📸

that Angel Investors raised two years earlier, Angel Investors II, was worth 50 cents on the dollar, according to confidential estimates that Conway gave his limited-partner investors.

But back in October 1999, getting Conway's fund on board was the first step for Napster to convince venture-capital firms that it was the real thing. And Conway and Bozeman told confidantes that Napster was the winner in all of Angel Investors II, the one that would multiply the fund's total investment many times over. Starting in late 1999, as Napster raised its second, or Series B, financing round, and taking two more bites the following year, Conway's fund spent $1.5 million on Napster stock. For months, he stayed away from the company's business. But twice in the future, when Napster's survival and his investment were at stake, Conway would come riding back.

Strategically, Conway's initial $250,000 investment was the most important piece of the $2 million Series B round that Napster closed in December at 80 cents a share. The other major financial participants were Korean investor Sung-Bu Kim, for whom Holly Shin had worked; Eddie Kessler; Excite executives Graham Spencer and Joe Kraus; Chicago financier Gidwitz; and Amram. Smaller amounts were sold to John Lee, Bales's friend Adrian Scott, and others.

A NOTABLE ABSENCE was Draper Atlantic. The Virginia venture firm had won the right to invest at 20 cents a share in August, when it loaned Napster the emergency $50,000. But then it passed on the Series A round that brought in Amram and Richardson, largely because Fanning was still in charge, Amram said. But Draper's agreement with Fanning had been worded so poorly, from Napster's perspective, that Draper felt it still had the right to invest later at the same low price. “Our understanding is that we have the right to invest up to $500,000 at the Series A price of $.20, or 2,500,000 shares,” Draper managing partner Jim Lynch wrote to Amram in December, during the Series B round. Amram was not happy: That would have amounted to the entire Series B round at a 75 percent discount. So Lynch offered Amram an alternative: He would swap the current purchase right for a warrant to buy just 1 million shares, still at 20 cents, at any time over the next three years. By that time, Lynch hoped,

📸