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 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.