Friday, October 9, 2009

Interview with GEMM CEO Roger Raffee about GEMM, Stig Leschly, and Amazon

Interview with CEO, Roger Raffee.

October 8th, 2009 .

Interviewer: I’d like to talk with you today about GEMM and how you got started.
Roger: OK
Interviewer: So, you started back in 1994. That seems like forever ago in internet terms. How did it come about?
Roger: I was a record collector. I used to have garage sales where I’d sell my records. Mostly my extras and stuff I didn’t want. After a while I got the inclination to start selling through a magazine called Goldmine. My mother suggested I get a computer so I could keep track of which records I sold, where they were stored, etc. She knew a programmer who had done some work for her business. I contacted him. He wasn’t available so he suggested Jim Hall. He told me Jim was the best programmer he knew.
So, Jim and I met for lunch. I showed him Goldmine magazine. The magazine charges you by the size of the space you use. So, many sellers were putting their listings in the magazine in tiny print. I said to Jim “you know, I think I have an idea that might be better than this. What if you could put your listings searchable in the computer, and then someone else on another computer somewhere could see what you have for sale, and vice-versa.”

About a week later I got a call from Jim. He reminded me of my idea. He said he searched the internet. At the time I had no idea what an “internet” was. I had to ask him what it meant. He said he searched it and couldn’t find anything like what I described. He asked if I’d like to go in 50/50 with him on this idea.

Interviewer: When was that?

Roger: That was in March of 1994.

Interviewer: How long did it take for him to get something online?

Roger: In August we were listed as a BBS (bulletin board on telnet). In September we had a searchable database marketplace on the web.

Interviewer: How did you get people to start using it?

Roger: We bought Goldmine magazines and called up every seller listed in the magazine asking them to send us their listings.

Interviewer: You and Jim?

Roger: No, I hired a girl I knew.

Interviewer: Did you get many sellers to send you their listings?

Roger: We created a database of about a thousand Goldmine sellers. We called them all. Most of them didn’t even know what the internet was, or barely heard of it. We got one-hundred of them to send us floppy discs and printed lists, which we hand-typed in to our database. Of the hundred only one had AOL email. The rest weren’t even online. Those hundred sellers sent us an average of about one-thousand items.

Interviewer: Did you start getting internet browsers coming along, interested in your catalog?

Roger: Yes, and of course, one-hundred percent of them were online, yet only one of our sellers was.

Interviewer: That sounds like it must have been a bit of a problem.

Roger: Yes, I had potential customers emailing me all the time wanting to buy what they saw online. I’d then call the sellers asking them if they wanted to sell. I was spending a fortune in phone bills trying to get the site popular by facilitating sales between the online buyers and the offline sellers . We weren’t even charging anything for our service but we were listed as a cool site on Yahoo.

Interviewer: That sounds expensive.

Roger: Yeah, I was going pretty deep in debt.

Interviewer: How did you solve that problem?

Roger: Well, I knew I had to get a shopping cart on the site but taking money for sales from our online customers to send to our off-line sellers proved to be a bit of a conundrum.

Interviewer: Why’s that?

Roger: Because you had to get permission from the credit card companies to do so. With the help of our credit card processing company I approached Visa International with my idea for a marketplace and worked with them to develop our internet marketplace. The only reason I was able to do it was because we were the first.

Interviewer: They liked your idea?

Roger: Apparently so..It was pretty exciting.

Interviewer: How did it go from there?

Roger: Slowly. I started out working with just a few sellers for about a year to get it wired, and then we opened up the marketplace to all sellers. After that, it took another year for Jim to automate the check-out so it kept track of which sellers needed to be paid for their sales. The ringing up of sales and keeping track of who needed to be paid was all done by hand for the first couple of years. It was a big hassle and it impeded our growth. Unfortunately, it took me a year to convince Jim that the business was worth his putting his time in to developing an automated version of the business process I had developed. However, once that was done we started to grow pretty quickly.

Interviewer: When was that?

Roger: You mean when Jim finished the automated version of the check-out and payments system? That was in the Fall of 1997. Once that was finished we started to grow pretty fast. About 100% growth each year.

Interviewer: This was before Amazon or Ebay had a marketplace type of business?

Roger: Yes. Ebay was strictly auctions up until around 2004. Amazon started their first marketplace at the end of the summer of 1999. They called it Z-shops at the time.

Interviewer: It seems kind of surprising that Amazon’s marketplace is so similar to your marketplace. I thought that you copied Amazon’s marketplace but from what you are telling me you guys were first.

Roger: Yes, and in my opinion it’s no coincidence that Amazon’s marketplace business model is similar to GEMM’s . There’s some history there.

Interviewer: What do mean?

Roger: It’s kind of a long story..

Interviewer: I got a few minutes.

Roger: Well, it started back in 1996. We were a cool site in Yahoo. You remember the Cool Sites? When they’d put your site at the top of search results with shades (sunglasses) around your link?

Interviewer: Yeah, I remember that..

Roger: The check-out payment system I was working on was still in its infancy but we had a searchable database with about 200,000 items by this time and getting a fair amount of traffic.

Interviewer: How much?

Roger: I’m not sure.. probably around one thousand to three thousand unique individuals per day. Not bad at the time. Anyway, a student at Harvard by the name of Stig Leschly contacted Jim. He said he was fascinated with what GEMM was doing. He talked with Jim on the phone. Jim told me about it but I wasn’t interested. I was too busy administering the shopping cart and payments, all by myself. Also, I was suspicious of anyone calling Jim asking Jim questions about GEMM.

Interviewer: What about the girl you hired?

Roger: I had to let her go. I was going broke. The shopping cart marketplace started making just enough to keep us in business and pay my minimums on my credit cards but it was a ton of work for me. Jim handled the technical stuff but I did all the administrative stuff by myself.

Interviewer: So, what happened with Stig?

Roger: He came out to visit us. Really he came out to visit Jim. He got the idea that Jim was the brains and brawn behind GEMM because Jim developed the site. He didn’t seem to notice or care about the administrative/business side of the site. I remember he took us to dinner and spent the whole time talking with Jim. I don’t think he barely said a word to me.

Interviewer: Did he travel far to meet with you?

Roger: Yeah, he came from the east coast. We were here in California. After he left Jim called me up and told me Stig wanted to buy me out for $20,000, and I could keep 10% of the ongoing business. Jim was really disappointed when I told him no way. I was working my ass off and really believed in what I was developing. Jim didn’t have much respect for me.

Interviewer: Why not? Jim also did a lot of work didn’t he?

Roger: Yeah, he did. He did a lot of work putting the technical side of GEMM together but he didn’t really know me that well. I just seemed like a long-haired semi-educated surfer to him. He never really trusted my opinion that this business would take off, or that I could create a business out of it that could compete. He thought Stig had better connections and a better pedigree.

Interviewer: What kind of education do you have?

Roger: A B.A. in micro-econ from UCSD.

Interviewer: So what happened next?

Roger: Not too much for a couple of years. We kept growing GEMM. It was growing nicely. By the summer of 1998 we had a small write-up in the New York Times and other national press. We were getting around five to ten thousand unique individuals per day coming to the site, and processing around $50,000 per month in sales transactions for our vendors. We had more than three thousand active vendors at the time with about three million listings. Jim called me up one day that summer and told me that we were going to sell to Stig. He didn’t ask me, he told me.

Interviewer: You didn’t sell?

Roger: No, I didn’t want to sell. GEMM was my baby. I had worked hard on it. I didn’t trust Stig.

Interviewer: Did that upset Jim?

Roger: Incredibly. Stig and he called me often. Stig came out to visit me, came to my little dump of an apartment. He took me to breakfast one morning and asked how I’d like to have $50,000 next week to use to go to Australia and go surfing. I don’t know.. To me it seemed he was being condescending. The offer was a half million in cash for Jim and I, and half million in stock to share between Jim and I in Stig’s company.

Interviewer: That wasn’t enough for you?

Roger: It wasn’t just that. I didn’t know Stig. To me he was just some guy from New York trying to get my business from me. Jim would go on and on about how well connected the guy was, about how we’d be on this incredible team. Not just the two of us. But I didn’t feel right about giving away my baby.

Interviewer: What happened next?

Roger: Stig set a time line for me to sell. It was around the end of December of 1998. As it got closer and closer to the deadline Jim got madder and madder. He’d call cussing and screaming but I refused to sell. Stig finally asked me to go visit a friend of his who was visiting La Jolla. Someone he said was very influential and powerful. He talked about this guy like he was the king of the venture capital people. Stig was calling me on the phone a lot. Asking me to talk to venture capital guys he said were the guys who funded Amazon. The guy he wanted me to see was the most powerful venture capital guy there was, according to Stig.

Interviewer: So you went to see him?

Roger: Yes.

Interviewer: Who was he?

Roger: At the time I didn’t even pay attention to who he was. All I remembered was that his name was John.

Interviewer: When was this?

Roger: Before Christmas, 1998 .

Interviewer: Did he impress you?

Roger: Somewhat. We met at a huge mansion in La Jolla, over-looking Black’s Beach, by UCSD. The part of the mansion we met in was under construction. I took my mom’s boyfriend with me. We sat in what seemed to be a large living room with no heat. I remember it was cold. I sat there at the table with John and my mom’s boyfriend, Richard. John was nice at first. He told me how Stig was well connected. Stig’s dad was a former famous tennis player, from Sweden I think. He told me that Stig’s dad was on the board of CBS Television, and was one of the most powerful men in America and a good friend of his. When I made it clear I wouldn’t sell his demeanor changed. He told me that he wanted me to understand in no uncertain terms that Stig had very powerful people backing him. If I didn’t sell to Stig he guaranteed me that Stig and his friends would roll right over me. He used that exact phrase, roll right over me.

Interviewer: And you don’t know who this “John” was?

Roger: For years I didn’t know and didn’t care but this past Spring I was browsing the internet and came across this article ( that dealt with this very issue. It was written by this guy, Marion Meyer ( I called him and told him my story. He asked me if the “John” I met could have been John Doerr. I didn’t know who John Doerr was, not by name anyway, or if I did I didn’t remember. He asked me to look up John Doerr on Youtube which I did. When I saw the videos of John Doerr on Youtube giving speeches I knew instantly that yes, this was the guy who met with me here in La Jolla back in December 1998, vouching for Stig Leschley, and threatening me if I didn’t sell to Stig.

Interviewer: So your partner Jim was really pissed off at you for not selling.

Roger: Oh God, that’s an understatement. Jim was so sure we’d sell to Stig that he gave Stig the contact information of all our vendors and gave Stig the OK to send them all an email introducing himself as our new partner. Stig then used that information to recruit all our vendors over to his new site, Musicfile.

Interviewer: You’re kidding..You’re saying Stig didn’t do any of that (gathering a data-base of music sellers) on his own.

Roger: Hell no! He got all that information from us. Jim gave it to him!

Interviewer: Geez..What happened next?

Roger: Well, the deadline came and went. We didn’t sell. Jim was beside himself. I told him we’d find another company to sell to, and do better than we would have with Stig, which I almost did, but that’s another story.

Interviewer: So what did this have to do with Amazon?

Roger: Well, about a month later, in January 1999. I was busy at home one evening, like usual, working on GEMM and the phone rings. On the other end of the line was Jeff Bezos. He introduces himself and tells me how he likes my site. He said he’d like to buy GEMM. He says he finds the payment processing system on our site fascinating. He really is interested in how I take payments from customers and send the funds to the sellers. How do I do that? What do I do if a seller doesn’t send the product?

Interviewer: What did you tell him?

Roger: Well, by this time I was really suspicious of telling him anything about how I do business. I told him he would have to send me a non-refundable cash advance of $100,000 which he could wire to my bank account as a show of good faith if he was really interested. After that, he could negotiate the sale of my company with my step-dad (my mom’s boyfriend). I had told my mom’s boyfriend at the time that he could be my business manager if we engaged in negotiations regarding selling the company. Needless to say, Jeff didn’t wire me the $100,000 .

Interviewer: Wow! What happened next?

Roger: We kept growing and doing good business but I was curious and a bit worried what Stig was going to do with his Musicfile site. I had heard from several of our vendors that he and his employees had been contacting them, asking them to send Musicfile their catalogs. I kept logging in to but it wasn’t a functioning site until March of 1999. At that time it did finally go live but it still wasn’t a functioning marketplace. There was no payment processing of any kind. The shopping cart really didn’t work at all. You basically just had to contact the vendor to send the vendor a payment but you had to register to be a user before you could do that, and it was kind of a clumsy sign-up process. I realized that they were no threat at all, at least not yet, but I was perturbed that Jim had given Stig all our vendors.

Interviewer: So, they launched in March of 1999.

Roger: Yes, and then they were bought by Amazon in April of 1999 for $200 million dollars!!

Interviewer: Amazing, and you say they didn’t even have a functioning site?

Roger: Barely. The amazing thing was that the article in the front pages of the business sections of newspapers across the country had this story about how Stig was a record collector, bought and sold records in Goldmine magazine where he got the idea for his marketplace, had accumulated hundreds of record stores with three million items etc. etc..

Interviewer: You mean he took your story.

Roger: Yeah, like his own story wasn’t good enough so he had to use mine, and he used our catalog!

Interviewer: Incredible, and Amazon gave him 200 million dollars.

Roger: Right. It seemed like a sweetheart deal to me. The venture capital guys who were buddies with Stig’s dad took care of their friend’s son, and somewhat at my expense.

Interviewer: But they did make you offers.

Roger: Yeah, but not really if you think about it. I was offered a pittance really, and it seemed to me I was treated with disdain, like I wasn’t really qualified to be in their company. They were too good to associate with the lowly likes of me. That’s the impression I got from Stig and his friend John, like I was lucky to get any scraps they were offering me. They weren’t really offering me a fair deal and they didn’t want to. They’d rather take what they want without having to deal fairly and honestly.

Interviewer: Right, but if what you’re saying is true they didn’t have too much value for you and what you had done. The real value for them was in inflating the value of Musicfile and doing that deal with Stig. The rest was just window-dressing. It was probably just an accident that your business model turned out to be a perfect alternative to their book-selling business. They apparently realized that the reason you wouldn’t sell was because your marketplace payment processing was the missing piece to Stig’s model and Stig’s model couldn’t compete with yours without it, and therefore a perfect model for them to develop.

Roger: Right. If you read about it now, more recent contemporary reports about it, you’ll see Amazon’s emphasis is more on Stig’s over-all corporate name, and their acquisition of Bibliofind. A book finding site that Stig bought just before he launched Musicfile. But, at the time, the press about this story centered more on Musicfile as the basis of the value of . I think in retrospect they’re trying to play down the emphasis on Musicfile.

Interviewer: Is there more?
Roger: A bit more. That summer, in 1999, I was getting a lot of ordering from one customer in Seattle, a woman by the name of Jennifer, if I remember right. I’m not sure. Anyway, one day a seller had a problem with one of her orders so I called the phone number on her account. A secretary at Amazon answered the phone. I asked who Jennifer was. The secretary told me she was the head of Amazon’s auction department. They were making purchases at GEMM as part of their research in to starting their own marketplace, which they then launched at the end of the summer of 1999. It was called Z-shops and it included all our vendors and their catalogs, which they got from Stig, which Stig got from Jim..

Interviewer: That’s a wild story.

Roger: Yeah. I think it’s kind of sad really.

Interviewer: Yeah but it’s really an interesting and amazing story. Look, I’m going to have to wrap this up for today. I’d like to interview you about how GEMM grew after the year 2000. Can we talk about that next time?

Roger: Sure thing..


  1. This is a great interview, boys. Thanks for putting it up.

    I've known GEMM for years and would like to know more about how they evolved as well. For instance, in the traditional vinyl how is GEMM doing against Amazon in this niche?

    D Anderson

  2. Excellent interview so far. As a book scout who started selling online in late 96 and loved bibliofind til it was absorbed into the collective, this interview brings back a ton of memories. No wonder the dot com busted, if folks were paying 200 million for half-baked companies. I agree with Roger - sounds like Musicfile was a sweetheart deal for one of the venture co. member's kids.

  3. Very interesting - now let's hear the rest of the story!

  4. Cast of charachters: John Doerr, Roger Raffee (GEMM founder), Jim Hall (GEMM Founder), Jan Leschly (former CEO of SmithKline Beecham and John Doerr's mentor), Stig Leschly (Jan's son), Jeff Bezos (Amazon), Marion Meyer (writer).

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  6. Great interview ~ a job well done, Roger. I hope our paths cross one day.

    Ariel Wada
    CEO, CommerceSocial

  7. From: Maria Bustillos []
    Sent: Friday, August 09, 2013 9:21 PM
    To: GEMM Support
    Subject: media inquiry for Roger Raffee

    Hello, I am a journalist working on a piece about Amazon and its effects on the used/rare book business, interested in speaking with Mr. Raffee. If he is available to discuss this, my phone number is 213 445 7691 and I'm available anytime. Alternatively, please provide contact details and a good time to call/write. Kind of a tight deadline, will very much appreciate the chance to speak with him.

    All best


    1. Ray Chapman is working with Roger Raffee. You can reach either Ray or Roger at .

  8. From: Roger
    Sent: Sunday, August 18, 2013 11:56 AM
    To: Maria Bustillos
    Subject: RE: FW: Musicfile start date. March 25th, 1999, not up yet..

    Here's some more interesting stuff. Worth looking at:

  9. From: Roger
    Sent: Saturday, August 17, 2013 11:36 PM
    Subject: Musicfile start date. March 25th, 1999, not up yet..

    The internet is good for research isn't? Look at this page I found, dated March 25th and Stig's site Musicfile hadn't gone live yet. "That site is scheduled to launch in April" and bought by Amazon on April 30th. Way different than stated in Shaping the waves! Plans Network of Vertical E-Commerce Sites

    By Staff | March 25, 1999
    Page 1 of 1

    Cambridge, MA-based, formerly e-Niche Inc., said it plans to launch a family of highly vertical online marketplaces, and to that end has acquired Bibliofind, a rare and antique book Web site.

    The company is also developing MusicFile, a destination site for hard-to-find and vintage music. That site is scheduled to launch in April.

    These new marketplaces provide full-service e-commerce solutions for both buyers and sellers within the untapped secondary market for used, hard-to-find and collector items in special-interest categories, the company said.

    In addition, closed a $10 million second round of private financing from Polaris Venture Partners, Accel Partners and The Washington Post Co. . The company also said it appointed several key industry leaders to its board of directors and advisory council, including Lotus Corp. founder Mitch Kapor.

  10. Hi! thanks for the talk!!
    Maria Bustillos []
    You replied on 8/11/2013 6:26 PM.
    Sent: Sunday, August 11, 2013 11:24 AM
    To: Roger

    I'm going to transcribe this and ask my editors about next steps.

    Gee whiz!!

    Thanks again! I'll be in touch shortly.

    All best


    Re: check this out!
    Maria Bustillos []
    You replied on 8/11/2013 6:30 PM.
    Sent: Sunday, August 11, 2013 6:08 PM
    To: Roger

    Just talked to Richard! Wow this is a lot to digest but I'm working on it really really hard.

    Thanks so much, Roger, be in touch soon---


    Re: FW: Isley Brothers: Soul On The Rocks
    Maria Bustillos []
    You replied on 8/13/2013 12:19 AM.
    Sent: Monday, August 12, 2013 11:05 PM
    To: Roger

    The New Yorker is super duper careful about fact checking. We can only publish what can be verified. So I am going very carefully, here. It will help a lot to have corroboration from Jim, and from your sellers.

    I do not think that these Leschly guys will hesitate to create problems if they think it is in their interest to do so.

    just talked to Jim
    Maria Bustillos []
    You forwarded this message on 8/13/2013 10:59 PM.
    Sent: Tuesday, August 13, 2013 3:23 PM
    To: Roger

    for about a half hour! He is a really nice guy too and wishes you well, obviously. Such a shame when a good friendship goes to pot over business! I've seen it a zillion times (eh, I am old!)

    ANYhoodle, I'm off to write like the wind. Thanks so much for all the help!!


    Re: just talked to Jim
    Maria Bustillos []
    You replied on 8/14/2013 6:23 PM.
    Sent: Wednesday, August 14, 2013 11:21 AM
    To: Roger

    On Tue, Aug 13, 2013 at 9:25 PM, Roger wrote:

    I just left a voice-mail for you. I just read that Shaping the Waves. Wow! Complete fabrication, just about every aspect of it.. Mind blowing that he lives a life based on such a big lie and probably feels good about it.. I wonder how many other rich people live like that. That's sad, and he teaches Harvard students.

    (not any more, I don't think--kind of wonder what happened there)

    The internet bubble of 2000 where so many people lost money, and then the recent economic bust in 2008. I'm sure people like him siphoning off investor wealth an then having the companies over-inflating their value has a large part to do with it.


    Interesting that he was funded also by the Washington Post. I'm sure there was and is a lot going on besides what we know....

    no doubt at all about that!!

    "With the acquisition of Bibliofind and the development of MusicFile, the premier destination for hard-to-find and vintage music scheduled to launch in April, has established a leadership position in two of the most lucrative and successful vertical markets online -- books and music. Specifically, collectors of hard-to-find books and music annually spend more than $4.6 billion internationally. In addition, the company plans to expand into similarly ripe vertical markets for hard-to-find and collector items in 1999."

  11. >From: Margalit, Ruth []
    >Sent: Tuesday, October 15, 2013 1:19 PM
    >To: Roger
    >Subject: The New Yorker fact checking
    >Dear Roger,
    >I'm a fact checker at The New Yorker magazine working with Maria
    >Bustillos on her piece about Amazon and origin myths on Silicon Valley.
    >Maria mentions GEMM's story and quotes you in her piece, so I was hoping
    >we could speak to make sure that everything is accurate. Could you give
    >me a call when you get a chance at 212-286-2941, or let me know when's
    >the best time to call you? We're hoping to publish this toward the end of
    >the week.
    >Many thanks.
    >Ruth Margalit
    >The New Yorker
    >4 Times Square
    >NY, NY 10036
    >p: 212.286.2941
    >f: 212.286.5947

  12. From: Maria Bustillos []
    Sent: Friday, October 18, 2013 10:09 AM
    To: Roger
    Subject: Re: FW: 2 + 2 = ? , theory about what's going on.

    Hello Roger (and Ms. Raffee!)

    Because Stig is flatly and absolutely denying that he was ever interested in buying GEMM, the more information we have to the contrary, the better the chances the New Yorker will publish the piece. I'm sure you both can understand their concern; they would be putting themselves in a bad spot if they were to publish a falsehood. So any documentation at all that you can find to the effect that there was an ongoing relationship between GEMM and e-Niche--any emails, any correspondence, draft offers, anything at all--will help enormously. Much better coming from both you and Jim.



  13. From: Stig Leschly
    Subject: Re: Something missing?


    I appreciate your request for detailed information on our business
    plan. One thing you should understand is that ordinarily full
    disclosure of a business plan (including financial projections) comes
    after the signing of the letter of intent which includes confidentiality
    promises. The business plan is a 50 page document and contains highly
    sensitive information. To date, there are only 12 copies of it in

    That said, because I want to move this process along, I will have Tim
    federal express a full business plan to you today. It is under strict
    confidentiality protection. I will, under these pressing circumstances,
    trust you not to copy it. If we don't reach agreement, please return it
    to me.

    In the business plan, you will see 5 year projections and a variety of
    other information on competitors, market size and our growth plans. The
    financial information includes full revenue and cost projections.
    Currently, our preferred exit plan is to sell the company in the next 12
    to 18 months. The sale price in 12 to 18 months would be in the $50
    miLcion to $150 million range. This number is calculated based on the
    trading values today of Internet companies with the types of revenue,
    membership and growth prospects that we expect. Ideal acquirers include
    large search engines, commerce companies, and auction companies. As an
    alternative to selling the company, we will consider going public. If
    we go public, we would do so at at a minimum of a $250 million valuation
    in year 2 or 3. I hope this gives you some sense of my and our
    investors' expectations. Also, feel free to look at the porfolio
    companies of Polaris and Accel. These venture investors only invest in
    companies with the type of exit possibilities that I just described.

    One other comment, Roger. At the highest level, the exit strategy is
    not that important to you because you have chosen not to own significant
    stock in e-Niche. The exit value is more important to Jim who will own
    almost 3% of the company. All you need to believe is that e-Niche is
    viable and has access to capital over the next 36 months. As long as
    that's the case, you will be paid. Note here that we are already 100%
    viable for the next 12 months with the cash we have raised.
    Furthermore, I have been offered more investment to fund us beyond the
    next 12 months. So far, I have turned it down because I will be in a
    better position to negotiate with eager investors after 6-9 months of
    operation. In short, I have no concerns that e-Niche will have access
    to capital and that, therefor, you will be paid. Feel free to
    investigate the histories of start-ups funded by Accel and Polaris. I
    don't know of any that have not raised a second round of financing.

    I am leaving for vacation this afternoon (Thursday) and will be back on
    Sunday afternoon. I understand you need to evaluate the information,
    and I in no way mean to pressure you insincerely. Can I ask simply that
    you have an answer for us by Sunday afternoon. I really can't wait much
    longer, Roger. I need to make decisions about hiring sales and
    marketing staff which depend on whether we do a deal with GEMM.

    Please leave me a voice mail with any question and please let me know if
    the Sunday afternoon deadline is okay. I will not be checking e-mail.
    Again, Tim will be in touch about mailing the business plan~
    Thank you,


  14. ________________________________________
    From: Roger
    Sent: Friday, October 18, 2013 5:59 PM
    Subject: Correspondence between Stig/myself/Jim Hall/Tim Capron of E-nich, Part 2, Oct. 21, 1998


    Here's an email from Stig to me, copied to Jim and his buddy Tim, who as I remember was introduced to me as his roommate at Harvard and his number one assistant. He's discussing with me the possible details of the deal. Below is my previous message to Stig.

  15. >> Dear Stig;
    >> Thank you for the letter of Intent and the business description you
    >> sent me. I am extremely interested in your proposal, however, not having
    >> the advantage of my partner Jim Hall I will need to see some more
    >> lnformation on your company, it's principles and that $2.5m in start up
    >> capital you purport to have in place.
    >> I'll need to see the details of that commitment before I can agree to
    >> contract to sell to your start-up company. Being a one man band out here in
    >> California and literally socked away in my hobbit processing orders, I
    >> forgot to mention to you when you and your partner came to see me that I
    >> will need some information on you guys and your operation.
    >> I believe I did mention this but some how it seems to have been
    >> forgotten. I am willing to sign your letter of intent with very few changes
    >> if all checks out regarding your information and my verification. Due to
    >> the seriousness of this transaction I will be engaging assistance on my
    >> part to vet the various papers and proposals and oversee details of the
    >> transaction.
    >> I am sure you must be under the gun to make a deal or else you would
    >> not have insisted upon an immediate response from me. I have spoken to Jim
    >> on this and will move as quickly as humanly possible. I will execute a
    >> letter of intent wihin 24 hours of receipt and approval of your information
    >> I have requested.
    >> Sincerely,

    >>Roger Raffee

  16. >Date: Wed, 21 Oct 1998 11:42:58 -0400
    >From: Stig Leschly
    >Organization: e-Niche Incorporated
    >MIME-Version: 1.0
    >To: Roger Raffee
    >CC:, Tim Capron
    >Subject: Re: letter of credit
    >That's terrific news. Let me respond with the following.
    >1. First of all, before I get to the due diligence, let me stress how
    >happy I am that you are willing to proceed. I have thought much about
    >your predicatment, Roger. I totally understand that you need to assure
    >yourself about the transaction and your payments. I think there are
    >ways to do that, short of an onerous letter of intent. Also, at the
    >highest level, I think this is a good deal for all of us.

    >2. Secondly, after talking to your sister last night, I thought about
    >what I can do -- short of tying up lots of capital in a letter of credit
    >-- to address your concerns. One thing that I can do, Roger, which
    >might make you feel a little better is to pay you a larger sum on day
    >one. One of my constraints, as you know, is that I conserve my cash
    >outlay for the acquisition in the first year. That said, I don't mind
    >paying you the first 4 months of the payments up front. I am making
    >this offer in an unsolicited way -- as a way of communicating to you
    >that I am sincere and that I understand your concerns. What this would
    >mean is that you get a lump sum of 4 x $13,194 (equivalent to $52,778)
    >on day one (probably mid-November) . I hope that goes some way to make
    >you more comfortable. Also, keep in mind, Roger, all the ways (other
    >than a letter of credit) which you do have to enforce your right to
    >receive payment. They include you contract rights under the "purchase
    >of assets" agreement that we will eventually sign and your rights as a
    >shareholder in e-Niche. Also, at a non-legal level, let me impress on
    >you again that my investors would simply not tolerate my defrauding you,
    >and it would be short-sighted of me to make enemies since e-Niche plans
    >to do many other acquisitions in the future.


  17. >3. Your requests to see our records regarding investors, management and
    >financial structure are 100% reasonable, and I have in no way meant to
    >ignore them. In fact, I expect to give you and Jim full access to
    >information on e-Niche. Let me say two things. First of all, at this
    >point, we only need to sign a letter of intent to do the transaction.
    >The letter of intent does not bind you legally to complete the
    >transaction. The letter of intent on requires you and Jim to observe
    >confidentiality and to not enter into acquisition talks with another
    >coQpany for the next several weeks while we get to closure on the final
    >documents. In transactions like this, a full due diligence period
    >typically follows the signing of the ltter of intent. It is in this
    >period, that you and Jim (and your lawyers if you wish) should put
    >together a list of everything that you want to see from e-Niche,
    >including bank statements, referal lists, and so on. You will have full
    >access to the information that you need. We will not sign the final,
    >legally binding documents until a few weeks from now -- as soon as our
    >lawyers can draft them and review them and as soon as you guys can
    >complete your due diligence (we, by the way, still have some due
    >diligence to do as well, including seeing you bank statements and so
    >on). In any case, Roger, I hope that lays out the process for you a
    >bit. In all, you will have full access to all the information that you
    >neeed. Second of all, for the moment, I will have Tim put together for
    >you a quick set of documents that he will fax to you today. These
    >documents will include photo copies of our bank statement, balance
    >sheets, deposit slips, lease, and whatever else we can pull together on
    >short notice. Again, Roger, remember that you will have a few weeks
    >after the signing of the letter of intent to get whatever information
    >that you need to sign the final documents.
    >Again, Roger, I am delighted that you are willing to proceed. Three
    >final things about how to proceed.
    >-- First, please have a conversation with Jim and make you the two of
    >you are on the same page. There appears to be some confusion.
    >-- Second, please e-mail to Tim ( a fax number (at a
    >local Kinko's if need be) so that he can fax you the information that he
    >is pulling together on short notice.
    >-- Third, we need to sign the letter of intent tomorrow. I will have my
    >lawyers draft a new one to reflect the lump sum payment to you on day
    >one. I will then fax out the letter of intent for all of us to sign.
    >Again, after that, we can get to work on drafting the documents and
    >swing into the full due diligence process. This should all be wrapped
    >up in 2 weeks. I have a board meeting on Nov. 5, and I need to have the
    >documents drafted, reviewed, agreed on, and signed by then.
    >Feel free to call with questions, Roger. I am delighted to be moving
    >All the best,

  18. Sent: Friday, October 18, 2013 6:13 PM


    Below is Stig's rebuttal offer to a counter offer I had previously made to him. This is clearly a legitimate offer by him to buy GEMM. You can also see below he sent us a payment schedule for the cash part of the offer as an attachment.

  19. >Date: Fri, 30 Oct 1998 12:36:00 -0500
    >From: Stig Leschly
    >Organization: e-Niche Incorporated
    >MIME-Version: 1.0
    >Subject: e-Niche offer
    >Roger and Jim,
    >Thank you for your offer. I have reviewed it with the Board, and my
    >response is below. In summary, I want to do the deal and think it's
    >positive for both of our companies. Still, your requests as they stand
    >are too large. I have responded below with a substantial improvement
    >over the last offer. I think it's a fair final solution.
    >In all, Jim and Roger, we are at the end of this road. I hope the offer
    >below is enough to get this done. If not, we should get on with it. I
    >look forward to your response.
    >As I understand it, your offer at this point involves $1 million in
    >cash, a letter of credit for the $1 million in cash, 10% of e-Niche, 2
    >board seats, and a $100,000 cash deposit. Please correct me if I am

  20. >OUR OFFER
    >1. Valuation.
    >I continue to think GEMM is worth about $1 million. We have analyzed
    >the valuation number extensively. In an effort to get this done and to
    >bend at the end of this, I am willing to add $200,000 to the value for a
    >final offer of $1.2 million. We seemed in agreement about $1 million
    >last week, and I hope we can get back to that range. At your requested
    >$2 million, I am better off going at this alone.
    >2. Cash and Equity Payments.
    >I will stand by the initial agreement of 70% cash and 30% equity. You
    >are free to take up to 50% of the payment in equity, as your latest
    >offer implies. Assuming 30% of the payment in equity, the offer
    >includes $840,000 in cash over 3 years (70% x $1.2 million). Total
    >equity in the first year would be 3.6% of e-Niche.
    >3. Letter of Credit
    >I understand your need to have the cash payments secured. I am willing
    >to agree to a letter of credit in the range of the $475,000 that you
    >asked for last week. Specifically, I am willing to include a letter of
    >credit for $500,000 from Silicon Valley Bank. The remaining $340,000
    >of the cash payments ($840,000 - $500,000) would, as always, be secured
    >by contract right as long as e-Niche is viable. In the unlikely event
    >of a shutdown, the $340,000 cash would be secured by the hard assets of
    >the company.
    >You are free to allocate the letter of credit between you as you see
    >fit. My sense is that Roger is more worried about having secured cash
    >and that Jim is more interested in equity, so you might allocate the
    >letter of credit accordingly. For example, consider a scenario where
    >the letter of credit insures Roger's cash and where, as we initially
    >talked about, Roger takes 95% of his half of the deal in cash. In that
    >event, Roger's cash payment (95% x 1/2 x $1.2 million) is $570,000. The
    >letter of credit would then almost fully insure Roger's payment. I have
    >attached a payment schedule for this scenario.
    >4. Board Seats
    >I would love to have you on the board, but there are nettlesome legal
    >and practical issues with that. Board members have a high fiduciary
    >duty on behalf of shareholders, are liably for the actions of the
    >company, and need personally to attend board meetings every 2 to 4
    >weeks. Additionally, since e-Niche plans to make other acquisitions and
    >partnerships, the precedent of putting people on the board could force
    >me have an unworkably large board.
    >The alternative is to have you both take seats on our advisory committee
    >which meets bi-annually and which will involve a variety of advisors.
    >Under this scenario, you would both be involved withe-Niche's strategy,
    >I would have the benefit of your input and involvement in the long-run,
    >and we would avoid the complications of a large board.
    >5. $100,000 deposit
    >I have no problem with making a $100,000 up front payment. I would only
    >ask that it happens after the closing documents are executed.
    >Again, Jim and Roger, we are at the end of this. I hope the offer above
    >is workable to you. If not, we should proceed on seperate paths. I
    >look forward to your response and hope we can avoid competing.
    >Stig Leschly

    >Date: Fri, 30 Oct 1998 12:43:19 -0500
    >From: Stig Leschly
    >Organization: e-Niche Incorporated
    >MIME-Version: 1.0
    >Subject: Attachment
    >Jin and Roger,
    >Attached is the payment schedule. I didn't attach it to the prior

  21. From: Margalit, Ruth []
    Sent: Monday, October 21, 2013 8:19 AM
    To: Roger
    Subject: Re: The New Yorker fact checking

    Hi Roger,

    Thanks for this. And no problem at all. I'm glad we got a chance to talk,
    and Maria did pass along all the documents that you had sent her.

    I'll be in touch if anything else comes up.

    All best,

  22. Sent: Wednesday, October 23, 2013 6:05 AM
    To: Roger
    Cc: Margalit, Ruth []


    You're entirely misunderstanding Ruth's rule in this process, and the New Yorker's, and mine too. I'm hopeful still that the the story will run and very grateful for the documents you provided; thank you so much for all the trouble you took last week.

    But the magazine is under no obligation to publish anything for any reason. They have their own standards of newsworthiness, and of responsibility to their readership (very high ones!) But this isn't a courtroom.

    Please just be patient for a bit longer.

    All best


    On Oct 23, 2013 5:09 AM, "Roger" wrote:
    > Hello Ruth and hello Maria,
    > I have a quick question for you. The day after you sent me the email below you called me on the phone and verified facts I gave Maria. You mentioned that Stig denied sending me to meet John Doerr but you didn't mention that Stig denied ever making an offer to purchase GEMM and the rest of my story. You also mentioned Jim Hall said he only sent some GEMM seller email addresses to Stig.
    > I then corresponded with Maria who told me that "if you want to see the story run" provide documentary evidence of Stig's offer. Which I did.
    > It therefore seems to me that if I hadn't contacted Maria the story would have been shelved. Is that so? Were you prepared to shelve the story without contacting me to see if I had evidence of correspondence between myself and Stig and that there was the described offer that I, Jim Hall, and Richard Messerschmidt, and my family, all knew about?
    > And if that is true are you still planning on shelving the story even with the documentary evidence I provided?
    > Marion Meyer was afraid to be credited as the interviewer when he spoke with me because he was afraid of offending Amazon and John Doerr. Is the New Yorker also afraid to print my story because of the possibility of offending these powerful people?

  23. Sent: Tuesday, October 08, 2013 3:53 PM
    To: Roger

    Hello Roger

    I have the edited version of the piece back from two different New Yorker editors and I guess they are getting close to publishing. One question they had was whether I had a list of the places where Stig talked about being a collector, other than in that book. I know I also read it in at least one magazine article, but I'm traveling and don't have my notes with me on this laptop. Do you happen to remember other sources of this story?

    Would be very helpful!

    I hope it's all right if I contact you a few more times as I make my last passes on this piece.

    Hope this finds you well!

    All best


  24. Maria Bustillos []
    You replied on 11/20/2013 5:15 PM.
    Sent: Wednesday, November 06, 2013 7:42 AM
    To: Roger

    Hello Roger,

    We should know something about the New Yorker piece next week, I think. (Who knew this was going to turn into such a thing!?)

    Hope everything is good your way!

    All best


  25. From: Maria Bustillos []
    Sent: Wednesday, December 04, 2013 11:13 AM
    To: Roger
    Subject: Re: just checking in

    I did the same thing yesterday! It's still alive: that's all I know.

    Hope everything is going well with you!

    all best


    On Wed, Dec 4, 2013 at 11:09 AM, Roger > wrote:
    Hi Maria,

    Just checking once again. Is there any progress with the story?



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