Saturday, January 22, 2011

How I Screwed Yasser Arafat out of $2mm (and lost $100mm in the process)

By James Altucher

I needed to make one hundred million dollars pretty fast. You know how it is. There are bills to pay. There are things you want to do in life. I wanted, for instance, to work as a cashier in a bookstore. But with a twist. I would own the bookstore. I wanted to do a 90 second ad in the SuperBowl which would just be me walking around for 90 seconds saying and doing nothing. People would argue afterwards, “he could’ve used that money for charity. How selfish!” But I wouldn’t care. It was my money and I could do what I want with it. I would be teaching this grand lesson to all the people watching the Superbowl. I had no other specific desires about what I would do with one hundred million dollars. Just those two. But I knew more things would come.

At the time (1999) I had recently made money selling a company in the web services business. Among other things, my company made the website for the movie, “The Matrix”. I knew I was Neo but I wouldn’t be able to take the red pill until I had my first hundred million. That was the pill that would let me be a real person. The pill that would allow me to be fully alive.

So I came up with an idea. It was a catchphrase and I would use it many times over the next six months. “First there was the wireLINE internet. Then there was the wireLESS internet. Which would be ten times bigger.”

Those three sentences (or maybe its one if you use commas) were my path to $100 million. Here’s what you do then once you have your catchphrase. I had a business partner who wasn’t shy. So he called up 20 companies in the wireless software business and said, “We want to buy your company.” We had no money to buy anybody but if you ever let that slow you down you might as well run around naked in a football stadium with 60,000 people watching you.

One company responded. A company called “MobileLogic” out of Denver. They flew in and we took them out to breakfast at the Royalton Hotel on 44th Street. Its a fancy breakfast place. The sort of place Rupert Murdoch orders the pancakes, chews it up, spits it out without swallowing, and then orders granola to be healthy.

We’re all sitting around a table. “Its fortunate that you called,” the CEO of MobileLogic said to us. “Since Ericsson just offered us seventeen million and we’re thinking of taking it.” “Why would you take that,” I said. “We’ll offer you twenty million, half cash, half stock. That stock alone will be worth one hundred million or more once we go public. We have five other companies we’ll buy after you. You’ll be President of a major company thats going public, pronto. Ericsson is the old generation. Be apart of something new and exciting.”

I love the pancakes at the Royalton. They whip the eggs into the batter. Its fluffy and delicious. And the bacon is thick and the bacon juices spill into your mouth as you bite into it. Life was good. Jerry Levin might very well have been at the table next to us buying AOL right in front of our eyes. Thats how good life was then.

They took our offer. We quickly wrote up a binding LOI which they signed. We negotiated their salaries, their options, their earnout, everything. Now we needed to pay them twenty million dollars. We knew we could pay half the twenty in stock. So that was easy. That was a piece of paper. Now we had to come up with the other ten.

No problem. Because suddenly I had a real asset. I had a binding LOI for a company with $5-10mm in revenues (despite my propensity to remember every detail of my childhood, I can’t remember how much in revenues this company I was buying in 1999 had). There were companies going public then with zero dollars in revenues that were now worth over a hundred trillion dollars.

So, with some partners who were excellent middlemen I started going to potential investors. Mark Patterson, who was then vice chairman of CSFB and is now the head of multi-billion dollar hedge fund Maitlin-Patterson set up a conference call with a few small investors. One call he set up was with Henry Kravis, Leo Hindery, Jim McMann (CEO of 1800-Flowers) and Dennis something or other who just sold a huge Irish telecom company and was worth a random billion or so. I gave a fifteen minute talk. I described my background and the company I had sold. Then I used my catchphrase (see above) and scoped out the opportunity (“10x the size of the wireline internet”) and that was the call. Henry Kravis asked a question. I can’t remember what it was now because all I kept thinking was “you were the barbarian at the gate and now I’m the barbarian.”

Right after the call, Mark Patterson’s phone started ringing. Mark told me, “Henry wants to wire five million right now.” But we only took one from him. Too many other people wanted to invest. Everyone on that 15 minute conference call put in one million each.

Read the rest here.

1 comment:

  1. Cool. thanks. I for one will never "work" for their counterfeit "money" ever again. I am going to either steal it from taxtakers (morally justified so I don't want to hear it) or suck "money" out of fiat bubbles. Only fools/slaves "work" for their Master's bogus currency. The Greeks are not fools.