In 1989, 22-year-old Sonja Hoel had been working as an analyst at the venture capital firm TA Associates in Boston for several weeks—yet she still didn’t have a chair for her desk. The secretary wouldn’t order her one.
Hoel didn’t dwell on it—she was just glad to be there. Before starting at TA, she had heeded her mother’s advice to cut her hair and wear glasses. “You will be treated with more respect,” her mother advised. In the same way, when she heard that her fellow analysts were getting together for Scotch after work, she quickly joined, feigning delight at what she found to be an awful-tasting drink. Nothing was going to dim her love affair with the venture capital industry. It was the perfect place for the cheerful blue-eyed southerner who liked to say “My obstacles are my allies.”
But before long, Hoel’s naturally sunny disposition took a hit. Standing upstairs in TA’s gorgeous wood-paneled offices, she looked down the spiral staircase and realized she was the only female investor in the Boston office. Am I here just because I’m a woman? she wondered. After a few days of sulking and second-guessing herself, she looked in the mirror and said, Snap out of it.
There was no point in looking for discrimination, she realized; life was too full of opportunity. Her firm’s downtown Boston office was less than a mile’s walk from her fashionable Beacon Hill apartment. She relished nights when it snowed, erasing her steps almost as fast as she made them. As boughs of trees became heavy with snow, the sounds of the city softened, and even the streetlight grew paler, turning the color of butter. She wore long underwear under her suits, purchased in the bargain basement of Filene’s department store.
When she started at TA Associates, she’d had only one black suit and one navy suit, with a few extra jackets, and she would mix the pieces to get through the week. She laughed when a fellow analyst told her, “Sonja, your long johns are showing.” She encountered the same homeless man, Michael, on her commute to work every day and eventually struck a deal with him: She would give him a dollar a week, but he was not allowed to ask her for money on any other days. Michael was friendly and made her laugh, and he was grateful when Hoel gave him warm winter clothes.
Hoel shared a two-bedroom apartment with Anne Heese, a woman she’d met while shopping at Filene’s Basement. The two had been trying on clothes over their clothes, as the store didn’t have dressing rooms. They now shared an apartment on the top floor of a three-unit building, furnishing their flat with chairs and tables that their wealthy neighbors had left at the curb. The top floor was old, and the floor was slanted—a marble would roll from one end of the kitchen to the other—but it had a treasured view of the landmark Citgo sign near Fenway Park. They each paid $500 a month, and often did the dishes while singing along to their favorite song, “Push It,” by Salt-N-Pepa. Hoel had taped a picture of Apple Computer founder Steve Jobs up on the fridge. She thought he was “the cat’s meow.”
Her father had been right—there was life after high school. During her teenage years in Charlottesville, Virginia, some of the girls had her disinvited to prom because she was “too straight.” She didn’t drink or do drugs and didn’t believe in casual sex. She didn’t make the cheerleading squad because the dance moves were too fast for her. She was cut from the basketball team as well but volunteered to be the team statistician. She tried out for field hockey and volleyball but didn’t make the squads—her high school was big and boasted a strong sports program. She joined the lacrosse team and the school choir because she loved both, and tryouts were not required. She grew up with two sisters, including a twin, and had a Marie Antoinette–style canopy bed.
A graduate of the McIntire School of Commerce at the University of Virginia, Hoel had been hired at TA Associates after a stint at the London Stock Exchange. She had impressed TA management with her self-taught computer skills and the computer jobs she held at UVA. Now an analyst, her job was to find auspicious companies for investments, interview the founders and executives about their business models, and then—when she had enough compelling information—pull in the TA partner best suited to land the deal.
Hoel was a quick study. She knew how to seek out companies that solved problems for businesses with products that were 10 times more efficient at one-tenth the cost. She understood intuitively that learning about the problem a company intended to solve, its market size, and its business model was just as important as learning about its core technology. Within two years of her arrival at TA Associates, Hoel landed two hugely lucrative deals by cold-calling companies she’d found in computer magazines—OnTrack, a data recovery software company, and Artisoft, which connected PCs to a network. Both went public.
But to rise through the ranks of the financial world to become a partner, she realized, she would need an MBA. It was the partners who made investments and received the all-important and closely held “carry”—a share of the profits. Venture partners took board seats and worked in lockstep with entrepreneurs. So she applied to the business schools at Stanford, Dartmouth, and Harvard and was accepted at Harvard. Dimming her excitement, her longtime boyfriend was accepted to the business school at the University of Michigan. The two talked about getting married. Hoel was heartbroken that they would be apart. But she was thrilled about attending Harvard. “I want to become a venture capital partner!” she told her roommate Anne.
When Hoel informed TA Associates that she would be leaving at the beginning of the summer, the firm’s managing partner, Kevin Landry, offered to double her salary if she stayed. But she was set on becoming a venture capitalist, knowing they played a key role in launching and shaping revolutionary companies. They were the futurists, hand holders, and risk takers in the financial world. Moreover, venture capitalists and entrepreneurs were her favorite type of people: optimists.
Hoel had proved that she had a nose for deals. Now she wanted to help build companies that would make the world a better place.
A few months before leaving for Harvard, Hoel, sitting at her desk at TA, studied an ad in PC Magazine. A company piqued her interest. She had by now cold-called more than one thousand companies. She dialed the number in the ad but got a busy signal. She tried again a few minutes later. Busy still. So she read the Dun & Bradstreet research report on the software company, which was based in Silicon Valley. The company sold antivirus software and was growing quickly. It had a good product and apocalyptic viruses were predicted to take down computers across the globe.
In the ad, the company was seeking agents to sell its software. Hoel went over the D&B report more closely. She took notes: “Hot co; anti-virus products; 2.5mm users; shareware; $7mm 1990 with $6mm pretax; 4,000 major corp users; excellent prospect; doing due diligence.”
Hoel picked up the phone again, eventually reaching a man named Jim Lynch in Santa Clara, California, who was creating a network of international agents to sell the antivirus software. She introduced herself, described TA Associates, and said she had money to invest. To her surprise, Lynch gave her the car phone number of the company founder.
She looked at her watch. It was midmorning in California. She reviewed her notes one more time and dialed.
“John McAfee, ” the man answered.
Hoel again introduced herself and began her pitch. McAfee listened for a moment before saying, “I’m sorry, but I’ve just agreed to sell my company to Symantec.” Symantec was a $460 million company that was the largest supplier of packaged utility software. It had been unsuccessful so far in taking over the antivirus market.
“How much did they offer?” Hoel asked.
“Twenty million,” McAfee replied.
Hoel ran the numbers in her head. Over a few years, starting with a handful of employees working out of a home office, McAfee Associates had captured more than 60 percent of the antivirus market. The personal computer revolution of the 1980s and the dominance of the open system IBM personal computer had created the perfect environment for viruses to thrive.
McAfee, a swashbuckling, idiosyncratic programmer who had worked at NASA and Lockheed, had seized the opportunity and developed VirusScan, a product that countered a virus’s basic replication techniques.
Drawing on her sales experience, Hoel kept McAfee engaged on the phone. He mentioned that he wanted to hire a new president and move with his wife to 300 acres in the shadows of Pikes Peak, Colorado. Hoel told herself, Go after it like a bird dog.
So she laid out an alternative deal: “We’ll value your company at $20 million, and you keep half. You sell half the company for the same valuation, hold on to the upside, and still get money up front.”
McAfee said, “I’d love that. I hadn’t even thought of it.”
It was a gutsy move. Hoel, as a $28,000-a-year analyst, didn’t have the authority to offer $20, much less $20 million. She quickly called Jeff Chambers, a managing director who had been with TA Associates for almost two decades and had opened the firm’s Silicon Valley office. She left him a voicemail, saying, “Jeff, you have to look at this business. Its forecasted revenue growth rate is more than 90 percent, and its pre-tax margins run between 80 and 90 percent of sales. The problem is that John is seriously considering selling McAfee to Symantec.”
Jeff Chambers wasted no time in scheduling a meeting with McAfee and working through the due diligence. He pulled in another firm, Summit Partners, and the two jointly offered first-round funding of $10 million ($5 million each) to buy half of McAfee Associates, which had seven employees. McAfee went public a year later, raising $42 million. It grew from there, licensing its antivirus software to more than 15,000 corporations and boasting an astounding after-tax profit margin of about 45 percent, far higher than the industry average.
But by that time, Hoel was ensconced at Harvard Business School, studying hard and networking even harder. She had become president of Harvard’s venture capital club, which gave her access to industry pioneers. She flew to California for in-person meetings and invited the legends of venture to Harvard to talk to students, including John Doerr, who had left Intel to join the venerable venture firm Kleiner Perkins Caufield & Byers; Reid Dennis of IVP; and MJ Elmore, who worked closely with Dennis.
After graduating from Harvard, Hoel, at 27, was hired at Menlo Ventures, whose firm had offices adjacent to the Reid Dennis–founded IVP on Sand Hill Road. While Hoel could have remained on the East Coast, Sand Hill was her yellow brick road. It was here that the “traitorous eight” had left the manic but brilliant William Shockley to start Fairchild Semiconductor and later Intel. Here a hot-tub-loving Nolan Bushnell had met Sequoia Capital founder Don Valentine to fund Atari.
Here Arthur Rock, at first reluctantly, had provided funds and advice to a scruffy and “very unappealing” Steve Jobs to build Apple. Here venture capitalist Tom Perkins and scientist Bob Swanson had started Genentech. It was on Sand Hill Road that Dave Marquardt’s early investment in Microsoft had yielded a bonus of a new red Ferrari, and where Larry Ellison incubated a startup called Oracle, getting a loan from VC Don Lucas to keep the relational database company going. It was here that Arthur Rock had defined venture capital as “taking adventures with capital.”
The day Hoel arrived in California, in July 1994, Time magazine hit the stands with a cover story titled “The Strange New World of the Internet.” The Internet was moving out of the hands of the military and academia and into civilian life. The story raised a question that was on the minds of VCs and entrepreneurs alike: “The world’s largest computer network, once the playground of scientists, hackers and gearheads, is being overrun by lawyers, merchants, and millions of new users. Is there room for everyone?”
Hoel thought there certainly was room for her. With her mother by her side, she set out in search of an apartment, driving from neighborhood to neighborhood looking for for rent signs on buildings. But this being the Bay Area, housing was difficult to find.
With Hoel’s start date at Menlo Ventures fast approaching, one of the partners at Menlo stepped in and offered her his guesthouse; Hoel could stay there while she searched for a flat. There was one caveat. The partner and his wife would need Hoel home at five—to babysit.
Hoel didn’t pause to consider whether a man with her credentials—a Harvard MBA, deals at TA that had netted the firm tens of millions of dollars—would have been asked to babysit. She was just thrilled to have a place to stay. If she had to babysit the children, that’s what she would do. It was a small price to pay on her path to success. And as she constantly reminded herself, obstacles were her allies.
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