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Mukherjee and Reed's company was born as an entry in an entrepreneurship contest at Stanford. Mukherjee had heard a radio commercial for the auction site eBay, followed by another ad for a used-car center, and thought, What about an auction site for used cars? Reed and Mukherjee pulled the idea out of the competition after reaching the semifinals, opting for secrecy over the paltry $25,000 prize. Good choice. By the time the winner was announced, Reed and Mukherjee had secured $2 million from the venture-capital firm Draper Fisher Jurvetson. Their Stanford connections helped. As an undergraduate, Mukherjee lived in a dorm with partner Steve Jurvetson; Reed played Ultimate Frisbee with director Warren Packard. Without those personal ties, their odds of securing funding would have been slimmer. Out of the 10,000 business plans the firm receives annually, Draper backs 15. "Our first meeting lasted, like, an hour," says Reed, "and we never even talked about the website."
Like a growing number of new Web entrepreneurs, Reed and Mukherjee opened their office in San Francisco's edgy South of Market (SoMa) district--two blocks from Maverick Online--an area that's long been popular with Web designers and multimedia firms. In contrast to most start-ups, people at BestOffer work in offices with doors rather than at makeshift desks. That's about their only perk. As of September, the employee health plan was to be married to someone who has a health plan.
On the basis of the conversation at one staff meeting, it seems that the company's fortunes will rely not on a killer app but on something called the Fluke, a portable diagnostic tool the company's mechanics can use to analyze a seller's car before it is put up for auction on the BestOffer site. "Why don't more people use the Fluke?" Reed asks BestOffer's seven employees, none of whom know much about computers or cars. "A lot of people are using the Fluke," says an employee, Chris Miller. "Five out of 10 mechanics have a Fluke in their toolbox." This gets everyone excited. "We can get a ton of Flukes tomorrow," Ed Diffendal says. There is much celebration.
Armed with that good news, Reed and Mukherjee feel confident about a meeting with Packard, their VC. They show Packard their just-completed home page ("Great! I think we can go public now," he jokes), then get reprimanded for offering a prospective marketing hire too much money. Packard suggests they offer $20,000 less. "You've got to set the trend for everyone else coming in," he says. "You've got to be careful." Mukherjee nods, but looks as if he's been told he's not getting dessert. "People think that entrepreneurs don't have bosses, but that's not really the case," says Mukherjee.
Though you wouldn't guess it from their business-casual demeanor, Reed and Mukherjee have a feverish launch schedule ahead of them, planning to go live early next month. They are rushing to enter a crowded space. eBay has started selling cars, and Mukherjee is doing opposition research on two other auto-related start-ups, iMobile and CarsDirect.