Getting the Band Together

(July 1997: nine months before launch)

A WEEK AFTER WE mailed the CD, I found myself at the head of an eight-top at the Cupertino Hobee’s, halfway through a massive BLT. Half-eaten burgers and crinkle-cut fries littered the table, pushed aside to make room for binders, notebooks, and coffee cups. We were really doing it.

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For the uninitiated, Hobee’s isn’t exactly fine dining. It’s basically a diner: tables molded to the wall, laminated menus with pictures of food on them and no stains, because they go into the dishwasher at the end of every shift. A cup of coffee costs two dollars and it’s endlessly refillable.

We didn’t choose Hobee’s because the food was good. And we weren’t meeting at Hobee’s in an effort to keep our idea secret. In fact, secrecy was the least of our concerns. I’d realized by then that telling people about my idea was a good thing. The more people I told my idea to, the more I received good feedback, and the more I learned about previous failed efforts. Telling people helped me refine the idea—and it usually made people want to join the party.

So why Hobee’s? Location, location, location. We used a compass to draw equal-size circles around Christina’s house in Foster City and my house in Scotts Valley. When you intersected those two circles, Stevens Creek Boulevard in Cupertino was in the exact center. No more than a thirty-minute drive for anyone.

Who was anyone? Christina, Te, and I, of course. Eric Meyer, our provisional CTO, looking at his overly foamy cappuccino with Gallic disdain. Boris and Vita Droutman, a married Ukrainian couple with heavy accents and, Eric assured us, a genius for coding. And Reed, on the rare occasions he could get away from the Pure Atria offices.

We had to meet at Hobee’s because we were in a weird, in-between place: moving toward being a real company, but without any kind of office. Or the money to rent one. Christina, Te, and I were still employed at Pure Atria, and it wouldn’t do to have people coming in and out of our offices there all day, working for a different company. So we stole time after-hours, or during lunch breaks, heading to Hobee’s for two-hour meetings to discuss our company-to-be: what we were going to do, how we were going to do it, and when we could start.

Christina and Te did hours of market research, and over their Cobb salads would present it to us. “In the past week, I’ve gone to fifteen video stores, and here’s what I learned,” Te would say, before Christina pulled out her preliminary drawings of what she thought the site might look like. Boris and Vita would huddle with Eric, talking about tech specifics in a language so advanced I really understood only every other word. I was usually doing about three things at once. While my body was at the table, attending to these conversations, my brain was often elsewhere, trying to figure out how to convince a new person to join our team, or what we should call ourselves, or where we’d land, once we had our funding finalized. We couldn’t stay at Hobee’s forever.

I also needed a CFO, and I had my eye on a guy I knew from Borland named Duane Mensinger. He fit the profile exactly: professional, with a work history that included close to a decade at Price Waterhouse. In casual California, where shorts and flip-flops were the norm, he was never seen in anything except a button-down shirt. But the very qualities that attracted me to Duane—he was careful, organized, and risk-averse—were the ones that kept him from committing to becoming part of our merry little group of outsiders. While he repeatedly and ever so politely told me no, he kept his iron in the fire, agreeing to help us build our financial models and acting as a kind of “rent-a-CFO.”

I had the opposite problem with a man named Jim Cook—who ended up as one of the most important members of the Netflix team. He was a friend of Christina’s, a burly guy who had worked in finance for years at Intuit and always had a shit-eating grin on his face. I liked that about him—it’s good to have optimism in the startup world. The problem, however, was that he desperately wanted to be the CFO. He certainly looked the part. Jim dressed like a banker: pressed pants, crisply ironed dress shirts, every last one of them light blue. He was organized, detail-oriented, and efficient—and unlike Duane, he was accustomed to startup risk-taking. Like the rest of us, he actually enjoyed it. I thought that made him perfect to run operations—to figure out just how we were going to buy, store, and ship DVDs.

But he didn’t agree. It took me a few meetings before I realized that his big grin was more than just optimism—it was a negotiating tactic. My strategy, when I’m not getting what I want in a negotiation, is to sigh and display my weary sadness, to make the other party feel like a child who has disappointed his parents. You know the drill: I’m not mad, I’m just disappointed. Jim’s was to just broadcast a huge creepy grin at me. It was unnerving.

But it didn’t work. Jim would sign on as our director of finance and operations in October. In the end, I realized that he was more interested in the finance title than he was in the actual job. I’m usually wary of title inflation—although it’s something that seems like it costs you nothing to give, it actually is far more expensive than it seems, since it causes a cascading series of overpromotions. For just this reason, I had already decided that no one would get a VP title—at least at first. Instead, they would all be directors, and their titles would reflect what they actually did, not what they wanted to do. But in Jim’s case, a little rule-breaking was unavoidable. He was too valuable to lose over a job title, so I reluctantly agreed to add the finance piece, while impressing upon him that with Duane on board—albeit in a temporary way—the real place we needed him at the start would be in operations. CFO would come. He would just have to be patient.

In the meantime, I had to find a place for Jim—and all the rest of us—to work. We needed an office. I had strong feelings about being a Santa Cruz company—of bucking the prevailing norms of Silicon Valley and not moving to a cookie-cutter office park in Sunnyvale or San Jose. Santa Cruz spoke to me. It’s a beach town, a surf town. A whiff of the sixties still clings to it. There are probably more Volkswagen vans than there are people. Its prevailing ethos, as a city, is the opposite of Silicon Valley’s “growth at all costs” model. People in Santa Cruz are typically against development. They’ve opposed widening the roads. They don’t want it to grow.

Growth is God, over the Santa Cruz mountains. But in Santa Cruz, it’s vulgar.

I wanted some of Santa Cruz’s laid-back ethos for my company. I didn’t want to attract just the same group of ambitious young tech workers from over the hill. I wanted freethinkers, people who were slightly outside the box. I wanted things to be different.

I wanted life balance—for me and for my co-workers. I wanted Santa Cruz’s access to trails and waves and a more relaxed way of life, and I didn’t want to have to spend two hours every day commuting to Palo Alto. If I was going to start my own company, I wanted it to seamlessly integrate with my life. I wanted my kids to be able to come by the office for lunch, and I wanted to be able to drive home for dinner with them without spending hours inching along in a conga line of cars.

I was looking at office space in Santa Cruz. But until we had money in hand, we were stuck with the Scotts Valley Best Western.

That Best Western is still there, by the way. I drove by last week, hoping to sit at the conference room table where we’d ended up spending weeks of time before we had a real office. I wanted to check my memory—how big was the conference table? What color was the worn carpeting? I parked my car and walked around outside the building, trying to be discreet. But when I peered through the window at the first office space Netflix had ever had, I didn’t see a long table, or ergonomic chairs, or the ever-present scratched-up water pitchers surrounded by plastic cups. I saw a room full of things none of us would have had any use for: a sad treadmill, a collection of mismatched dumbbells, a dirty yoga mat unfurled in the corner.

Time is cruel, and there are no monuments in tech.


I was spending a lot of time eating lunch that summer. In addition to Hobee’s, I was driving up to Woodside a few times a month, in an ongoing attempt to woo a video store owner named Mitch Lowe.

I’d first met Mitch in Las Vegas, at the annual conference for the Video Software Dealers Association (VSDA, for short). I’d gone in June on a hunch, with no real plan other than to conduct the most general kind of research. It had seemed prudent, given that we were looking to start an e-commerce business focused on video rental, to acquire something more than a vague idea of what it meant to rent videos. In the back of my mind, I was hoping that someone might sell some kind of software for running rental stores that we might be able to convert to working online.

I’d had to use a little subterfuge. The VSDA was a “trade show,” which means that ostensibly it was only open to members of the trade, not the general public. So, a month or so before I left for Vegas, when I went to register, I decided that I was now the general manager of “Randolph Video of Scotts Valley, California.” I answered the questionnaire as best I could:

Employees?: 7.

Annual revenue?

That was a hard one—I had no idea how much

a video store did in business. Let’s see, how about


And then a few weeks later, my badge showed up in the mail.

I don’t know what I expected from the VSDA show. Probably some booths, some roundtable talks, the normal dry business convention I recognized from my years in direct marketing. I think I had the idea that the whole thing would be presided over by stereotypical video store employees. If you’re old enough to remember video stores, you know the type: early twenties, big glasses, permanent sneer.

What I found was entirely different. VSDA was insane. There were thousands of people there, swarming around hundreds of elaborate, ridiculously appointed booths. Models wandered the convention center, handing out studio swag. Celebrities posed for photos. Bright colors festooned every banner, and spotlights lit up the room. Movie soundtracks blared from gigantic speakers, so loud the floor was shaking. It was like some unholy mix of Disney World, a Hollywood movie premiere, and the Indiana State Fair.

I stood in front of a green screen, then had my smiling face inserted into a poster for Mission: Impossible. I posed for a picture with Wallace and Gromit. I stood in wonder beneath the thirty-foot Barney standing sentinel at the entrance to the exhibit hall, and watched him open and close his mouth in greeting.

I felt like I was on hallucinogens.

For hours, I wandered from booth to booth, essentially trying to figure out how the video store business worked. Who were the major players? Who made money? And how? My strategy was to play the rube—to Columbo my way to an understanding. But I wasn’t getting very far.

By the end of the day, I’d made my way past the huge booths to what, at these kinds of conventions, is called the “pipe-and-drape” section—so called because each booth is separated from the next by a waist-high framework of metal pipes, draped with curtains to hide the ugliness. This was the home of the lesser-trafficked, lower-real-estate booths. Gone were the fancy electronic displays. There was no sign of John Cusack or Denise Richards. No commemorative mugs or 3-D glasses greeted me. Instead, middle-aged guys sat behind card tables, chatting placidly about return rates and inventory.

Here were the people I wanted to see. The software guys.

I ended up at a booth near the back, talking to a nondescript man in his mid-thirties with a mustache. He had a kind expression, a sweet manner, and a hand-lettered name tag that simply said “Mitch.” I laid my Columbo act on thick.

“At my store, my seven employees and I have been using pad and pencil to keep track of rentals,” I said. “What does this type of software actually do?”

His smile suggested that he might be on to me, but he didn’t let on. As we talked, I learned that Mitch ran a small chain of video stores called Video Droid. He had ten locations and managed thousands of titles in each one of them. I was interested in the way he talked about the practical challenges of maintaining an inventory of both new and classic films, but what really fascinated me was his deep knowledge of movies and his even deeper connection with his renters. He paid attention to what they liked, what they asked for, and what they wanted. He was a movie buff, and he wanted to help his customers find the kinds of movies they’d love. That meant giving them not only what they thought they wanted but what they didn’t even know they wanted.

Mitch was a walking, talking IMDb. He watched movies all day at the store, then went home and watched a movie while he was eating dinner, then stayed up late watching even more movies. Unlike the stereotypical video store employee—snobbish and elitist, proud of his vast knowledge—Mitch was gregarious and friendly, eager to share his passion. Over his decades in the business he had talked to thousands of people about what they watched, what they liked and disliked, what else they had seen. It was this deep internal database of movie knowledge and human insight that enabled him to predict exactly the right movie for a person’s mood, interests, and tastes.

He was a movie sommelier.

He also wasn’t falling for my Columbo routine. About ten minutes into our conversation, he smiled at me—seemingly guileless, but with a glint in his eye—and said, “What are you really up to?”

I hemmed and hawed, and then I told him the outlines of my idea for videos by mail. He seemed mildly interested. We exchanged numbers, and I left the booth thinking I might have found a low-profile minor player to bounce ideas off of. What a nice guy, I thought.

Later that day, looking for a map of the convention center, I opened the VSDA program. On the inside cover was a half-page, full-color photograph of the man from the pipe-and-drape section. Beneath it was printed his name. Mitch Lowe: VSDA Chairman.


After VSDA, Mitch and I kept in touch. He lived in Marin, so we mostly met by phone, but I kept him abreast of what we were up to, asking him questions if I thought his answers would be helpful. I met him a few times in Woodside for coffee. By the time we were starting to raise money, I was actively recruiting him, and I started buying him lunch at Buck’s.

Buck’s is one of the temples of Silicon Valley. So many companies have been birthed there—conceived, funded, or otherwise organized—that the owners should probably start demanding a cut. The food is very good, elevated comfort-food diner fare, but the atmosphere is what you go for. Probably the most notable piece of décor—and the place is packed to the gills with stuff—is a motorless car suspended from the ceiling. Remember Soap Box Derby? Home-built wooden cars that you roll down a hill to race, in Boy Scouts? Well, consider this Silicon Valley’s version. Every year, there was a motorless car race on Sand Hill Road in Palo Alto, with multimillion-dollar VC firms fighting for bragging rights. Instead of wooden cars, these were spaceships on wheels. Their sponsors had sought out cutting-edge, hi-tech, carbon-fiber composite materials. They had used their connections to get time in the Lockheed Martin wind tunnels. They had procured bearings that cost thousands of dollars apiece. Even the wheels were lighter, stronger, and more expensive than what you would find on a drag racer.

And in Buck’s, one of these ridiculous contraptions—it had lost at Sand Hill but had once held the downhill motorless speed record—was hanging from the ceiling over you as you ate, a constant reminder that anything was possible with enough effort, enough ingenuity, and enough money.

Every booth at Buck’s bears the residue of venture financing. The napkins there have felt the imprints of thousands of pens, sketching out improbable ideas that just might work. In a way, it’s the VSDA of Silicon Valley—a crazy, slightly hallucinogenic place that seems engineered to confound outsiders. That’s exactly why I took Mitch there.

I was gathering intelligence at those lunches. I’d float possible solutions to problems Christina and Te and I had discussed, and just by hearing Mitch shoot them down, I’d learn something. He had the perfect combination of content knowledge and industry knowledge—he loved movies as much as he loved the logistics of renting them.

Mitch wasn’t—and even now, he isn’t—a Silicon Valley guy. He was a down-to-earth business owner with incredibly progressive ideas. In fact, the very name of his video store chain, Video Droid, was a reference to his very early wager that eventually, movies could be distributed from kiosks. (George Lucas at one point came after Mitch, serving him with a cease-and-desist order, claiming he held the rights to the word droid. That lasted about as long as it took Mitch to demonstrate that his use of the word predated Star Wars by many years.)

His look and manner screamed “normal guy.” But the more I talked to him, the more hints I got that there was something much more interesting behind the façade. He let slip once that he’d once worked as a smuggler of clothing in and out of the Eastern Bloc under communism. He shyly admitted that his mother had a porn Oscar. Not as a performer, but as a friend to the industry. Mitch’s family house in Muir Woods had been used as a set for dozens of adult movies in the seventies and eighties.

Eventually, I openly offered him a job. But he politely demurred. He loved running his family’s company. He loved the video business. He wasn’t exactly itching to leave Marin.

And yet…he kept agreeing to meet me at Buck’s. And it wasn’t because of the bison meatloaf—as good as it was. He was intrigued. He kept giving me advice and guidance. And I kept buying us lunch. I ate so many Reubens that spring and summer wooing Mitch Lowe that I think I gained what I came to call the “Founder’s Fifteen.” I just kept loosening my belt, hoping the calories would pay off.