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Livingston: Did you use the same strategy with other companies: Try us out for a month, and, if you feel like we ve driven some true leads, you ll continue with us Kaufer: Yes. Once other companies saw Expedia advertising, they sometimes didn t need a free test, but we might say, Look, our leads are normally a dollar a click, because they convert so well. But we ll let you get started at a quarter. And we ll send you 5,000 leads, and you can test with no risk. But you know, we re looking for an insertion order to show that you re committed to the test. Invariably it would take three months to get a test going. You have to find the right person; you have to introduce yourself; you have to decide whether it s an ad agency or direct with the client and lots of other annoying aspects. But for the most part, once the client was getting the leads, the leads would convert well enough such that they would be up and stay up for years and years. So there wasn t a whole lot of maintenance involved. Our technology would automatically find the right links to advertise. Livingston: It sounds like finally figuring out how you were going to make money was a major turning point for you. Kaufer: Right. We went from no revenue to break-even in the course of about

Here, because of the nature of the application, there is a legal disclaimer displayed (there will be more on legal matters in 5). Since it s a singleuser consumer program, no sign-on or password is required. But the basic elements are still there product name, version, copyright, and, most importantly, a clear instruction on what to do next. What you place on your opening form, like every facet of your product, is dictated by the customer. There are no hard-and-fast rules. There are applications that don t use an opening form. WinZip just opens right up to the business end of the application. Same with Norton Ghost. Same with Word and Excel.

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4 months. That part was a testament to finding a model that worked. To break even, I had to do $75,000 in revenue for the month, something like that. We had never let our burn rate grow. We didn t do any advertising at that time. But even since, we re rarely going to do promotions that we can t tie back to actual revenue-generating activities on the site.

$50-a-square-foot offices, hire loads of people to get it all done quick to get big fast, etc. Several of them had already flamed out. That was really never in my blood, if you will. The other company I had started right out of college was self-funded, and then a tiny bit of angel investing, and then half a million dollars, and then a couple of million dollars, where the last round was purely growth capital. We had always run that profitably and had grown slowly because of it. I guess I had toyed with the idea of doing the same here taking my savings, building the product, not looking for any venture money but that would have taken a long time. I had a family to support, that sort of stuff. So we certainly decided early on to go raise some money, and within the first year we had raised $3 million or so but a comparatively small amount of money. There wasn t anything obvious that we should spend money on, other than hiring a lot of people, and I m just a fundamental believer in small teams do better than big teams. We were building a product, and if there were 5 people and they were all within shouting distance of each other, they were going to build a better product than if we had had 15 people. Really, even if I had the dollars, I didn t want to spend the money there. And then, did we need more

sales reps without a product to sell No. Could we have bought more PR I m sure we could have. We actually had a full-time PR person pretty early on. But we were never going to raise $20 million for a marketing blitz.

You need to pay us. What were some of the other things that went wrong when you were trying to figure out your business model

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