Founders at Work.pdf

Ron Gruner 429
Gruner: They said “Fine.” What they thought, I don’t know. But we did go
back to them about 4 months later, when we had a first draft of the business
plan done. We worked very hard on that plan and then went out to San
Francisco and pitched the idea to them. This was John Doerr. He had been
there a few years at the time, but he was just really getting started in his career.
Frank Caufield, Brook Byers, and Tom Perkins—that whole crew.
They liked the idea because they could draw analogies with Tandem
Computer. They looked at our backgrounds, having been in the business, etc.
So we were able to raise money from Kleiner Perkins. The first round, as I
recall, was about $4.7 million, and back in those days, that was a lot of money
for a first round of financing.
They then introduced us to Hambrecht & Quist—Bill Hambrecht—and
Venrock, which was the venture management arm of the Rockefeller family—
Peter Crisp in New York City. We were able to put together that consortium of
three VCs in about 3 months.
We closed in early October of 1982 and set up the board. Tom Perkins came
on the board. Bill Hambrecht did not, but he liked to be able to observe. It all
worked pretty well. We raised three additional rounds with those investors for a
total of about $30 million.
We kept it to those three investors, or some subset of those. As the game
moved on, Hambrecht & Quist, being an investment banking house and,
frankly, hoping to take us public someday, stepped up and took a larger share
than Kleiner Perkins did, but they were all substantial investors.
We announced the initial product in the summer of 1985.
Livingston: Three years later?
Gruner: Yes. It took 3 years. We got financing in the fall of ’82. It took 2 1/2 years
to hire a development staff, design the computer, develop the software, and
announce it. We shipped initial systems, which were not beta systems but were
really production systems, in September of ’85. So it was approaching 3 years. It
was a complex task. And that consumed the better part of $30 million.
The first year we did approaching $5 million dollars in revenue. Then the
next year, in ’86, we did about $30 million in revenue.
Livingston: That’s impressive.
Gruner: Because it was hardware. We went public in December of ’86.
Morgan Stanley and Hambrecht & Quist took us public.
That was a very positive experience. We found a lot of plain, simple wisdom
from some of the venture capitalists we had—particularly Tom Perkins. Tom
was on our board. Even at that point he was quite wealthy, very successful. And
he made almost every single board meeting. He had to make them in Boston by
taking a red-eye from San Francisco to Boston, coming into a meeting at, say,
9:30 in the morning, going to a 4- to 5-hour typically boring board meeting,
then flying back that night. And he was in his early 50s at that time. He always
had great insights, and always tinged with a nice touch of humor, too.