Executive Chairman.
It was not asked coldly. It came from mentors, framed as comfort for the partnership and their duty to their investors, and framed to him as playing to his real strengths: evangelism, strategy, networking. Just in case.
He did not push back. He trusted them, and he had reasoned it through: realistically he would have to fail first; both sides understood governance from the same litigation consulting background; and he read it as a device for installing a big-name operator, which he was content with, since he had always intended another startup anyway. The mission, not the company.
The irony is exact. He had just demonstrated that he could not be crammed down when he was not watching. The people backing him responded by obtaining, contractually, the one thing that would work.
Spence, as Vice Chairman, opened everything — Morgridge at Cisco, and Lord John Browne at BP, who was himself interested in complexity theory. Ray Lane, newly out of the Oracle presidency and just arrived at Kleiner, explained the attraction: his vision of BP is one giant room full of computers, him, and that's it. The virtual corporation.
Browne sponsored a strategic deal in which BP would make a $10m lead investment in a crowdsourcing model to develop solutions on the Consilient platform. That is the Accelerator model, proposed by a major industrial company, in 2001.
I passed on $15m at a $150m valuation from Société Générale's venture unit, waiting for a Tier 1 name. I then blocked a dilutive Oak Hill note by lending the company $1.5m myself — on a margin loan against Evolve stock still under lock-up — and raising $1.5m more from angels, employees and friends against my personal guarantee, to buy time for the BP round.
Once that was locked down and Oak Hill's money was unnecessary, they used the silver bullet.
Three months later the new chief executive returned with no term sheets and a plan to lay off almost everyone. I returned with a signed $10m at $50m on a weighted-average ratchet, and could not sign it. The terms were changed to a full ratchet over my written protest. After September 11th the guarantees were called, and I honored them.
He designed the note. He agreed the silver bullet. Both were reasonable at the time, both were made from strength, and both were made with people acting in good faith. They still ended his tenure — because a discretionary lever, once it exists, will eventually be pulled by whoever holds it under whatever pressure they are under. That is why the architecture removes the lever rather than trusting the holder, and why the transitional authority Hare holds today is narrow, expires on deployment, and cannot distribute value to anyone including himself.
Episodes are building blocks. The same material appears in more than one where it belongs in more than one, and every claim traces back to a primary source.
Three rounds, a silver bullet, and the end of Hare's tenure
Open →In the graphA clause he signed, and the reason there was nothing he could do
Open →In the graphTwenty-nine, and in over his head in the worst spring in a generation
Open →In the graphA $10m lead investment in crowdsourced solutions — in 2001
Open →In the graphVice Chairman of Consilient, and the introduction into Cisco
Open →In the graphCTO at Evolve, founder of InfoCanvas — which became Consilient
Open →In the graphBass's model fixes the Spence problem. Then it creates a second one.
Open →The account this was distilled from, preserved as dictated — verbatim and immutable.
Read the source →In his own words · S-023The account this was distilled from, preserved as dictated — verbatim and immutable.
Read the source →In his own words · S-024The account this was distilled from, preserved as dictated — verbatim and immutable.
Read the source →The record and the architecture are not separate arguments. Each of these mechanisms exists because of something in this episode, and each is what the episode turned out to require.
The episode is the story. The explainers are the mechanism — what problem it solves, how, and where it would fail.
The mechanism in full, with the condition that would defeat it.
Open the explainer →Consilient Innovators NetworkThe mechanism in full, with the condition that would defeat it.
Open the explainer →Quantum Adaptive Systems TheoryThe mechanism in full, with the condition that would defeat it.
Open the explainer →Quantum Privacy NetworkThe mechanism in full, with the condition that would defeat it.
Open the explainer →