Inside Story Of ‘Hotmail’ $400 Million Deal With ‘Microsoft’

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Very few Indian's must be knowing that the current 'Outlook' was formerly a 'Hotmail' and co-founded by an Indian Businessman.

This generation is majorly aware about only the email service & that is ‘Gmail’. But did you know that it was an Indian who co-founded the first free web-based email service? Some of us might still be taking the same services in our office which was originally co-founded by an Indian. Yes, the current Outlook.com was formerly known as ‘Hotmail’ which was sold to Bill Gates by an Indian businessman in a deal with ‘Microsoft’.

‘Hotmail’ First Email Service By Indian
Outlook.com, originally known as Hotmail, has an interesting Indian link with the service. Hotmail was created by an Indian entrepreneur named Sabeer Bhatia. He co-founded this service with his partner Jack Smith in 1996.

Around the same time, another service called RocketMail was also launched, which later became Yahoo! Mail. You will be surprised to know that the free storage limit, during that time, for users was only 2 MB. Hotmail received its initial funding from venture capital firm D****r Fisher Jurvetson.

By December 1997, Hotmail had 8.5 million users and became one of the biggest email services in the world. Though subscribers numbers were very high, people were not paying for email services, hence the business couldn’t generate the revenue. So 18 months later, in 1997, Sabir Bhatia had to sell the ‘Hotmail’ to the tech giant Microsoft for $400 million.

Inside Story Of ‘Hotmail’ $400 Million Deal With ‘Microsoft’
Recently Sabeer Bhatia shared some inside stories of how Hotmail was in a discussion with Microsoft to sign the deal. He mentioned that as a small company, like ‘Hotmail’ , receiving an offer from Microsoft so quickly was a big thing for them.
They had tried searching for the funds from various sources to build the company. They knew Hotmail had the potential to grow but it was not generating any revenue. Bhatia said that if they had rejected Microsoft’s offer, they would have faced major challenges, as Microsoft might have easily created a similar product on its own. Initially, Microsoft offered just $140 million.
Though it was very huge, still ‘Hotmail’ rejected it. Sabir Bhatia was not allowed to speak over the deal initially. Then Microsoft had given a higher offer, which was rejected by Sabir. He faced the backlash from board members over his decision, so finally after all the negotiations, the deal was finalized at $400 million.

After Hotmail No Other Venture By Sabir Became ‘Successful’
After Microsoft acquired Hotmail, Bhatia continued working at Microsoft for nearly a year. He then started an e-commerce company called Arzoo Inc. He also founded JaxtrSMS, a messaging service. However Bhatia could not get the success of Hotmail again. Hotmail’s other co-founder Jack Smith became the CEO of software company Proximex in 2007.

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