📸

Parker at Grosfeld’s apartment a few blocks from the World Trade Center.

Parker took the train up from Washington and waited with the angel investors in the apartment. It was mid-July, and the temperature rose above one hundred degrees outside. They sweated as they waited for the venture capitalists, Lynch and Backus, who arrived late in their suits. The air-conditioning couldn’t keep pace with the heat, and Fanning and Shawn still hadn’t appeared, so the group adjourned to a gritty Irish bar nearby called Brady’s Tavern.

The Fannings arrived more than two hours late: John had insisted that they drive down in style in a Z3 convertible with the top down and Napster’s server in the backseat. Trying to ignore the smell of stale beer at Brady’s, the men pushed together two tables in the back and ordered chicken wings and soft drinks. After the pleasantries, Jim Lynch surprised everyone but his partners. He whipped out a ready-made term sheet, a page-long summary of how much the firm would invest in Napster and under what conditions. Grosfeld couldn’t believe it. The venture pros had moved even faster than he had. And now they were cutting him and Lilienthal out of the deal. “They weren’t honorable,” Grosfeld said. “They did something that I had never seen another investor do. They tried to take all of the action.” He pulled his old friend aside. “You fucking idiot,” he hissed at Lilienthal. “We didn’t negotiate our commission.” Lilienthal looked abashed. “I didn’t really think about it,” he said. “I thought they’d play square.”

The saving grace, from their perspective, was that the term sheet required Lilienthal to be Napster’s CEO, which gave them some leverage to negotiate their equity stake. And the deal was generous to a fault. It called for Draper to put in $500,000 and take only a minority position in the company. Fanning began hemming and hawing, saying it wasn’t enough money for the stake they wanted. For the second time in ten minutes, Lilienthal was flabbergasted. “John, this is the most friendly term sheet I’ve seen in two years,” he said. Fanning said he’d think about it, and the signals he gave turned positive. “I’ve got a bias for action,” he told Lynch, and as the meeting broke up, it looked like everything would come together soon.

After the Draper team left, the rest of the crew went back to Gros-feld’s

📸