Serialisation: eBoys - Part 1 - Go Big or Go Home

This week silicon.com is serialising eBoys, a fly-on-the-wall account of two landmark years in the late 1990s at Benchmark Capital, the Silicon Valley venture capital firm behind companies such as eBay, Priceline and Webvan.

Author Randall E Stross was given unprecedented access to the remarkable team of partners. In the following excerpt we learn how new boy VC David Beirne was handed one of the biggest projects of them all - help create Webvan...

Venture capitalists are not in the idea-generating end of business - that is a gift they neither have nor need. The venture guy's job is to refine his powers of evaluation, to hone the ability to see the outline of one good idea among the thousand brought in by entrepreneurs that are too small or me-too.

Dave Beirne did not know this, however. He arrived at Benchmark with ambitions to contribute to the partnership, fast, in any way he could, and he had some ideas for new businesses for which he hoped he could find entrepreneurs. One of the concepts that kept nagging him was an ecommerce business that he called MyStore, which would sell online everything for everyday needs. Start with groceries and move toward an online Wal-Mart.

"Well, sh*t," Bruce Dunlevie [fellow Benchmark VC] said when Beirne told him his idea as the two sat in Dunlevie's office, "have I got the plan for you." The five partners' individual offices were arranged along the rear and were rarely used for visitors, who were met in conference rooms at the front; within their sphere of private space, the partners dropped in to one another's offices throughout the day for informal consultations like this one. Dunlevie reached into a stack of papers and pulled out a business plan called Oasis. He tossed it to Beirne, explaining that he and the other partners lacked the balls to do it. Would Beirne be willing to get together with the guy?

What caught the eye immediately was the name of the entrepreneur: Louis Borders, the cofounder of Borders Books and Music. The company had grown from unlikely beginnings as a used-book store Borders and his brother Tom had opened in 1971 in the small town of Ann Arbor, on the edge of the University of Michigan campus, where Louis had earned a degree in mathematics. When they started the store Louis was twenty-three years old. Two years later, they added new books and subsequently developed a well-stocked-and-damn-the-accountants identity. In fact, Louis Borders had applied a talent for developing computer systems, he created artificial-intelligence software designed expressly for managing the inventory of a very large bookstore.

Initially, Borders used the systems as the basis for a separate business, serving other bookstores, but eventually - 15 years after opening the first store - a second store was added. With the software, Borders Books pioneered in opening bookstores with a much larger stock - 150,000 to 200,000 titles - than the typical 40,000 titles carried by the chain bookstores in malls. In 1992, on the eve of an IPO that would have valued the company, then consisting of 21 stores, at $180m, the Borders brothers sold the company to Kmart for an undisclosed sum that presumably matched the IPO price and added a premium for the cession of independence.