CASE IPR2019-01278
`Patent No, §,020,083
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`LENOVO HOLDING COMPANY,INC.,
`LENOVO (UNITED STATES) INC., and
`MOTOROLA MOBILITY LLC,
`Petitioners,
`
`¥.
`
`' DODOTS LICENSING SOLUTIONS LLC,
`Patent Owner.
`
`CASE IPR2019-01278
`Patent No, 8,020,083
`
`DoDots Exhibit 2003
`
`1
`
`Exhibit 1044
`Samsungv. DoDots
`IPR2023-00701
`
`1
`
`Exhibit 1044
`Samsung v. DoDots
`IPR2023-00701
`
`

`

`CASEIPR2019-01278
`Patent No. 8,020,083
`
`I declare as follows:
`
`1. Iwas the sole in-house counsel of DoDots, Inc. for approximately nine
`
`months in the 2000-2001 timeframe after having served as DoDots’ outside
`
`counsel while at a law firm, | am submittmgthis declaration to provide
`
`information about the commercial success of the invention described in U.S.
`
`Patent No. 8,020,083 (the “‘083 Patent”).
`
`-
`
`2, Led by twin brothers John and George Kemibel, the team of scientists from
`
`Stanford who invented the groundbreaking technology described in the ‘083
`
`patent were true internet pioneers. In 1999, more than nine years before the
`
`Apple app store opened,these inventors conceived of a novel approach for
`
`creating an ecosystem ofapps (which they called “Dots”) that enabled the
`
`delivery of custom-tailored content from the intemet without using a web
`
`browser and without the need for each Dot to be a standalone application.
`
`3, DoDots, Inc, was able to build a company around the then-patent-pending
`
`technology thatat its peak was valued at $275 million. DoDots, Inc. built
`
`Dots for dozens ofcompanies, including ABC, Edmunds, CNET and many
`
`others. Attached as Exhibit A is a copy of the company’s customer hsting
`
`from its website in 2000.
`
`4,
`
`I recall that DoDots received much praise and recognition fromothers for the
`
`
`
`2
`
`

`

`CASE IPR2019-01278
`Patent No. 8,020,083
`
`technologydescribed in the ‘083 Patent. Attached as Exhibit B is a true and
`
`correct copy of a CNN article dated April 7, 2000 entitled “DoDots: The Web
`
`without a browser,” which demonstrates that what DoDots was doing at the
`
`time was newsworthy.
`
`5. The success the company had was directly related to its technology, as the
`
`sole product/service of the company was the DeDots platform described in
`
`the specification of the "O83 Patent.
`
`6. Unfortunately, the industry-wide dot com crash sank the company, allowing
`
`later entrants to eclipse the trailblazing work done by DoDots, Inc. DoDots,
`
`Inc. was forced to sell its patent portfolio, which remained dormant for
`
`various reasons until recent years,
`
`7. [was one of the owners ofa company that owned the patent portfolio after
`
`DoDois, Inc., and I continue to have a stake under certain circumstances In
`
`any eventual recovery.
`
`8. Stanford Business School put together a case study of DoDots, Inc, in July
`
`2000. A copy of that case study is attached as Exhibit C. The case study
`
`includes various attachments, including the summary ofa Proposed Private
`
`Placement dated March 10, 2000 in which DoDots, Inc, was valued at $275
`
`million. I wasstill counsel for DoDots, Inc.at that time, and was aware of the
`
`negotiations relating to the Proposed Private Placement.
`
`
`
`3
`
`

`

`CASE IPR2019-01278
`Patent No. 8,020,083
`
`9. [have a Bachelor of Science degree in Electrical Engineering from UCLA, a
`
`Master of Science Degree in Engineering from USC, a JD degree from the
`
`University of Pittsburgh and an MBA frori Carnegie Mellon University.
`
`10. Currently, I manage business development, venture investment, software
`
`advisory, strategic alliances joint ventures from start-ups to established
`
`companies. [ also develop and manage corporate and business development
`
`activities and initiatives, technology evaluation and diligence, product
`
`development/program management, go-to-market and other matters in a wide
`
`range of technology and commercial areas for tech clients, law firms andVC
`
`chents.
`
`I declare under penalty ofperjury that the foregoing is true and correct.
`
`Executed on May _&, 2020 in Los Altos, California.
`
`—~
`tee I
`Rakesh Ramde
`
`e
`
`
`
`4
`
`

`

`EXHIBIT A
`
`
`
`
`
`
`
`5
`
`

`

`Case 1:18-cv-00098-VAC-CJB Document1-2 Filed 01/16/18 Page 2 of 2 PagelD #: 74
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`EXHIBIT B
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`
`7
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`

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`GIN,com.sissies»cassis
`
`Editions | my | ideo | Audio |HeadlineNews Buefl Feedback ure Fo
`MAINPAGE
`CNN sites
`By
`WORLD
`US.
`WEATHER
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`BUSINESS
`SPORTS
`TECHNOLOGY «+
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`Hom.
`computins
`
`personaltechnoloey.
`SPACE
`PC World
`TOP STORIES
`HEALTO
`ENTERTAINMENT April 7, 2000
`POLITICS
`Web posted at: 9:40 am. EDT
`LAW
`(1340 GMT)
`
`
`
`Search
`NALcom
`
`kl
`
`Find
`
`V0
`
`(CNN.com - Technology - DoDots: The Webwithout abrowser - April 7, 2000:
`
`.
`DoDots: The Web without a
`browser
`
`ns
`
`Consumergroup:
`Onlineprivacy,
`
`TRAVEL by Chris YurkoGuidetoawiredSuper
`
`
`FOOD
`Bow!
`
`(IDG) -- "DoDots" may sound like
`
`BOOKS Debateopensonsome new kind ofcandy, but it's
`
`
`
`NATUREinakinge-commercenot. And it's not the latest kid-
`
`IN-DEPTH crazy, animated Japanese import.Jawconsistent
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`LOCAL
`
`(MORE)
`COMcom
`TOP STORIES
`
`DoDots is an application made up of small windows called dots.
`Through these windows,you cantake advantage of the features and
`services offered by certain Web sites without actually visiting them
`EDITIONS:
`—through a browser.
`CNNcomEurope
`Because the dots are small and operate outside the browser,they on
`chaneedefault
`provide a faster, more direct link to content providers, according to
`edition
`Tepresentatves of DoDots, the new Intemet company that makes the
`.
`.
`Mideastuseauators
`application. Each dot handles a specific task.
`MULTIMEDLA
`
`
`
`video"Essentially, it's attle Web application on your desktop,” says JohnaiterIsraelielectionsarchive
`audio
`Eembel, the company's cluef technology officer.
`Sa
`(MORE)
`
`
`multimediashowease=, : .
`
`
`
`
`
` Anything you can do on the Web, you can do on a Dot,” adds George :" BUSINESSDeee ' ahs : 'e tar oy
`
`
`
`
`
`Eembel, DoDots' chief executive officer (and John's twin brother).
`.
`_
`=. PlayingforIran'sjackpot
`
`MAIL:
`Here's how it works. First you must download the DoDot “home dot,"
`-
`Subsenbe to one of which sits in the top nght-hand comer ofyour screen regardless ofCoke&smokebiteDow
`
`
`purnewscanal whether your Web browseris open. Thenyou can pick andchoose
`
`
`—postsamong any ofthe other "dots" offered from the company's Website SunMicrosystems
`
`
`Enter your address
`partners
`tinyprod
`,
`ge
`Upon DoDots' launch this week, a handful more comPuTING INTELLIGENCE
`(MORE)
`DISCUSSION
`ofdots are available. The partners include
`chat weAGansroaMARKETSAnyDay, anonline calendar; eHow, a “30pmET,
`
`
`
`
`icedback Q&A site: Merriam-Webster, a dictionaryGutevoubuseswinNeoPianet4/16
`
`
`
`_ and thesaurus; MySimon,a priceMishSulatovamsoulbowess §6=6=—|-DITLA 144.708257.60
`
`CNN WEB SITES:
`comparison site; PhotoPoint,a site for
`adLousGewpevermpoenspc;
`NAS
`3.71
`1304.72
`
`myGicom CASI=posting photographs; Work.com, a Coensouicebowswnsbiasuguod S&P 1090 87991
`
`
`
`alipetities CAMf"-=business information site: and ZDNet.fr Gejope a n-oxn nnaar ine Es
`U3
`
`bitps:ewwcnncom'2000/TECHcomputing4/07Modotsidg/indexhel 8
`
`
`
`
`
`

`

`(CNN.com - Technolosy - DoDots: The Webwithout abrowser - April 7, 2000
`EBuginessWor
`news and information on the computer
`‘Year 2000 Wied
`Slleom SPORTS
`industry. Other dots let you download
`
`QuestionsaboutcoyLet
`Jordan says farewell for
`MP3s or get the current time.
`10G.ners editors help you
`the third time
`Subscrine to1DG.netsfree daily
`All ofthe dots appear in your home dot
`CiniTtceisleres
`menu:
`click on one to
`it.
`shagcouldmissplayoit
`you simply
`open
`Oeics)
`
`gameforchild'sbirth
`Search IDG.net in 12 languages
`opens a 1-by-2-inch window where you
`
`can enter words you want defimed by theEsaUSOCofficialsays
`athletesbentdrysmules
`
`TIME INC.
`SITES:
`aot...
`
`The advantage of this 1s that if you're
`working in another application, such as writing a letter, you don't have
`to launch your Web browser to access a Web resource, George Kembel
`says. Sometimes, though, the search itself will launch your browser to
`display the results.
`CNN
`Us Zip|go|Allcities
`NETWORES:
`Dots can be bundled or be e-mailed to fmends. Also, you cam access
`your dots from any other Dot-enabled PC.
`Ga
`(CRGnTeRnancMan
`Dots are free ofcharge, but the beta 1 versions are now available only
`
`‘(GRAHeacinelEWS
`Quake help not fast
`to users with Internet Explorer 4.0 or later versions of the browser. The
`AIRES
`enough,saysIndianPM
`application also requires Windows 98, NT, or 2000, although other
`erane
`versions are in development.
`CNW anchors
`
`(MORE)
`
`+ All Scoreboards
`
`WORLD
`
`US.
`
`Tumerdistibution
`
`DoDots also plans to tackle devices other than the PC. "The desktop is
`just the start," George Kembel says.
`
`RELATED IDG_net STORIES:
`
`SITE INFO:
`help
`contents
`search
`adinio
`yourbrowser
`(PC World Online)
`jobs
`Clotheyour browser with NeoPlanet
`ec World Online)
`
`WEB SERVICES:
`
`
`
`Wareexpands
`
`(PC World Online)
`
`inebrowsers
`
`(PC World Online)
`AOL puts Gecko everywhere but PCs
`(PC World Online)
`Open-source browser wins bigsupport
`(Computerwarld)
`
`RELATED SITES:
`
`DoDots
`
`Heartdoctorsdebate
`Note: Pages will open in a new browser window
`ethics of testingsuper-
`Extemal sites are not endorsed by CNN Interactive.
`aspirin
`
`Search
`
`(CNN.com
`
`Bb
`
`Find
`
`TRAVEL
`
`Nusestoaid ailing
`
`ainlinepassensers
`
`ag
`
`
`burps:/errwenncony'2000/TECHcompuring/04/07dodotsidg/indexhem 9
`
`
`
`
`
`
`

`

`4242020
`
`(CNN.com - Technology - DoDots: TheWebwithout abrowser-Apm 7, 2000
`FOOD
`
`Tesascattle
`quarantinedafter
`
`‘olution
`of
`mad
`feedban
`
`ARTS & STYLE
`
`Ceramist Adler addseee
`
`Backtothetop© 2001 Cable News Network. All Rights Reserved.
`Temmg under which this service is provided te you.
`Peed our pileculls.
`
`bitps:/iwwwwenncom/2000/TECH/computing/O407idedotsidgindexhtml=4.
`
`
`
`
`

`

`EXHIBIT C
`
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`
`

`

`iy
`
`GRADUATE SCHOOLOF BUSINESS
`
`STANFORD UNIVERSITY
`
`
`
`er
`a re
`
`Running out of cash in an otherwise really good company is like run
`gas in an otherwise really good helicopter - Unknown
`
`a
`
`
`
`
`with Heidi Roizen, a
`DoDots’ first round of
`
`Tt was May 5, 2000, Tony Medrano, President and co-foun
`month old Internet start-up (www.dodots.com), had just hung up the
`partner at Softbank Venture Capital (SBVC). Roizen, the lead i
`
`financing and a Director of the Company, had repeated a pre
`
`ank portfolio, was getting close to
`second round if necessary. The Company, a star of the §
`ompany had signed a second
`running out of cash. On April 17, six weeks after the hi
`t at a pre-money valuation some
`round term sheet with Chase H&Q for a large equity
`inv
`collapsed,
`leaving the Company
`deal
`60 times higher
`than the first
`round valuation,
`the
`
`m the deal in the wake of recent stock
`scrambling for financing, Chase had pulled
`
`market volatility that had sent many Interne
`s Well below their initial offering prices. The
`
`market was littered with horror stories with
`high profile companies such as Chemdex and
`(See Exhibits 1 & 2 for a chart of the
`months.
`InfoSpace losing over 70% oftheir val 7 o
`Nothing was wrong
`wi (om Chase said, but with the market fornew Intemet
`company IPOs sta’a depressed for the foreseeable future, Chase could no
`investment at a much beratin The founding team, CEO George Kembel, CTO John
`
`NASDAQ Composite index and In
`
`t Sector
`
`Indices.)
`
`with
`
`th
`
`longer justify the invest
`
`at
`
`a high price. Chase said it would consider making a smaller
`
`being upset over the seeming vaporization of the majority of the
`Kembel and Medran
`worried that if the markets continued to vacillate, and the deal fell
`value of their C
`pany would be in serious trouble. To minimize that risk, the team chose
`through again, the
`ources of funding, while continuing to talk to Chase. The team wasn’t bitter,
`to pursue
`
`they had se
`arket and understood the implications, however, they still had a company to
`
`5 getting closer and closer to running out of cash.
`fund
`
`
`Roizen’s offer, to lead the round with a $20 million investment at an $80 million pre-
`money valuation, albeit at a much lower valuation than the Chase’s original offer, was, by any
`=.eeis
`This case was prepared by Keith Sigg under the supervision of John Glynn, Lecturer in Management, Stanford
`University Graduate School of Business, as the basisfor class discussion rather than to illustrate either effective or
`ineffective handling of an administrative situation.
`
`For confidentiality purposes some facts and numbers in this case have been changed. These changes should not
`affect the readers conclusions,
`
`This case was made possible by a giftfrom Brook A. Byers.
`
`Copyright © 2000 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved,
`
`12
`
`
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`

`

`
`
`DoDvots ERS 2
`
`standards, still an enormous step up from the first round. Roizen repeated that she and her
`partners at Softbank felt that the Company had a strong future and was willing to support it. Asa
`rule, Softbank did not pre-emptively lead rounds in which they were already invested, preferring
`to have new investors involved both for purposes of objectivity as well as for the added benefits
`that additional investors brought to the Company.
`In this case, Softbank had decided to make an
`exception for various reasons including market conditions and the partnership’s expectations for
`the Company. Medrano appreciated heroffer, but didnt want to take it unless necessary. He saw
`it mainly as a safety net. Medrano and his co-founders felt that having the first round lead
`investor also lead the second round, would not look good and was not necessarily in the best
`interests of the Company. The Company wanted to get additional value-added investors on
`board to expand the Company’s network and spread the control amongst mu
`Besides, Softbank and Roizen, as first round shareholders were conflicted.
`
`side as a
`
`On
`
`
`
`capitalist,
`board membershehadafiduciarydutyta theCompany,ontheotherside,foo
`The founders welcomed the safety netprovided by Roizen’s xas theynegotiated with
`shaken investors who were cautious about putting money to Work in the wake of recent market
`
`events, The Companystill had enough cash to last until.thevend of May (see Exhibit 3 for
`
`DoDots financial statements), so there was still some b
`ch time to pursue additional
`
`investors. To make things more complicated, the
`Company faced significant dilution from the
`exercise of warrants by a creditor if the second round
`was not closed by May 15". A condition
`
`had been written into the contract with the credi
`stated if the second round was not closed
`
`
`by that date, the conversion price for the w
`switch from the Series B to the Series A
`ould
`
`price. As a result,
`the number of shares
`stock issued to the creditor would increase
`
`dramatically. This meant that the Co pany)
`Id in effect be giving a much larger slice of
`
`
`+
`threatening to the Company, it provided a strong
`fatherthan later.
`The Company's ote if it didnt secure financing in short order, was to take a
`
`she wanted to invest in the Company for the lowest price possible. Med
`still felt the Company was worth more.
`
`equity to the creditor, While this
`incentive to get a deal done sooner
`
`bridge loan at Softbank
`Although Softbank’s t
`investors, bridge lo
`and in extreme ¢
`
`bridge loan terms, while it continued to look for investors.
`ere more favorable to the borrower than those of some other
`ral were often viewed as a last resort by companies and investors
`ied draconian terms. (See Exhibit 4 for the terms of the Softbank bridge
`
`loan.) Kembel, John Kembel and Tony Medrano began working in the spring of 1999
`
`(See Exhibit 5 for founders’ biographies.)
`on an idea for a new type of Intemet company.
`George and John Kembel, identical twins, graduated from Stanford University with B.S. degrees
`in Mechanical Engineering in 1994. George pursued a sales and marketing career path while
`John focused on a more technical career in computer science. Both returned to Stanford for M.S.
`degrees in Product Design. George focused on technical marketing and John concentrated on
`software and product design. While in graduate school
`they met Medrano through personal
`contacts. Tony, a former naval officer, high school physics teacher and JD/MBA student at
`Stanford, joined George and John in developing a business around technology which John had
`created and patented.
`
`13
`
`
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`

`

`DoDots E-#9
`
`a
`
`The idea was to bring consumer packaging and distribution to web content. The
`Company, DoDots, would provide online and offline companies with technology to enable web
`content to be “packaged, branded, and distributed" to customers outside of a web browser, Dots,
`as the team called them, were small windows able to deliver specific information and features
`such as weather, games, a dictionary, financial information or e-commerce (sec Exhibit 6 for
`some examples of Dots). Dots could be open along with other applications on a desktop, and
`because of their small size, Dots displayed in about one tenth the time of a normal web page.
`Companies, the team felt, would want to use Dots to distribute content because of the benefits of
`having a single purpose, small window sporting that company’s branding and style that
`could stay
`visible as users used other applications. Similarly, users would like the simplicity,
`\ability to
`multitask, and fast downloads,
`
`Through June and July 1999, Medrano and the Kembels met with
`discuss their idea and show a working prototype of their application.
`academic contacts to put together meetings with several technology-f
`
`
`
`
`ofH idi Roizen by Tom Kosnik, a
`In early July, the team was referred to Softbank part
`former professor of George and John whom Heidi had know.fo
`al years, a5 Well as by Pete
`Hartigan, an associate at Softbank who worked closel
`idi. Hartigan knew Medrano
`
`through his fiancé who had been a classmate of Medrano atthe business school,
`
`SOFTBANK VENTURE CAPITAL’
`
`Yahoo!, E-Trade and #Dnet, which had distribution or other
`De.
`ftbank-backed companies.
`
`
`
`In early 1996, SBYVC was formed whet Gary Rieschel joined Softbank Holdings to head
`up their venture capital activities. The ens
`amily ofcompanies was headed by the vibrant
`
`inded Softbank in 1981 as a software distribution
`Masayoshi Son, an entrepreneur
`into a multinational diversified high technology
`it
`company and by 1999 had developed)
`synergies among the ma le in which Softbank held stakes would be leveraged for
`f nearly $80 billion. Son developed an ambitious 300-
`organization with a market capitalizati
`year plan for Softbank tha
`luded the creation of a worldwide Internet "zaibatsu," in which
`
`maximum advantage.nkee ing with this strategy, some of Softbank's central holdings were
`infrastructure com
`
`resources to offe
`
`
`rsUSem partners took Son's zaibatsu vision to heart when they began directing
`
`
`
`Softbank's
`
`estments, choosing deal and sectors that supported the global Softbank goal of
`cOmpelling, long-lasting Internet infrastructure."” By early 2000, SBVC had $4.9
`er management. Rieshel told an interviewer that “because of the information that
`travels between [Softbank] companies and our portfolio and how we really encourage them to
`work and communicate with each other...we get better information as investors."" The synergies
`between companies were good for SBVC as well as for the companies involved, because they
`strengthened the overall network by fortifying each with its components.
`
`! Special thanks to HBS High Tech Fellow Mary Rotelli for her research on Softbank which is included here
`* Alex Gove, “Softbank Antes Up." Red Herring 61/96
`* Interview with Bruce Francis, CNNfn Anchor, Digital Jam 2/499
`
`14
`
`
`
`

`

`DoDots E-89
`
`4
`
`Softbank had considerable Internet investing experience upon which SBVC could draw.
`Son envisioned Softbank as "the hub of a huge digital marketplace,"* and began investing heavily
`in Internet companies as early as 1995, Softbank’s early stake in Yahoo! yielded not only
`enormous financial gains but also global business synergies: its presence in Softhank’s portfolio
`gave other Softbank companies access to one of the most powerful distribution engines in the
`Internet economy of the late 199)'s,
`
`Heidi Roizen
`
`
`Roizen, an outgoing, personable, former entrepreneur, joined Softbank as
`investing
`partner in the spring of 19997. Roizen had spent the first decade of her career
`
`T/Maker, the software company she co-founded while at the Stanford Business
`c
`Hater vice
`her roles as CEO of T/Maker, President of the Software Publishers Association
`
`president of worldwide developer relations at Apple Computer, Roizen haddev oped a network
`
`
`sector. Roizen was
`fy
`that included many of the most powerful business leaders in the tech
`
`f many, and effectively
`
`a set of guidelines that
`combining social, community, and business relationships. She
`followed
`she had developed for how to leverage her relationships in a sonstn clive manner to create win-
`win relationships for those involved. Roizen wove her family
`and home life into her career as
`
`well, and the family house was the site of everything
`unity planning sessions and
`
`dinner parties with the likes of Bill Gates of Microsoft and,Scott McNeally of Sun Microsystems
`to company retreats.
`
`
`
`place at her home one morning at 8:00 AM
`The team’s first meeting with Roizen took
`a week, but on a strong recommendation from
`before her daily jog. She was leaving t
`:
`
`showed their product technology an
`
`her questions. The team and Roizen immediately
`
`
`Hartigan wanted to meet with the eamon ather than later. During the meeting, the team
`hit it off, Georgerecalled, "Heidindwhashelikedwhat wehadshown herand she likedour
`company. She put us in ceit another of her partners, Scott Russell, to also hear our
`pitch Two days la C).. met with Scott Russell. Russell also liked the idea,
`the
`
`work ethic even though she
`
`pecog
`
`that we were young and inexperienced in running a
`
`Based on that meeting and Russell's input from Roizen, Russell made
`technology and t
`offer on the spot. Russell discussed how Softbank could help the Company.
`the team a tentative
`m, would fit in well with the Softbank portfolio, and be an excellent platform
`DoDots, hi
`duced by many of Softbank portfolio of over 100 Internet companies (see
`for the c
`r a partial list of Softbank’s portfolio). Scott explained that Softbank associates
`Exhi
`etbatsu Development Officers) had specific responsibility for facilitating business
`(know
`development deals between the portfolio companies (in fact, approximately 50% of the NDOs’
`time was slated for the purpose). With so many Internet companies in the portfolio, the potential
`value to a "platform" company like DoDots was substantial. Following the meeting, Russell
`offered to draw up aterm sheet and asked for the team’s input on what they wanted to see in it.
`
`
`
`4‘ Brian Bremner and Linda Himelstein, “Softhank Cyber Keirstsu," Business Week, 4/5/99
`* For an excellent discussion of the career of Heidi Roizen, see HBS Case study N9-800-278 80 January 18, 2000
`
`15
`
`
`
`

`

`DaDots E-89
`
`2
`
`George and John had given Tony full responsibility for investor negotiations especially those
`aspects dealing with legal matters. Tony himself had drafted several term sheets between his
`years in law school while working at Cooley Godward, a law firm specializing in venture law,
`Tony went over the terms that were important to the Company. Medrano was conscious of the
`fact that once terms were included in the first round term sheet it was very difficult to change
`them later. His goals were to ensure that the terns protected the founders and to avoid any terms
`that limited the upside potential of the Company or had the potential to cause problems in future
`fundraising rounds.
`(See Exhibit § for a discussion of typical terms of preferred stock.) Tony
`also wanted John and George to receive a portion of their equity with immediate vesting for the
`work they had already done towards creating the technology and prototype. Board
`composition
`was also an important consideration and the DoDots team wanted to ensure that the
`not lose
`contro! of the Company. With DoDots" input, Russell had the term sheet drawn up.and hadit in
`their hands by that evening. The team considered the resulting terms
`hibit 9) to be
`extremely entrepreneur friendly.
`
`levels: Softbank had
`To date, the team had been impressed with Softbank on
`been very responsive, arranging mectings and preparing documents in short order. The extensive
`
`Internet portfolio, or "ecosystem" as Hartigan had referred to.
`ked promising for deal flow.
`
`To that end,
`the partnership espoused a philosophy o
`acilitating and supporting
`
`relationships between the portfolio companies, In additi
`felt that Roizen and Russell
`seemed to “get it", that is they shared the vision of the
`rs for the Company. As Roizen
`would be the partner to sit on the Company’s Board,
`along with George and John, the DoDots
`
`founders were very alert to the way in which
`wld interact with the Company. Because
`
`
`Heidi had just
`recently started working
`she did not have a large number of
`tbank
`
`investments she was overseeing. To DoDaots,
`this meant that they would get more of her time at
`
`mmunicating and committing to what she would be
`
`companies growand had been expliciti
`
`any.
`the critical formation stages of the Co
`willingtodo.
`C)
`
`was Very interested in using her skills to help
`
`riod, the team also began to have serious discussions with Menlo
`During the same ti
`Ventures (Menlo). Medrano had,originally approached Menlo based on a personal relationship
`he had developed with
`of the Menlo partners, Doug Carlisle, while in business school.
`Menlo, a well-knowfh;
`respected firm that had been in business for 23 years had numerous
`investments in
`Inbermel) e-commerce, communications, software and health care companies.
`Menlo was very
`intégested in doing the deal. The DoDots team also felt comfortable with Doug
`Fumet with him several limes to discuss the Company and the value that Menlo
`
`
` Carlisle, h
`could bindAt stive to the team was the fact that the firm was actively involved with the vast
`
`major
`portio
`DoDots.
`
`if portfolio companies, taking board seats on over 80% of them. However, the
`ile broad, had fewer content companies that would be candidates to partner with
`
`CLOSING THE FIRST ROUND
`
`By the beginning of August, the team had received two term sheets - one from Menlo
`Ventures and one from SOPTBANK.
`
`The Company was looking to raise $3 million from two investors. Softbank proposed a
`$4.5 million pre-money valuation with Softbank investing $1.5 million, and another yet to be
`
`16
`
`
`
`

`

`DoDots E-F9
`
`6
`
`determined investor also investing $1.5 million, Menlo Ventures had proposed a $5 million pre-
`money valuation. The Menlo offer, although higher, carried with it some restrictive terms that
`would provide Menlo with warrants on 20% of the Company in series B with no more than a $25
`million pre-money valuation. While at the time $25 million seemed generously high when
`compared to the current valuation, Medrano and the Kembels did not like the idea of signing a
`document now that capped the upside of value of the Company in the future.
`
`The team considered taking funding from both Softbank and Menlo, but the desire by
`each VC to lead the round left the Company with a choice. Medrano and the Kembels felt that
`the good chemistry between themselves and Heidi Roizen, Softbank’s entrepreneur friendly
`reputation, which had been backed up by their own experience to date, and the
`v
`of the
`Softbank portfolio led the DoDots team to accept the Softbank offer on August
`
`1999.
`
`21,
`
`DEBT FINANCING
`
`ontinued to look for a
`After DoDots received the term sheet from Softbank, the t
`to begin building the
`complementary investor for the Company. At the same time,
`itching
`
`
`Company, George, John, and Tony did not want to wait until
`money was "in the bank"to
`
`equipment.
`begin hiring people, getting office space, and buying necess
`In early August,
`
`k and obtained a $250K line
`Medrano approached a personal contact who ran a com
`d
`
`ofcredit forthe Companybased on thependingequitywfc Medranodescribed the use of
`
`the funds and the implications on the value of the Company.
`
`“With this money, we signed a lease fo
`a technology consulting company,
`poco
`client.
`In the meantime we're
`verification of the product. Ni
`
`‘ébegan
`
`rst office space and John hired Reactivity,
`the prototype client
`to the production
`to customers and getting initial customer
`hiring people internally. The result was that
`
`to pursue more forms of debt financing with the
`ided
`round of equity financing, Wi
`goal of stretching the
`pany's cash as far as possible, Give us a long Tunway"'as they
`call it. Our goal was_to fi
`¢ as much of the growth of the Company as possible with
`debt. We decided
`orgo selling any more equity in the Company than necessary.
`
`Letting anotl
`into the first round at a 34.5 million pre-money valuation
`ar
`seemed foolish
`aw@hif point. We were already worth much more."
`
`everyday the Company was tine valuable and we still hadnt closed our first
`
`
`
`raised 32
`fromSoftbank at the previously agreed upon $4.5 pre-money valuation. By the time
`
`:
`
`an raising $3 million in the first round as originally intended, the Company
`
`
`In early October
`vestment closed on Sept 15, the Company was employing six people.
`ph Vetter, a former Microsoft Officer and Softbank limited partner asked to invest in
`the Company. Medrano recalled,
`
`"Vetter really liked the Company and wanted to put a significant amount of money to
`work in it. He wanted to invest at
`the first round proce, which we told him was
`impossible, We had specifically removed the provision from the Series A closing
`decuments that would allow additional
`investors to come into the round after the
`closing®. We also told him that we planned to raise the second rownd early in the next
`
`
`
`* Often, the deal documents allow for additional investors to come in after the closing for some predetermined length
`of time.
`
`17
`
`
`
`

`

`DaDhots E-8o
`
`7
`
`year, but intended to take financing from venture capital investors and couldn't guarantee
`that there would be space in the round for individual investors at that time. However, if
`he chose, Vetter could purchase convertible debt. His investment would earn 10%
`interest and be senior to equity in the case of a liquidation, so there was less risk than an
`equity investment, however, at
`the time of the closing of the second round, his loan
`would convert
`into an equity investment at the B share price.
`It was good for the
`Company and would also allow him to invest in the second round. He agreed and in
`early November purchased $1.25 million in convertible debt."
`
`As the Company grew and George and John concentrated on steering the Cofhpany and
`developing the technology, Medrano continued to pursue additional forms of de
`neing to
`
`negotiated an equipmentline of credit from Western Technology Investments forthe purchase of
`D
`
`in mensote mpany
`Following the convertible loan from Vetter,
`its growth.
`fuel
`Cis
`nt loan was
`computer equipment and software in the amount of $1.5 million. Th
`% annual interest
`secured by the assets purchased with the loan proceeds. The loan carried
`rate with the payments spread over 36 months, and 6% warrant co érag
`at
`the Series B share
`
`price. However an additional caveat was written into the contract which would price the
`warrants at the Series A price if a B round was not closed by
`
`
`In February,
`by obtaining $2 million in
`the Company further increased its
`
`s of this loan included an APR of
`commercial debt from Lighthouse Capital Partners. The
`
`fo warrant coverage. These warrants
`
`10%, a balloon payment at the end of36 ak
`Through this phase Roizen was cn surprised by the DoDots team’s abi