Founders At Work: Uncovering The Truth Behind A Hotmail Founder's Claims

In 2007 Jessica Livingston, a founding partner at Y Combinator, released a book called Founders at Work: Stories of Startups’ Early Days in which she transcribed over thirty extensive interviews with some of Silicon Valleys most notable successes. Included in the book was an interview with Hotmail co-founder Sabeer Bhatia, who detailed the experiences he had raising money for the webmail startup and its subsequent acquisition by Microsoft for a tidy sum of $400 million.

In the interview, Bhatia made some strong accusations regarding early-stage venture fund Draper Fisher Jurvetson (DFJ), stating that DFJ had actively tried to dissuade other VCs from investing in the company (so that they could be the only ones to invest in Hotmail’s funding rounds). He also denied that DFJ’s Tim Draper had come up with the idea of including ‘viral’ taglines at the end of each message inviting new users to join Hotmail, instead attributing the idea to Hotmail co-founder Jack Smith. Today Livingston has written a blog post asserting that some of the statements made by Bhatia are incorrect:

I received evidence yesterday that some of the things Sabeer Bhatia said in his interview in Founders at Work were false. The evidence indicates that (a) Tim Draper rather than Jack Smith had the idea of putting a Hotmail ad at the bottom of emails sent by the service, and (b) that DFJ didn’t disparage Hotmail to other VCs interested in investing.

The corrections are notable for a number of reasons. While Founders At Work may not be a national bestseller, it has become very popular in the startup community (it currently ranks second on Amazon’s list of books in the ‘High-Tech’ category), so Bhatia’s claims may well have impacted DFJ. In the tight-knit Silicon Valley community, reputation is extremely important among VCs and such statements can be damaging, even if the events involved occurred well over a decade ago. The fact that Tim Draper was also apparently responsible for one of the elements that helped make Hotmail massively successful also serves to dispel the myth that most investors’ only contribution is money – clearly, the good ones have far more to offer.

Livingston isn’t at liberty to share the evidence that led her to believe that Bhatia’s statements were false, but the fact that she wrote the blog post indicates that it is extremely compelling (authors don’t take such corrections lightly). It also sounds like Bhatia had previously requested that the statements in question be removed from future editions of the book, though he didn’t indicate that they were untrue (it sounds like his burnt bridges were coming back to haunt him). In a post on a message board, Livingston writes:

Sabeer approved the interview before publication, but after the book was published he asked me to remove those parts if there was a second edition. He didn’t say specifically that the things he said were false, just that they hurt people’s feelings. (Many people in the book cut stuff out of their interviews, but usually because the material was controversial or confidential, not false.) But once I got evidence that what he said was actually false, it seemed appropriate to post a statement about it immediately.

None of the other things people said in interviews were false that I’m aware of.

Since leaving Hotmail, Bhatia has begun a number of other ventures, including Live Documents, an online Microsoft Office clone that doesn’t seem to be going anywhere fast.