Kevin Warnock

Jerry Engel, December 10, 2009, Wells Fargo Room at Haas School of Business. Photo by Bruce Cook.

On December 10, 2009 I attended a dinner at the Haas School of Business at University of California at Berkeley to thank Jerry Engel for his leadership of The Lester Center for Entrepreneurship and Innovation. There were a lot of people in attendance, including Jerry’s son and wife.

I’ve known Jerry since about 1992. I met him while I was working at Cooley Godward Kronish, which at the time was a sponsor of the the Lester Center. Cooley received ten passes per month to the Entrepreneurs Forum, which Jerry had started in about 1991. I didn’t introduce myself to Jerry right away, as I was pretty shy back then. Jerry probably didn’t know me until 1998 when I really started serious work to raise money for Hotpaper.com, my first Internet startup.

Jerry stepped aside as Executive Director of the Lester Center recently to assume the new role of Faculty Director. This dinner was to honor and recognize his leadership.

Keval Desai, Stephanie, Jerry Engel, Laura Oliphant, John Hanke and Kevin Warnock, December 10, 2009. Photo by Bruce Cook.

I am posting this today because I received the pictures from the event from Bruce Cook yesterday. I’ve also known Bruce for a long time, as he’s been a fixture at most every Entrepreneurs Forum that I’ve been to. He’s an independent professional photographer that covers many of the events at Haas. We talk shop about the latest cameras when he has a spare moment. Bruce is a real pro, and is particularly good at gathering people together for group shots when he only has a minute or less to get the shot. Bruce graciously gave me his permission to use these shots on my blog. Thank you Bruce.

Award presented to Jerry Engel in recognition of his leadership of The Lester Center, December 10, 2009. Photo by Bruce Cook.

Keval Desai, Jerry Engel and Melissa Daniels, December 10, 2009, at Haas School of Business at UC Berkeley. Photo by Bruce Cook.

Keval Desai and Melissa Daniels were at the dinner. It was Keval who suggested to Jerry in 1999 that Haas stage a business plan competition. Jerry was cool to the idea, but Keval and Melissa convinced him, and the competition was born. I was a finalist in that first competition with my startup Hotpaper.com, and I firmly believe I would have not sold my company for as much as I did and when I did if not for Keval and Melissa.

This is ancient news. In August, 2000, I sold my first Internet startup, Hotpaper.com, Inc. I am writing about it now because I stumbled upon the public filing for the acquisition today on the Edgar website. The filing brought back old memories, and I wanted to say a few words about the experience of selling a company during an economic downturn.

It was an exhilarating experience. It was difficult. It was fun. It was heartbreaking. It was educational.

Here’s the SEC Form 8-K the acquirer filed in connection with the acquisition. I’ve embedded it into this post via the cool document site Scribd, which thinks of itself as the YouTube of documents.

Hotpaper Aquisition Public Filing

Hotpaper made document assembly software that was well suited for the Internet and Intranet. The premise was that it’s difficult to write complicated documents from scratch. It’s much easier to start with a template. It’s sometimes easier yet to use document assembly software that prompts you for answers to questions, and then uses your answers to automatically fill in a template. This is the core idea behind Turbo Tax, the tax preparation document assembly software that is perhaps the most popular document assembly software in the US.

Hotpaper didn’t have anything to do with tax forms – they’re far too complicated for a tiny startup to automate, especially when you consider you have to make dozens of versions per year for all the states with an income tax.

Hotpaper concentrated on business and legal documents. Customers would send us their documents and Hotpaper would build a question front end and host them on the Internet for a monthly fee. One of our large customers was Salesforce.com. We built a private API for them so their CRM users could automate their own custom documents. Their customers could even write the questions and build the templates themselves, without having to work with any of our employees.

We were approached in May 2000 about selling Hotpaper. The acquirer, GoAmerica, which is now named Purple Communications, at the time was a nationwide aggregator of wireless connectivity for Blackberry and Palm, the two big handheld assistant makers of the day. Purple had competition in this agregation business from companies with much higher market capitalizations. Purple wanted to differentiate their connectivity offering, and they identified Hotpaper as one way to accomplish that goal.

Since it’s tough to type a long document on a Blackberry, the idea was to make it possible for users to just have to answer the questions that drive an automated template filler that would run on the Hotpaper web server. The user would just need a web browser on their handheld, and having this, they could generate very complex documents, provided there was a template on the server for them.

Purple built this system after they bought my company. They called the service Mobile Office. It won top honors from CNet.com two years in a row —  best enterprise application if I recall correctly. CNet was the TechCrunch of the day, and had a multi-billion dollar market value.

I was fortunate to sell Hotpaper to Purple. They had completed a public offering in April, 2000, just after the stock market began its long collapse. They raised $160,000,000 and had the money in the bank when they met us the next month. They offered us $10,000,000 and agreed to assume the stock option obligations to my team, so the overall consideration approached $11,000,000. We accepted their offer with almost no changes, as there was outright panic in the air, since the stock market had dropped dramatically from its recent all time high. Remember, the Nasdaq was in the 5,000 territory, much higher than it’s ever been since, a decade later. I also liked the Purple plan for Hotpaper, and was a believer in the future of mobile devices. I was on board and enthusiastic, though I did have a few anguished thoughts along the way since I was selling my baby I had been working day and night on for six years.

One of the reasons I was so enthusiastic is that I had been dreaming of mobile document creation for years, before there were handheld wireless devices on the market. I even built a prototype where I attached a Ricochet wireless modem to the bottom of a non-wireless Palm handheld and connected it to the palm via a serial cable. Ricochet built a wireless network in San Francisco in the 1990s that offered speeds similar to a 28K phone modem. It offered an unlimited data plan for $29.95 a month. The modem was hefty, about a pound and about the size of two iPhones stacked up. But it gave the Palm wireless capability in the San Francisco Bay Area. There was a third party web browser for the Palm on the market called Hand Web. I bought it, and then I was on the web wirelessly in about 1998. I proudly showed the contraption to Jerry Engel, then Executive Director of the Lester Center for Entrepreneurship and Innovation at the Haas School of Business at the University of California at Berkeley. It didn’t work since there was poor wireless reception in the sturdy concrete building at Haas. But Jerry got the idea and agreed to help me. He joined the board of advisors at Hotpaper, and he years later agreed to join my board of advisors at my current company, Silveroffice, Inc.

Sadly, the world changed for Purple. The big wireless carriers came out with their own nationwide wireless plans, which limited the role for Purple. The eventually abandoned Hotpaper and their own business of selling connectivity for general use. They remain in business today as leaders in the small but vital field of providing wireless communications solutions for the deaf. My hat is off to them for their sheer tenacity to stay in business and help people communicate. I wish them all the best success, and I want to thank them for adding Hotpaper to their offerings, if only temporarily. The acquisition forever changed my life, and I am extremely grateful. I wouldn’t have the life I have now if not for Purple Communications.

I was reading a story on TechCrunch.com today, the influential technology blog based in Silicon Valley. The story says First Round Capital has set up an echange fund for their portfolio companies to use to diversify their risk. The idea is founders will put some of their stock in this fund, and if they go out of business, they will share in the results of the companies in the fund that have successful exits.

I think this is a great concept, and it’s particularly great that a venture firm is sponsoring it, since to participate you have to have received an investment from this firm. So participating startups are already going through a tough screening process to get in. I hope more venture firms set up funds like this.

I do have a question: Would it be possible for the entrepreneurs to hold their ‘exhange shares’ of the other companies in the fund within their Roth IRAs? To my knowledge, you can’t have your own Roth IRA buy stock in your own startup. But it is OK to have your Roth IRA buy stock in tiny private startups, provided you don’t work on them at all. So I suspect there is a way to get these exchange shares into your own Roth IRA. Maybe by segregating the shares in your own startup from the shares in all the other member companies.

The beauty of having your Roth IRA hold startup stock is that if there’s a big exit, you pay no capital gains tax, even if there is a Google sized exit. Then you could have your Roth IRA sell the stock and diversify. The downside is if there is a loss, you can’t deduct your losses on your taxes, as far as I know.

I’m not a lawyer, so don’t act on this without consulting with one. I have had my Roth IRA buy private company stock several times, so I know that can be done. Not many financial institutions will handle this transaction. For example, Fidelity won’t. But T Rowe Price will, and their fees are reasonable. I pay $35/year for them to hold private stock in my Roth IRA. I think there was a $100 fee to set everything up in the beginning.

Here’s the link to the TechCrunch story that inspired this post: http://www.techcrunch.com/2010/01/29/first-round-capital-entrepreneur-exchange-fund/

Michael Pollan signing books, January 27, 2010, Campbell, California

Earlier this evening, my wife, some of my friends and I attended a fascinating interview of Michael Pollan. The event was the annual kick-off of Silicon Valley Reads. Silicon Valley Reads is designed to promote reading and literacy, broaden the exposure to and appreciation of good literature, and build community. So reads the blurb about them from their website at siliconvalleyreads.org.

Columnist Mike Cassidy from the San Jose Mercury News newspaper did a television worthy job of interviewing Michael.

Michael Pollan is the best selling author of a trilogy of books about food and eating. Earlier today I finished reading his 2006 volume The Omnivore’s Dilemma: A Natural History of Four Meals. This 400+ page work changed my eating habits dramatically. I used to seek out the best price for food, and would eagerly buy 100 cans at once of Progresso brand soup when Safeway had it on sale at $1.25 each, and then spend the next year happily consuming them, knowing I paid less than half price. I would load up the shopping cart with 15 gallons of Safeway apple juice if the price was $3.00 or less a gallon. Just a couple of years ago it would routinely sell for $2.00 a gallon on sale. But this juice was imported as concentrate from over 5,000 miles away, according to the origin information printed on the bottles.

Now, after reading Omnivore’s Dilemma, my wife and I shop mostly at three special stores in San Francisco, Rainbow Grocery, Bi Rite Market and Guerra Meats. Rainbow Grocery doesn’t sell any meat or fish. This is a large supermarket, similar in size to a small Safeway. I have never seen a supermarket that sells no meat or fish. This means no meat or fish in cans either, so no chicken noodle soup. But even without the meat, Rainbow is the most magical food market I have ever visited. Bi Rite is much smaller, almost as small as a corner convenience store, but it’s packed with beautiful food. To get an idea of what it’s like, imagine a store smaller, more delightful, compassionate and thoughtful than a Whole Foods, but with the same type of vibe. Guerra Meats is a family owned butcher shop near our house that sells free-range organic poultry and grass fed beef from local farms. We bought our Thanksgiving turkey there last year.

These stores cost a fortune compared to Safeway. But I am happily and even eagerly shopping at my new favorite three stores because of Michael’s book. I plan to start right in on his latest book, which he was plugging tonight, In Defense of Food: An Eater’s Manifesto. What did he write that caused me to make such a big change in my eating and buying? What convinced me most was his belief that eating what he calls ‘industrial food’ causes people to get sick and causes extensive damage to the environment. I am able to afford the better food by cutting the quantity that I eat in about half.  I’ve also cut out about 75% of the meat I used to eat, since my wife is a vegetarian.

I used to snack all day and night. For about a month now, I’ve eaten three moderate meals a day, with no snacks in between. I’ve lost weight and feel better. Yes, I’m sometimes hungry between meals, but I’m getting used to it, and it’s not unpleasant. I find that when I do eat, I enjoy it more because this higher quality food tastes substantially better.

Michael Pollan seated next to my housemate Denise D'Amico and my wife Monika Varga, January 27, 2010

Michael Pollan is a journalist by profession, and according to the liner notes for Omnivore’s Dilemma, he got his start writing books about food when his editor at The New York Times Magazine asked him to write about food for the magazine. Michael is an engaging writer, and he researches his subject like one would expect a journalist to do. The references section of Omnivore’s Dilemma is pages in length. If he read all those books cover to cover, he was a busy man for an extended period. He also rolled up his sleeves and for a week worked on PolyFace Farms in Swoope, Virginia, perhaps the most sustainable farm in operation from the sound of it.

When my wife’s friend Aimee Epstein emailed us about the Pollan talk, I knew I was going to write a long blog post about it, as I’ve been reading his book with surprising relish for a few weeks now. I decided to try to shoot video of the interview, and I’m happy to report I was successful. This event was a free event, and there were no prohibitions posted or announced about recording. Furthermore, the event was broadcast on the radio. The event was held in the Heritage Theatre at 1 West Campbell Avenue, and every one of its 800 seats was occupied, and people had to be turned away at the door. The mayor of Campbell was on hand to welcome Pollan.

I am so happy to be able to share Pollan’s interview with you here by video. I hope this video will open a discussion about the interesting subject of food. To comment, click the comments link above just below the title of this post.

There were some funny moments in the interview. Mike from the Mercury News started things off of a humorous note when he began by saying he was running late and was hungry, so he stopped by the McDonald’s drive through window and picked some items from the dollar menu for himself and Michael. Mike handed Michael a bag of McDonald’s products, and Michael pulled out a cheeseburger wrapped in yellow paper and waved it around, to great effect judging by the audience response. I would guess most everyone there had read Omnivore’s Dilemma based on how they reacted to seeing Michael wave a cheeseburger on stage. I had earlier been joking with my wife Monika that I was going to bring Michael a bouquet of corn dogs and put them on stage like they were flowers. Pollan is particularly hard on corn in Omnivore’s Dilemma, blaming it for many of the ills of the country’s industrial food system, in ways that I found surprising and frankly disgusting. I thought it was funny that the interviewer made much the same joke I had thought would be funny, but would never have done.

For about two years now I have been learning to cook Chinese food. The cookbook I got to learn from wasn’t helpful, and the recipes were lackluster. As a result, I have just experimented by buying anything that looked interesting at the local Chinese market at 22nd and Irving Streets in San Francisco.

I’ve been planning to make a cooking channel on Vimeo.com, the video hosting community site similar to YouTube. I got a turkey fryer for Christmas two years ago. I asked for it because I hoped to use the burner as a high heat wok burner, not to deep fry a turkey. I have used the turkey burner once, at full heat. It was so hot it burned the dish, so I need to conduct more experiments. I suspect half of the maximum flame will be ideal.

It’s a big project to video tape cooking, and I’m not there yet. But I made a dish tonight that I particularly like, so I thought I would just write up the recipe here. It will be tough for me to lose it once it’s on my blog, an added benefit.

My wife Monika is vegetarian, and is our housemate Denise, so this is a vegetarian dish. But I also made a variation with chicken and cashew nuts that was also good.

So, this is my first published recipe. I did not borrow any of this from a cookbook, so all the blame or credit for how it tastes rests with me.

I call this recipe Zucchini and pepper with peanut and garlic sauce

Ingredients

1 tablespoon butter, melted
1 medium white onion
3 cm piece whole ginger
1/2 small red bell pepper
1/2 small yellow bell pepper
1 tablespoon minced garlic
1 tablespoon ground bean sauce
1 teaspoon Chinese barbecue sauce
1 teaspoon sea salt
1/8 teaspoon MSG
1 ripe Roma tomato
1 green onion
1 teaspoon brown sugar

Instructions

Dice the onion. Fine chop the ginger. Dice the bell peppers. Chop the green onion into 1 cm sections.

1. In a wok over a high flame, add the butter and heat for 30 seconds

2. Add all the ingredients at once except for the tomato. Stir with a spatula until the onions are translucent and the zucchini is still not yet translucent, about 6 minutes.

3. Add the tomato, and stir for 2 more minutes.

Serve immediately over rice.

I went shopping today at Rainbow Grocery, a most amazing grocery store unlike any other I’ve been to. It’s at 1745 Folsom Street in San Francisco. The web address is Rainbow.coop. I had never seen a site with the .coop extension before today. It’s a fitting address as the store is a worker owned cooperative.

This store has more variety than even the largest Safeway or Whole Foods Market, in my estimation. There is a bulk foods section where you bag your own ingredients, and it’s this section I most enjoyed today. They have perhaps 20 kinds of rice for sale. I bought two varieties today: Lotus brand Volcano rice and a different brand of rice called Wehani rice. The Wehani rice was the standout, though both were delicious. The Volcano rice is light brown, and the Wehani rice is dark brown. When the Wehani is cooking in the rice cooker, it sort of looks like melted chocolate cooking.

The prices are higher than Safeway, but lower than Whole Foods, I estimate. There is only one Rainbow, so it’s not a chain. The staff really seems happy to be there, and so do the customers. It’s actually an adventure just walking the isles, as there are few national brands for sale.

I’ll need to return with my video camera to do a short walk through so you can see what an unusual store this is. Highly recommended.

If you try the recipe above, please let me know and provide feedback, as I know nothing about writing recipes. I hope you like it.

Bamboo Hut sign, San Francisco, California

Mark, a friend of Monika’s friend Aimee organized a private party in North Beach, a San Francisco neighborhood known for its active nightlife. He rented out the entire Bamboo Hut at 479 Broadway. This is a small dive bar, not a million dollar dance club. But Mark was able to sell out the place with about 100 friends in attendance, and it was crowded, but not too crowded. We all had a great time. I even was persuaded to dance on the bar, something I’ve never done before. I had to duck so as not to hit my head on the low ceiling.

Bamboo Hut, 479 Broadway, San Francisco, Dec 31, 2009

I got a great cookbook for Christmas from my wife’s aunt Nancy. It’s published by the cookware store Sur la Table. The name is The Art & Soul of Baking, and the author is Cindy Mushet. This is a beautifully printed book that’s fascinating to read. I learned an enormous amount by reading the first 71 pages, which tell the reader that All Purpose Flour is better thought of as No Purpose Flour, as it’s a compromise blend not best suited for anything. When I went to Safeway in search of actual bread flour, I discovered they only stock one brand in one size, but have numerous brands and sizes of ‘no purpose flour.’

The pictures are nearly works of art. The photographer experimented with shallow depth of field in many of the shots, which I’ve not seen done in a cookbook so well. Some of the shots even have blurred motion in them, such as when showing how to use a rolling pin.

I wanted a bread machine for Christmas, but I didn’t get one. I did get a bread machine specific cook book from my mother, but I’ve not had a chance to use it yet. I don’t know what machine to get, as I’ve read some of the machines can hop off the counter by themselves. If anyone has any good suggestions, please let me know.

For my first loaf, I made the first recipe in the book, for plain white bread. This was no Wonder bread however. I discovered it takes a lot of time to make bread, and I had to refrigerate the dough overnight since it got too late to bake the bread. The dough rose further in the cool refrigerator, but when I took off the plastic wrap, it sank an inch within 30 seconds. It never regained its height, so the loaf was shorter than the loaf pan, when it was supposed to be higher.

Here’s a video I shot of my first loaf of bread. I sliced it while it was hot so the video would look especially appealing.

My brother and his family come to San Francisco every other Christmas to spend the holidays at my parent’s house, which is not far from my house. My brother and his wife have two great kids, a girl and a boy. This year the kids got a cool Lego set unlike any I’ve seen first hand. I know these sets have been around for years now, but I’ve never seen a set in use before.

Today’s Lego are inspiring kids to be inventors like never before. The set Andrew’s kids got has proximity sensors and inclination sensors, and motors that are powered from the USB socket on a PC or Mac computer. The sensors and motors are read and controlled by software that runs on the attached computer. The software let users program the Lego so that it actually does something.

In this video, Andrew helps his kids make use of the software, using a propeller plane I helped put together. I didn’t need to help though as the directions were very clear, and contained zero words… just drawings. It was all really quite impressive. I would have loved to have a set like this as a kid. In fact, I’d love to have a set like this now. Santa, are you reading my blog?

Along with my wife Monika and my brother and his family, I went to the beach today at Redeo Cove in Mt. Tamalpais State Park just North of San Francisco over the Golden Gate Bridge. It was windy and chilly… so windy there is not much audio worth hearing on the video, as the wind was just whipping past the microphone of my camera.

The surf was pretty active, and we all kept our distance from the water. But the real fun on the beach was the makeshift all natural teeter-totter we discovered. Since teeter-totters have mostly been removed from playgrounds, I haven’t been on one in a very long time. These all organic models we rode today were even better than commercial models because even multiple adults could ride simultaneously.

Rochelle, who my brother and his wife have known since they were all undergraduate students in Washington, also joined us with her husband Henry and their inquisitive and well behaved young son.

Before we went to the beach, we toured the Marine Mammal Center in Sausalito, a short drive from the beach. This center has a hands on kids area where children can learn about marine mammals. The center is partly solar powered, and the installed panels provided shade to the recovering patients. The center is essentially a hospital for sick or injured sea mammals.

Sunset on Redeo Cove beach

My wife Monika and I went to my parents’ house at 8:30 this morning to open presents. My brother and his family flew in from their home in Colorado, which they do every other year. My grandmother Elsie Battaglia lives in Portland, Oregon and is 98 years old, so she no longer visits at the holidays. However, thanks to the wonders of the Internet, she participated in the present opening via video conference using iChat on my brother’s MacBook computer. We set the laptop up on the coffee table by the Christmas tree, and she was able to ‘be there.’

This sounds like it might be awkward or impersonal, but it wasn’t at all. The kids seemed to really like showing off each new gift they received by holding it up close to the camera. Grandma’s live-in helper Claudia would describe the goings on on screen to Grandma, who has lost much of her sight in recent years to macular degeneration. Both Claudia and Grandma really seemed to enjoy the experience. Grandma bought a 24″ iMac about a year ago specifically for video conferencing with her children, grandchildren and great-grandchildren, so this wasn’t the first time she’s done conferencing. But it was the first time she joined in opening presents Christmas morning around the tree.

I set up my video camera on a tripod and let it record a segment. I think it turned out great because you can see Grandma on the laptop and you can see everyone interacting with her almost as if she were sitting on the couch in person. I heartily recommend you try this at home with your loved ones that can’t travel for important events. It was really a special day today.