Long before Gmail was a norm across the globe, and Oultlook was a default necessity in the corporate set up, there was Hotmail which was the first to provide free web-based email services. Hotmail was the brainchild of Indian entrepreneur Sabeer Bhatia and his friend and co-founder Jack Smith.

In a podcast, Bhatia shared the story of Hotmail’s birth and how it was sold to the world’s second biggest company, Microsoft. The service, which is now famously known as Microsoft Outlook, was first launched in 1996 and amassed 3 lakh subscribers within the span of three months and further soared to 50 lakh in a year.

“That was the beginning of viral, the term viral was coined by our venture capitalist, Tim Draper,” said Bhatia referring to Hotmail’s skyrocketing growth.

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The service, however, was acquired by Microsoft within just 20 months of its launch in 1997. Bhatia elucidated upon how the deal went through and how he initially rejected the Big Tech firm’s first offer.

He said that Microsoft approached him asking if the numbers the company recorded were correct, and almost immediately scheduled a meeting. The initial idea was for Hotmail to become Microsoft’s email provider but eventually, as talks progressed, an acquisition deal was taking shape.

Bhatia said he got his first opportunity to meet Microsoft’s then-CEO, Bill Gates, in October 1997. After he met with Gates at Microsoft’s headquarters in Redmond, he was offered $140 million (₹1,175 crore) to sell his company.

While some of Hotmail’s board members were happy with the offer, they eventually decided to raise their bets and Bhatia presented a counteroffer of $750 million (₹6,297 crore) that set forth a series of back-and-forth negotiations that lasted for months. That’s until the company’s then CFO Greg Maffei, presented a final offer of $350 million (₹2,938 crore).

That too did not seem to impress Bhatia. To his co-workers’ and board members’ dismay, he rejected their offer. But just a week later, Maffei was back at the negotiating table with him and they agreed to seal the deal at just 50 million short of Bhatia’s expectations, at $400 million(₹3,358 crore).

When asked why he considered selling the service instead of expanding it, Bhatia said that he was more concentrated on partnering with Microsoft than competing with the firm.

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