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on the floor of a friend I went to see this random lecture at Stanford given by a guy named Peter, who I had heard about, but never met before The lecture turned out to have only six people in it It was in the heat of the summer, so nobody showed up This guy was like, There are only six of you, OK Afterwards I walked up to talk to him He was this really intense guy, and he said, We should get breakfast sometime So we met up the next week I had two different ideas that I was considering starting companies around, and I pitched him on both evenly Peter was running a hedge fund at the time.

As you can see from the pricing of the E-Z-MRP system, there are two versions. One version limits the capacity of a critical data table the Part Master table. And it sells for considerably less than the unrestricted version. Since the target for this product is manufacturers in the startup to $20,000,000 range, a low-priced version helps startups get started with a system. At that level, the restriction is not material as the number of parts they have to manage is usually very low. As time goes on and they grow, they will eventually bump up against the restriction. At that point, however, they can upgrade to the unrestricted version for the difference in the price.

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For a few weeks we kept talking, and eventually he said, Take this idea, because this one is better, and you go start a company around it, and then I can have my hedge fund invest a little bit of money in it like a couple hundred thousand dollars That was a good thing, since I was starting to run out of money I had just moved from Champaign; most of my contacts and friends were in Chicago One of them I was trying to convince to be the CEO He wasn t really available, so I wound up being without a CEO I called Peter and said, This investment is a great thing, but I have no one to run the company I m just going to write the code and recruit the coders And he said, Maybe I could be your CEO.

So I said, That s a really good idea The next 2 weeks we were sort of playing with the idea, and by 1/1/99 we agreed that he would be the CEO and I would be the CTO..

Livingston: How did you have the idea Levchin: The initial idea was actually very different At the time, I was really into developing software for handheld devices, which is sort of an art and a science unto its own And I was really into security This idea that I had in college, which I was vaguely successful with if you ve ever seen these authentication devices, like a little card that spits out numbers at you that you can log in with It s like a one-time password generator, like S/Key, Digital Pathways, and CRYPTOCard Most of the algorithms are variations on the standard called X99, which is a public standard The algorithms don t really use it correctly In college one day I had bought all the different kinds of cards Each costs like $50 or $100, so it s not that expensive.

They weren t that difficult to reverseengineer because you already know the standard, so you know it can t be too far outside the standard I reverse-engineered most of them except for one which was very proprietary I decided not to touch that one since I was too poor to handle a lawsuit Once I got them all reverse-engineered, I wrote an emulator for every single type of them for a Palm Pilot I had a lot of friends on campus who were really into security as well most of them were sys admins and they carried a whole bunch of these things in their pockets, because most of the time you can only use one per computer, per system If you adminned a lab with ten servers, you d have a stack of these things in your pocket, and that adds up They are heavy, and they need batteries.

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