By Mark Leon
The Red Herring magazine
January 1997

There's an entrepreneur living in the shadow of Pikes Peak, Colorado, who thinks software is a living tree and can't be sold. So in his last venture he gave it away. He sees the Internet as the physical manifestation of what Indian shamans call "the golden thread," and his latest project, Tribal Voice, is an attempt to capitalize on this mystical vision.

Would you give this man a million dollars? Five years ago, Jeff Chambers of T. A. Associates and Walter Kortschak of Summit Partners each gave him $5 million and made so much money they're begging to do it again. Now Vinod Khosla, cofounder of Sun Microsystems and a Kleiner Perkins heavyweight, is also eager to powwow with Tribal Voice.

The entrepreneur is John McAfee. He founded McAfee Associates in 1986 and turned it into what Kortschak calls an "unbelievable money machine." Today it enjoys gross margins of nearly 95 percent--more than any other software company. McAfee Associates proved something that nearly all software companies now believe: you can give away your best brand to build market share and then sell other things--updates, services, Internet servers, advertising--to earn revenues. But when McAfee Associates was founded, that idea was by no means obvious; worse yet, it was justified by McAfee's oddball New Age philosophy.

Tribal Voice sounds even nuttier than McAfee Associates seemed in 1986. Are Chambers, Kortschak, and Khosla smart to take McAfee on trust just because he was so right the last time?

After a minor heart attack two years ago, John McAfee sold his stake in the McAfee Associates money machine, bought a Winnebago, and drove around the western United States visiting various Native American tribes for a year. Today you will find him in Woodland Park, about 30 miles northeast of Colorado Springs, running Tribal Voice, which has yet to earn a dime. But that doesn't faze the money moguls of Silicon Valley. "I get four or five calls a week from venture capitalists," McAfee claims. He hasn't decided whether to accept their importunities.

Woodland Park residents were a little mystified when this tall, intense 50-year-old multimillionaire set up shop above the Gold Hill movie theater. "Everything's 'gold' around here," McAfee says, referring to the region's history. Now there are 14 NT servers in the town of 4,000, and the locals know about dedicated high-speed bandwidth. "We have gone as far away from civilization as we can get and still have T1 lines," McAfee says.

Tribal Voice exists to distribute a free piece of software called PowWow to as many people as possible. Users can download it from the Tribal Voice Web page at www.tribal.com. What is PowWow? It's not a Web-based product, and it's not a chat room--the connections are node to node and don't go through a central location. Instead, with only Windows and a connection to the Internet, it allows a user to connect with six other users in real time. A superset of PowWow called Tribe, which is also free on the Internet, allows even bigger groups to congregate. One Tribe member--the leader--becomes a Web server for the others.

"We let people set up whatever tribe they want. We have, for example, a gay Hispanic tribe," McAfee says. "Our biggest tribe, believe it or not, is an Icelandic tribe. We also have an enthusiastic user community in Rio de Janeiro." He claims there are currently about 400,000 PowWow users.

Weird but revered
Like the early McAfee Associates, Tribal Voice thinks of itself as being about something that is much more important and revolutionary than earning money or building a corporation. "Tribal Voice was created to facilitate the propagation of cybertribes within the realm of cyberspace," the company's literature proclaims. "PowWow is the tool that provides the means of communication and shared experiences that are necessary for the formation of tribes, the first social structures to emerge on the path to cybercivilization."

McAfee has tapped into an Internet phenomenon, according to Khosla. "He has just jumped in and is setting up these great communities." Bill Larson, McAfee's successor at McAfee Associates, agrees with Khosla but isn't quite ready to join a tribe. "Tribal Voice is weird," he says. "But the product does have wide appeal. John understood what was lacking in cyberspace, but there is a dark side to all of this: the idea of running in gangs on the Internet."

How, Kemosabe?
Larson may think Tribal Voice is creepy, but investing money in it is another matter. "I would invest in anything that John McAfee did, with the understanding that he is usually two to three years ahead of the market."

But how can this strange Internet undertaking make money? The plan seems to be to imitate McAfee Associates by charging licensed (mostly corporate) users for frequent updates. "When we reach 5 million users, we'll throw the switch like we did at McAfee and start charging for updates," McAfee says. "Based on current growth rates, that should happen next spring."

It's easy to dismiss John McAfee as a self-described jack-of-all-computer-trades who got lucky once with antivirus software, but the venture capitalists whose business it is to judge such things are willing to take a risk. Khosla is sure Tribal Voice will succeed because "John McAfee has the entrepreneurial spirit." How does Khosla define this spirit? "Nonentrepreneurs tend to look outside for validation of their ideas. The entrepreneur, on the other hand, will just say, 'I'm right' and jump in and do it." Chambers and Kortschak are more pragmatic. "If John had walked into my office empty-handed and said he was going to put software up for free and count on corporations to pay for it, I wouldn't have listened to him," says Chambers. "But he had already demonstrated success with McAfee Associates."

It's true: in 1991, when the tiny staff of six at McAfee Associates was minting money from VirusScan--a popular program that checks computers for viruses--Chambers put up $5 million. Summit Partners' Kortschak put up another $5 million. T. A. and Summit each realized more than $100 million on their investments.

What McAfee Associates had to offer, what impressed Chambers and Kortschak, was a new business model that was extremely profitable. As McAfee recalls, "We said, 'Look, our software is still free, but why don't you guys get on board with an update model? You can use it as much as you want--we really don't care--but it is in your interest to tap into the tree here. Then you are assured of becoming part of the growth process.' McAfee Associates never sold software. The company still doesn't sell software because I don't think you can sell software. We started making money after we had about 15 million users--then we just threw the switch."

Tribal Voice shares this business model, which partly explains why Kortschak and Chambers are so confident. "John has an incredible appreciation for how to make money," says Kortschak. "The rest is just bullshit."

"McAfee pioneered the business model of distributing software for free over the Internet," Kortschak says. "Netscape has successfully adopted it. There is a lot of merit to this vision. Computers and networks are constantly evolving. So software is a living tree. I'm 100 percent confident Tribal Voice will be profitable."

McAfee agrees. "If you give software away and assist people as well, you're almost bound to make money."