Fatal Error
Authors: Michael Ridpath
Fatal Error
Michael Ridpath
Copyright © 2012, Michael Ridpath
For Hugh Paton
Contents
September 1999, Clerkenwell, London
‘Are you ready?’
Guy was smiling at me. A smile that held confidence and anxiety in equal proportion. The confidence was there for all to see. Only I, his friend for seventeen years, could see the anxiety.
I glanced around the large room with its white-painted brick walls and blue pipes, its cheap desks bearing expensive computers, its chairs in bright green and purple, the table football and the pinball machine, both at rest, both ignored, and the whiteboards covered with scribbles detailing flowcharts, timetables, schedules and missed deadlines. The room was bustling with young men and women in T-shirts and combat trousers tapping away at keyboards, staring at screens, talking on telephones, rushing from desk to desk, pretending that this was just a normal day.
It wasn’t.
Today we would find out whether ninetyminutes.com, the company Guy and I had founded a mere five months before, had a future.
‘I’m ready.’ I gathered together the papers I would need for the board meeting. ‘Do you think he’ll go for it?’
‘Of course he’ll go for it,’ said Guy. He took a deep breath and smiled again, banishing the anxiety, pumping up the self-confidence, winding up the charm. Guy had charisma, and he would need it today, even for his father. Especially for his father.
He was thirty-one, just a few months older than me. He looked younger, boyish even. He had short blond hair, high cheekbones, bright blue eyes, a mobile, delicate mouth. He dressed cool: white T-shirt under a black designer suit. But he had an edge. Something sharp that lay just beneath his finely structured features. It was a hint of danger, a hint of unpredictability, a touch of cruelty perhaps, or perhaps melancholy. It was difficult to say exactly what it was, or even how it was betrayed, whether by a glint in his eye or a hardening of his mouth. But everyone saw it. Women, men, children for all I knew. It was what attracted people to him. It was what made people follow him.
It was how he usually got his way.
The boardroom was a glass-encased bowl at one end of the open-plan office. The table could seat twelve, which was eight too many for our board. There were only four directors of Ninetyminutes: Guy was Chief Executive Officer, I was Finance Director, Guy’s father Tony Jourdan was Chairman and the fourth director was Patrick Hoyle, Tony’s lawyer.
Although Guy and I ran the company, Tony had put up most of the money and held eighty per cent of the shares. He also held eighty per cent of the votes. Patrick was there to say ‘Yes, Tony,’ whenever necessary. There were other shareholders, all Ninetyminutes employees, including Guy’s brother, but none of them had a seat on the board. It was up to Guy and me to fight their corner.
This was our second board meeting. They were held on the third Monday of the month and Tony and his lawyer had flown to London from their homes on the French Riviera to attend. We were already settling into a pattern. It began with Guy outlining the company’s progress. Which was good. Astoundingly good. We had founded ninetyminutes.com the previous April with the aim of creating the Internet’s
number-one soccer website. Somehow we had managed to get a site up and running by the beginning of August. It provided commentary, gossip, analysis, match reports and statistics about every club in the English Premier League. It had been well received, with great coverage in the press. More importantly visitors were flocking to the site. In our first full month on-line we had had 190,000 visitors and the numbers were climbing strongly week on week. We now had twenty-three employees and were aggressively hiring more.
Guy went into our plans for the rest of the year. More writers, more match reports, more commentary. Alliances with a bookmaker to enable our visitors to gamble on soccer results. And the gearing up of e-commerce. We were planning to sell club and national kit off the site as well as ninetyminutes.com’s own branded clothing. This was Guy’s big idea: build a brand on the Net and then make money from selling fashionable sportswear on the back of it.
Tony Jourdan listened closely as Guy spoke. He had been a spectacularly successful property developer in the seventies, but had retired at an early age to the South of France. Too early. It was clear that he missed the cut and thrust of business, and he took his duties as chairman of Ninetyminutes seriously. He looked much like his son, but smaller. His own fair hair was turning a sandy grey. He had the same blue eyes, twinkling out of a deeply tanned face, and the same easy charm that could be turned on at will. But he was tougher. Much tougher.
It was my turn. Guy had done the easy stuff. Now Tony was warmed up it was time for the crunch.
I referred everyone to the board papers. ‘As you can see our loss this month will be slightly less than budgeted. I’m hopeful we’ll manage to keep that through to the end of the year, especially if we begin to see some good advertising revenues come in.’
‘But still a loss?’ Tony said.
‘Oh, yes. That was always in the plan.’
‘And when do you expect to turn in a profit?’
‘Not until year three.’
‘Year three? That’s 2001, isn’t it?’ Tony said, a note of mockery creeping into his voice.
‘Probably 2002,’ I answered.
‘Our funds won’t last that long.’
‘No,’ I replied patiently. ‘We’ll have to raise more.’
‘We’ll need cash to gear up for the e-commerce phase,’ added Guy.
‘All of this was in the plan,’ I said.
‘And where is this cash going to come from?’ asked Tony.
‘Actually, we have an idea for that,’ Guy said.
‘Really?’
‘Yes,’ I said. ‘Over the last few months we’ve been talking to a firm called Orchestra Ventures. They’ve seen what we’ve been doing and they like it. They want to invest ten million pounds. It’ll be enough to finance our growth plans and take us through to next year.’
Tony raised his eyebrows. ‘Ten million, huh? And what do they want for their ten million?’
‘It’s all here,’ I said, passing copies of a term sheet to Tony and Hoyle. The sheet outlined the terms under which Orchestra Ventures would make their investment. They were the product of several days of hard negotiating.
Tony scanned it quickly. Then he tossed it on to the table. ‘This is crap,’ he said. His blue eyes were cold. No sign of the famous Jourdan charm. ‘The way I read this, my equity stake goes down from eighty per cent to twenty per cent.’
‘That’s right,’ I said. ‘After all, they’re putting up ten million quid. You invested two.’
‘But management’s stake is sticking at twenty per cent.
Do Orchestra Ventures expect me to give up some of my equity to you?’
‘Well, that’s not quite the way it will be done.’
‘But that’s the overall effect, isn’t it?’
‘Yes, I suppose so,’ I admitted.
‘Why on earth do they think I should do that?’
‘They think we need a decent equity stake to give us an incentive.’
‘They do, do they?’ Tony let his contempt for that idea show. ‘But I was the one who stumped up the cash when you came begging to me. When you’d been to everyone else and no one was prepared to touch you. I deserve to make a decent profit.’
‘You will make a profit,’ I said.
‘And Ninetyminutes will have the funding to take us on to the next stage and beyond,’ said Guy.
Tony leaned back in his chair and folded his arms. ‘You boys don’t have a clue about this, do you?’
If Tony was trying to bait me, he nearly succeeded. But I just managed to keep control. ‘And why is that?’ I asked through gritted teeth.
‘Because you give away everything to the first mug who’s willing to back you. Now that’s fine when I’m the mug. But not when it’s my equity stake you’re giving away.’
‘So what do you suggest?’ Guy asked.
‘Bootstrap it,’ Tony said. ‘Get some cash flow into the company. Then use the cash to expand. Better yet, borrow on the back of it.’
‘But that’ll be too slow!’ Guy protested. ‘If we’re going to dominate this space, we need cash now. And more in six months’ time.’
‘Not on these terms, you don’t.’
‘So where do you suggest we get this cash flow?’ I asked.
‘Skin.’
‘Skin?’
‘Yeah, skin. You know. Pics of women without clothes on. And men, for that matter.’
I flinched.
Tony ignored me. ‘Last week I bumped into an old friend from my property days. Joe Petrelli. Smart guy. He has a nose for cash flow, always has. He tells me the only money being made on the Internet at the moment is in skin.’
I had heard that too. But I didn’t like it.
‘People rack up a fortune on their credit cards downloading dirty pictures,’ Tony went on. ‘It’s a licence to print money.’
‘I can’t see what this has to do with us,’ said Guy. But I was sure he could.
‘It’s a perfect fit,’ said Tony. ‘Sign up the punters with football, and then reel them in with links to a porn site. Joe can put us in touch with the guys he deals with in LA.’
Guy and I sat stunned.
‘What do you think, Patrick?’ Tony asked.
‘Great idea, Tony,’ Hoyle said. ‘These losses worry me. We have to do something to turn them around. Footie and totty, a great combination.’ He gave a deep chuckle at his own skilful use of language, a low rumble that shook his broad shoulders. He was a huge fat man with several chins and a sweating brow. His merriment just seemed to underline the sleaziness of the whole proposition.
‘If we turn ourselves into a porn site we’ll never attract respectable investors,’ I protested.
‘We won’t need them,’ said Tony. ‘We’ll have our own cash to spend. Guy?’
We all turned to Guy. I prayed that he would be able to come up with an effective response. I had less than no desire to count the credit card payments of sad men downloading computer porn, however much money there was in it.
Guy stared hard at Tony. It was a cold stare, lacking the affection or even the respect of a son for his father. If Guy was angry, he was controlling it. It was the stare of someone assessing an enemy, thinking through his weaknesses, weighing options.
Eventually, he spoke, ‘Let’s stand back a bit here,’ he said. ‘My objective when I first dreamed up this company was to make it the foremost soccer website in Europe. If we can do that, the site will be worth hundreds of millions, given the valuations we’re seeing at the moment. That’s much more important than a few hundred thousand in the P and L. I can see a link to a pornography site would help our cash flow,’ he nodded towards his father. ‘But it would make it that much harder to reach our objective. It would take the whole site a long way downmarket. So I don’t think we should do it. We’re better off going for outside investment.’
‘From Orchestra?’
‘Yes.’
‘The bunch of crooks who want to steal my equity?’
‘Tony,’ I said, ‘you’ll end up with a smaller slice of a much larger pie –’
‘Don’t give me that apple-pie bullshit,’ Tony snapped. ‘I heard it dozens of times in my property days and I ignored it every time. You know what, Guy?’ He was speaking to his son now, his voice hard. I was out of the picture. ‘I always kept the pie. The
whole
pie. And I got rich as a result. That looks like a lesson you need to learn.’
‘So are you saying no to Orchestra?’ Guy said, struggling successfully to keep his tone reasonable.
‘I’m not just saying no. I’m saying I want you to get hold of Joe Petrelli and find out what he does and how he does it. We’ll discuss it at next month’s board meeting. Sooner if need be.’
This was worse than we had expected. We had known
Tony would be unhappy with the dilution of his equity stake, but we hadn’t expected him to start dictating the strategy of the company. And in such a repulsive direction, too.