Part 2 (2/2)

We found a decent-sized office above a strip mall on Railroad Avenue in Greenwich. Chinese food to the left, printers to the right, pharmaceuticals dead ahead, dry cleaner down below-who could ask for more? We had our computers installed, hired a couple of programmers, and set about starting up a corporation that in time would knock people's socks off.

The idea was brilliant but simple, like most trailblazing plans. Steve's devotion to bonds was unflagging, but he had noticed over the years that when you wanted to know something about a new bond issue, it was a royal pain in the a.s.s to find out. You had to call the corporation, explain who you were and what you wanted, and then request a prospectus. Bear in mind that some investors, especially big inst.i.tutions, might want to know about perhaps twenty bonds. They wanted to study and understand them, and it might take weeks to gather the relevant material, which was all contained in these big, glossy, often overwritten prospectuses that often were full of bulls.h.i.+t.

In simple terms, we planned to collect these prospectuses from companies all over the country. We wanted to use them to build a huge back-end database that would contain details about every bond, either for sale or about to be issued, in the entire nation: coast to coast, north to south.

It was a mammoth task. Sometimes our goal seemed too far away. And sometimes we thought we were going too slowly. But we kept going, phoning, writing, e-mailing, visiting. Steadily our priceless database came into being. We talked to every mutual fund, hedge fund, and pension fund in the world, any fund that had any kind of record of buying or selling convertible bonds. We discovered their needs, and we tailored our information highway to all of their requirements.

”One day,” said Steve, ”the whole world is going to need this. In time, anyone buying a convertible bond would not dream of doing so without going online and checking out the bond issuer with ConvertBond.com. We're on the verge of something enormous. This, Larry, old buddy, can't miss.”

The trouble was, it was so difficult to get any kind of income. All we did was spend. We had nothing to offer until the database was complete. We certainly had nothing to offer the big investment houses yet, and we were both terrified some national outfit would copy our idea and run with it a whole lot faster than we could.

We spent between $300,000 and $400,000 financing the operation. We worked night and day, sometimes even sleeping under our desks-anything to save time. We ripped open the prospectuses as they arrived in the mail, and then we set about transferring each and every one of them onto the computer, deriving a standard formula for them that in the not-too-distant future would allow investors anywhere in the world to go to ConvertBond.com and find out anything and everything significant to the bond in which they had an investment interest. Just at the touch of a few b.u.t.tons. and find out anything and everything significant to the bond in which they had an investment interest. Just at the touch of a few b.u.t.tons.

As you can imagine, the sight of our office was amazing. We were trying to sort out more data than the U.S. Army's recruiting department did. We had floor-to-ceiling, wall-to-wall, out-in-the-hallway prospectuses. Once we had this mountain of information under control, we planned to slip into Steve's pet project. Each morning we wanted to highlight one single knock-'em-dead bond, deemed our Convert of the Day-chosen with the full and fearless approval of this new two-man operation, a.n.a.lyzed and researched right up here over the dry cleaner, next to the Chinese takeout. Stand back, America.

Of course, our own presentation was designed to make us look as substantial as IBM. It was the tried and tested American way, and we were following in the footsteps of the great U.S. entrepreneurs. There's never been anything like the Internet to provide instant status to minor-league outfits like ours. To tell the truth, our Web site made us look like the Pentagon. Our creed was printed boldly at the head of the home page: ”Founded in 1997 [which it still was], the site offers terms, a.n.a.lysis, news and pricing relating to the 890 convertible securities that currently can be found in the U.S. market.” The number 890 may not sound like much, but you should see what 890 looks like in stacks all over the floor, forming a kind of office minefield.

Our Convert of the Day was typically a bond issued by a corporation like Hewlett-Packard. That bond might offer a strike price of $63.15, which means, broadly, that a bondholder who had paid par for his convertible-that's $1,000-could, if he wished, convert that into regular Hewlett-Packard stock at any time at the fixed price of $63.15 per share. That meant he could always always exchange the bond for 15.83 HP shares. The moment that share price began to rise, the price of the bond rose with it. So if the stock went from $55 to $90, you multiply that figure by 15.83, and your bond is worth at least $1,424-which is sweet for the investor, especially since the coupon yielded 5 percent. In the raging dot-com market of the next twenty-four months, if the HP stock eventually surged to $100 a share, the investor's bond went up again and was now worth at least $1,583. That's more than a 25 percent annual return. It was especially good if you happened to have a thousand of them, because, including your 5 percent coupon, that added up to a $683,000 profit. Because Hewlett-Packard had a credit score nearly as good as the U.S. government's, that bond was never going to be worth much less than $880-not with HP guaranteeing your 5 percent exchange the bond for 15.83 HP shares. The moment that share price began to rise, the price of the bond rose with it. So if the stock went from $55 to $90, you multiply that figure by 15.83, and your bond is worth at least $1,424-which is sweet for the investor, especially since the coupon yielded 5 percent. In the raging dot-com market of the next twenty-four months, if the HP stock eventually surged to $100 a share, the investor's bond went up again and was now worth at least $1,583. That's more than a 25 percent annual return. It was especially good if you happened to have a thousand of them, because, including your 5 percent coupon, that added up to a $683,000 profit. Because Hewlett-Packard had a credit score nearly as good as the U.S. government's, that bond was never going to be worth much less than $880-not with HP guaranteeing your 5 percent and and the return of the original $1,000 in twenty-four months. The bondholder thus enjoyed the upside potential of the stock and downside protection from the mighty Hewlett-Packard. That's why we made it Convert of the Day. the return of the original $1,000 in twenty-four months. The bondholder thus enjoyed the upside potential of the stock and downside protection from the mighty Hewlett-Packard. That's why we made it Convert of the Day.

Getting all this data loaded and providing breaking news updates was h.e.l.lishly complex and absolutely impossible to put into action for anyone except a computer genius. I could help with the design, but the actual mechanics of installing this huge site on the World Wide Web was a project for Steve and his programmers. It was 1997, and I felt like some kind of techno-peasant. In the late nineties there were only a limited number of people in the entire country who could undertake such a mind-blowing operation, and Steve Seefeld was one of them because he could speak the language of cybers.p.a.ce. I was learning as we moved along. But Steve was fluent, probably had been since birth.

While my new business partner toiled away in the literal engine-room of ConvertBond.com, my group continued to hammer the phones, order the prospectuses, and gut them for the key points, the parts that were essential for the bond buyer. My work was then moved over to Steve for uploading. It was without question the busiest time of both our lives. We had no time for real meals. We kept going mostly on chop suey chicken chow mein, and fried rice from the restaurant downstairs. We were always driven by the fear of a new, bigger, and richer player entering the game and stealing our idea, because beyond the walls of our frenzied office the whole world was on the move in a kind of panzer-division march to the Internet. There were guys leaving Procter and Gamble, IBM, Johnson and Johnson, Kellogg's, and other ma.s.sive international corporations just to join Internet companies. Outfits such as Ask Jeeves, America Online (AOL), dating services, and G.o.d knows what else were on the rise. Yahoo went public.

Like them, Steve and I could see the future. In a very short span of time we would inaugurate a convertible bond Web site that had to prove itself priceless, and the only thing we needed was data. We already understood that much of this information was on the very expensive Bloomberg system, and we needed to get hold of more of it.

When we launched, we immediately charged inst.i.tutional investors $1,000 a month to access our Web site at will. We had other sliding-scale charges for investors of all sizes, depending on how much data they wanted. And right from the outset we attracted traffic, paying customers. Our debt was growing to maybe $100,000, times were quite tough, and we were putting in eighteen-hour days. But our vision of the future remained undimmed: the indispensable convertible bond research Web site.

Once we were up and running in late 1997, we had the system operating virtually on automatic. My new project involved publicizing ConvertBond.com. Once more I hit the phones, bombarding the media with calls, this time targeting the financial journalists who knew a bit, but nothing like as much as Steve and I did.

I would get through to the reporter, oftentimes a woman, and my pitch was dead-on, to say the least. Remember, I knew a thing or two about pitching, princ.i.p.ally to tell 'em what they most wanted to hear. Oh, hi, Deborah, my name is Larry McDonald and I'm a co-founder of Oh, hi, Deborah, my name is Larry McDonald and I'm a co-founder of ConvertBond.com. I have some information that might interest you. Key words: dot-com dot-com and and information information, both irresistible to a financial journalist in this climate.

I then proceeded to tell the journalist about the new project, but never too long, and never too complicated; I just kept feeding them the words they salivated over-revolutionary, World Wide Web, the next stock craze, state-of-the-art system, groundbreaking method.

Deborah, I am one of the frontline operators in this brand-new game. I can help you make sense of this. Take this new Amazon.com bond. It's got a 4 percent coupon with one h.e.l.l of a valuation. I will help you with every sliver of intelligence on this bond. Show you the ropes when you access bond. It's got a 4 percent coupon with one h.e.l.l of a valuation. I will help you with every sliver of intelligence on this bond. Show you the ropes when you access ConvertBond.com. Because there's nothing more important you're going to tackle this week, and I've read you, there's no one better than you. Trust me ...

Jesus, McDonald, you silver-tongued charmer, you.

Steve and I left no publication untouched. We called reporters at the Wall Street Journal, Barron's, Investor's Business Daily Wall Street Journal, Barron's, Investor's Business Daily. We hit newspaper financial editors in New York City, on Long Island, and in Connecticut. We hit magazines, columnists, broadcasters. And for a very short while not much happened. Then it did.

Greg Zuckerman of the Journal Journal suddenly called me and wanted to know all about this new suddenly called me and wanted to know all about this new Amazon.com bond due to be released in a matter of hours. Next morning I opened up the bond due to be released in a matter of hours. Next morning I opened up the Journal Journal, turned to C1, the front page of the hugely read Money and Investing section, and saw a major article: ”Amazon, Bookstore of the World.” It centered around their new convertible bond, one of the biggest ever issued, involving inst.i.tutions only and either marketed to or sold to firms such as Fidelity Putnam and Vanguard.

s.h.i.+vers ran up my spine. There we were, ConvertBond.com, mentioned not once but twice, and given colossal credence: ”According to ConvertBond.com ...” We had arrived. Our Web site already had been clocking 1,000 hits a day, but now we exploded like Mount St. Helens-before close of business that day we had received 150,000 hits. ...” We had arrived. Our Web site already had been clocking 1,000 hits a day, but now we exploded like Mount St. Helens-before close of business that day we had received 150,000 hits.

For months now the publications had been heralding some kind of a dot-com gold rush. Anyone who did not accept that such a surge was in progress was in danger of being mown down in the stampede. And here we were, one of the nation's newest dot-com outfits being swamped with hits on our Web site. Looking back, we were right in the midst of the boom: we were becoming the guiding light for the biggest inst.i.tutional investors in convertible securities on Wall Street.

It was a crazy time. The whole ethos of U.S. business was changing. In this new, vibrant atmosphere we were seeing big high-tech corporations where people no longer bothered with pin-striped suits and ties but rather turned up for work wearing sneakers, jeans, T-s.h.i.+rts, and denim jackets. The geeks were taking over the world as corporations settled into business models that were entirely based on buying and selling in cybers.p.a.ce.

The sudden low price of reaching millions worldwide and the possibility of either selling to or hearing from those people promised to overturn established business dogma in advertising, mail-order sales, and customer relations.h.i.+ps. The Web was, in the jargon, a killer app-a computer program so useful that people were rus.h.i.+ng out to buy computers just to get hold of it.

The big scorers in this new atmosphere were Hewlett-Packard, Dell, IBM, and all the components companies that supplied them, such as Intel, Sun Microsystems, Sony, and Cisco Systems. Also making fortunes were Yahoo, AOL, Netscape, E*Trade, and Microsoft. So far as we were now concerned, at the top of the entire pile was ConvertBond.com, right over the dry cleaner, the new 150,000-hits-a-day gang-buster operation blazing a trail through the pages of the Wall Street Journal Wall Street Journal. That was a self-view, of course, probably not universal. Yet.

Thus our business began its early march toward becoming a cash cow, generating dollars every hour of the day and through the night. But it was still very tough going, because every day we received several new prospectuses, and they still had to be gutted and uploaded. And between us, Steve and I still had to select the Convert of the Day. h.e.l.l, we had thousands of unseen investors out there relying on us, our judgments, our research and a.n.a.lyses.

And still we were aware of the value of publicity. We needed to keep our name out there in the front lines of the bond investment world. The one exposure we lacked was the business channels on television, Bloomberg and CNBC. A slot there would surely send us straight through the roof. But how to pull that off?

My favorite CNBC program centered around a very beautiful reporter called Kate Bohner, who produced a daily ten-minute essay on some quite difficult financial subjects. Difficult for the average reporter, that is. But I had always thought Kate was different. She showed a very astute grasp of complicated matters. To me she always seemed more like an executive in a finance corporation, a big commercial bank, or an investment house. There was just something more thoughtful about her, a quality that went beyond merely telling a topical story.

There was no question of telephoning her, because there was no chance of getting through. There was probably a network screening operation designed to snag perverts, to protect women as good-looking as Kate, and I did not think it was in the interest of ConvertBond.com for me to find my way onto that particular list. for me to find my way onto that particular list.

So I pondered the problem, and decided, when the time was right, to launch my message through the Internet. By now I was certain Kate Bohner would have her own e-mail address, which, of course, was a secret that I had no way of finding out. But I worked in a hotshot Internet company with access to a lot of know-how, and I resolved to try to crack the Kate Bohner code.

I started with the e-mail address and compiled a list of about thirty different permutations, waiting for the right moment to write a good friendly message. Days went by, and then one day I turned on the television, switched to Kate's channel, and saw to my delight that she had a brand-new hairdo. Very slick, a bit shorter, and it made her look fitter than ever.

I pulled up those thirty different e-mail addresses on the computer, composed my short message-”Really nice new hairdo today”-and signed it ”Larry McDonald, co-founder, ConvertBond.com.” I then fired them all out, a scattershot approach, fully expecting all of them to bounce back with ”address unknown.” And twenty-nine of them did. But fifteen minutes later, I got a reply from Kate: ”Larry, so glad you noticed. Thank you.”

I now had her e-mail address, and all I needed was a reason to send her another message. And that was real easy. I just waited until she broadcasted another good essay on a subject I knew a lot about, and then fired off a signal: ”Kate: I really liked your piece about bonds today. Very insightful. I might be able to give you a hand with that type of stuff. Maybe even give you a few creative ideas. Yours, Larry. P.S.: Don't change your hairdo.”

I made no attempt to suggest a meeting or even a phone call, just kept it easy and complimentary toward her. By this time I had made some provisional inquiries about this G.o.ddess of the airwaves. And the answers, given her astute grasp of finance, were predictable. She'd done business and international studies at Wharton and graduated from Columbia University School of Journalism. Her dad was a professor of English literature, and she'd spent several years in Europe. Just about what you'd expect from someone that good at her job. Would I hear from her again? Would she make contact?

Back came another response: ”I'd appreciate that, Larry. By the way, what do you do?”

I waited a day and then sent her an e-mail explaining about our new Web site, told her I was sure it was sufficiently revolutionary to make a very good piece, and noted that we were riding the dot-com wave in a very big way. The Wall Street Journal Wall Street Journal had already mentioned us. So had had already mentioned us. So had Barron's Barron's.

Again she responded, and suggested that we meet, perhaps for drinks one evening after work. Of course I immediately agreed, and she suggested the bar at the Gotham Lounge in lower Manhattan.

On the appointed day, beside myself with excitement, I finished work early, drove out of Greenwich, and headed into the city. The traffic was heavy, and I almost crawled over the Triborough Bridge and onto the FDR Drive, heading south. At last I was going against the afternoon rush-hour flow, and I remember racing along the highway beside the East River toward Wall Street at a real good clip. The good news was that I was right on time. The bad news was that Kate never turned up. I waited for ages, sipping fizzy water and becoming steadily more disconsolate. I did not have a phone number for her, and to be honest, I was completely baffled by her absence. In the end, after forty-five minutes, I left the Gotham and drove back to Greenwich. I decided not to contact her; I thought that was her prerogative.

Next day she sent me an e-mail apologizing. And her reason was not anything simple, like working late or a car that wouldn't start. Kate had been in a car crash, a full-blooded wreck, and this time we swapped phone numbers in case she was in another one. Our new date was for the next week, Wednesday at six.

Once again I drove into the city, and this time the traffic was worse. I was two minutes late and double-parked outside the Gotham before running in. I spotted her immediately. She was sitting way down at the far end of the long bar with a girlfriend.

I introduced myself, and she introduced me to Candace Bushnell, the New Yorkbased author of s.e.x and the City s.e.x and the City. I remember Kate ordered me a gla.s.s of wine while I dashed out through the bar to get the car legally parked. As I did so, I glanced into the mirror and could see Candace smiling and giving Kate a thumbs-up. I saw her mouth the words, ”He's cute.”

With my confidence high, I parked the car and went back in. Right away we all got along, and had a great evening together. The three of us went out for dinner, and ended up at Kate's place for a nightcap. Candace went home first, leaving Kate and me alone, an opportunity to show her I was a proper gentleman, not some smart-talking lounge lizard on the make. We concluded the evening with a chaste kiss on the cheek from Kate to me, and we parted, having established a friends.h.i.+p that has lasted to this day. I still think she's one of the best financial reporters in the business. But I knew right from the start that I could not really compete. I mean, Jesus, she'd been married to Michael Lewis, who wrote Liar's Poker Liar's Poker. She'd been at the soccer World Cup in Paris.

But Kate came through for me in spades. We talked quite often, and under my tutelage she wanted to do two programs on convertible bonds. One would plainly be on Amazon, bookstore to the world. This was a bond I was a real expert on. And she wanted to do a second program, on a global corporation with a recently issued convertible bond. I knew just the outfit for her: Diamond Offsh.o.r.e, the Louisiana-based deepwater drilling kings whose services are in demand worldwide. This has always been a very exciting, brilliantly run operation, and I really believed in their new bond and credit quality. I regaled Kate with Diamond's history and their success searching for oil in the depths of the Gulf of Mexico. So far as I could tell, they had always made a stack of money in oil fields throughout the entire planet, especially off the coasts of Texas, South America, and western Australia and in the North Sea.

What I always loved about Kate was the ease with which her imagination was fired. You could be talking about a bond, just a name, but you start painting pictures of a big sea off the coast of windswept Scotland, of men braving the storms, drilling into the ocean floor in freezing, dangerous conditions, pumping the crude oil, hundreds of miles from home, out there on a giant offsh.o.r.e rig. Right then you had a real audience, not just some impatient journalist looking for a sound bite. When Kate went on the air with her essays-CNBC coast to coast and worldwide, an international audience-talking about the bonds, the background, the price, and the potential profits, she was the best. And did she ever do us proud. She mentioned ConvertBond.com several times. She mentioned me constantly and prominently: several times. She mentioned me constantly and prominently: According to senior partner Larry McDonald ... I have just spoken to According to senior partner Larry McDonald ... I have just spoken to ConvertBond.com partner Larry McDonald, and there's no doubt in his mind ... partner Larry McDonald, and there's no doubt in his mind ...

Overnight Steve Seefeld and I became world oracles on the convertible bond. And we deserved it, because we both understood the subject as well as anyone and a lot better than most. Kate Bohner made us famous, and in turn we helped to make Kate look her peerless best. What a team.

I should perhaps mention here that at this stage in the proceedings ConvertBond.com's site went berserk. Those 150,000 hits we'd received off the Wall Street Journal Wall Street Journal story now looked like a real slow day. We had hits from all over the world, hundreds of thousands of them, inquiring about convertible bonds, extolling the virtues of convertible bonds, explaining about new issues. People were ransacking our site for information, sending messages, requesting interviews, hammering in their credit card details. story now looked like a real slow day. We had hits from all over the world, hundreds of thousands of them, inquiring about convertible bonds, extolling the virtues of convertible bonds, explaining about new issues. People were ransacking our site for information, sending messages, requesting interviews, hammering in their credit card details.

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