📸 Photo

her chief partner, John Hummer, and another VC at the San Francisco firm drove to see Richardson at Napster’s office. She walked them through the PowerPoint slides and introduced them to Liz Brooks and Lyn Jensen. It took about forty minutes. Later, another Hummer partner, a former intellectual-property lawyer at Wilson Sonsini named Hank Barry, came over, and he spent about fifteen minutes with Richardson and Kessler. And a third time, Hummer associate Alicia Morga came to look at documents. There were some phone calls, mainly between Barry and Richardson, and then a draft term sheet appeared like an answered prayer on April 22. Hummer would put in $13 million, along with another million from Conway’s fund and $500,000 from elsewhere. After a month of dithering, Napster was worth not $100 million or more but $65 million. “Hummer had us over a barrel,” Richardson said.

A confidential term-sheet draft called for Hummer Winblad to have two directors’ seats and approval of the CEO, who would also serve as a director. Hummer Winblad wound up with two out of three seats, with Fanning keeping the third. The venture firm had one more provision, though. In the event of a merger or acquisition offer, Fanning wouldn’t get to play roadblock again. He and the other big holders have to promise to vote their shares the way the board wanted.

Letting Fanning keep his board seat was a huge concession, and Richardson prayed that it would be enough to get his support. But both she and Hummer Winblad were worried it wouldn’t be. So the venture firm pored over Napster’s shareholder agreements, bylaws, and incorporation papers, looking for a fallback plan. Fanning’s 41 percent of the junior shares still meant he could veto a new series of shares issued to a venture firm. But if Fanning were suddenly not on the board, Hummer Winblad concluded, the remaining directors might be able to do a deal unanimously without calling a vote. “If John Fanning is removed and Hank appointed then can do a unanimous written consent,” the plotters wrote in a two-page memo with the improbably bland title “Mechanics.”

In a scheme worthy of a Shakespeare play, they saw a way they might be able, just barely, to get Fanning removed. Since one director was electable by the combined number of Series A Junior shares, some 11,750,000, and the 536,860 common shares, a majority of the two classes together could replace Fanning in that board seat with Hank Barry. “Then new