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A Poker Face for Profits
by Chris De Benedetti

Sabeer Bhatia, the multi-millionaire Hotmail co-founder, would probably make just as much money playing poker in Vegas. His powers of persuasion and negotiating grit have become the stuff of Silicon Valley legend.

He first made his fortune and steely reputation when he sold Hotmail, the company he co-founded in 1996 with Jack Smith to Microsoft for a tidy sum.

Prime Mover: Sabeer Bhatia
Founder of Hotmail and Arzoo
Co-founded Hotmail and
Cal Tech, B.S.; Stanford University M.S
Former Company:

Some random Bhatia thoughts...

How did the Indian-born then 27-year-old engineer pull it off? All with a coolly executed mix of brilliant idea, Zen-like negotiations, and sly approach to venture capitalists that would make Machiavelli green with envy.

"I think you have some gut instincts and you have to go on those," says Bhatia. "And you have to give it a shot ... to an entrepreneur it's like a gamble, but you've got to take that chance." Bhatia crafted the strategy of pitching a decoy idea to venture capitalists in order to see which ones he could trust his true idea with. His real idea turned out to be Hotmail, which offered free e-mail accounts that could be accessed over the Web.

"I was introduced to a number of people who pretended to be venture capitalists, but were in fact, people who had little money or just wanted the idea," explains Bhatia. "I was skeptical and I was scared. I truly believed it was going to be very powerful."

The strategy was not only gutsy, it paid off handsomely. Hotmail added users at a record pace after its kickoff on July 4, 1996, which attracted a lengthy courtship from Bill Gates & Co. Bhatia's stubborn negotiations shocked the Microsoft officials and frightened his own partners, who worried the deal would blow up in his face.

It was the software giant that buckled, however, and it purchased Hotmail for a then mind-boggling $400 million. The humble engineer from Bangalore became an instant Internet player.

Bhatia's mild-mannered appearance may lie in the grounded roots of his upbringing in India. Yet, that doesn't fully explain his innate yen for navigating the business' oft-murky waters.

"You have to be able to look into your adversary's eyes and try to figure out how much does he want this, and can I play on his weaknesses? ... And that's exactly what I did."

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Sabeer Bhatia, CEO of Arzoo Sabeer Bhatia on...

Related Stories
• Tackling Tough Internet Questions
• Gazing Into the e-Crystal Ball
• Artificial Knowledge Is Power
• Prime Movers
• Love the Job You're With
• Fixing a Broken World
• Emotional Intelligence
• Unplugged Yet Energized

Web Links
• Arzoo

Related Books
• The Nudist on the Late Shift, Po Bronson

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