Founders at Work.pdf

Ron Gruner 431
board was saying, “Let’s take our time; work this thing through; live with this for
2 or 3 years; get things fixed; transition into another segment, and move in that
direction.” Another segment of the board was saying—and I don’t mean this in
a derogatory way—“Let’s take more risk, roll the dice. If it works, it will work
out big, and, if it doesn’t, it disappears and let’s move on to the next deal.”
One of the things that I think is dogma within venture capital is that you
don’t want to manage what they call the “living dead.” I don’t know what the
numbers are now, but back when I was working with venture capitalists, their
rules of thumb were: typically one out of ten companies is a really big hit;
roughly three out of ten go belly up pretty quickly, and you get rid of them. The
other five to six are what they call the “living dead.” They grow nicely, organically,
but don’t generate spectacular returns, and they take management time
and energy. Those are the kinds of companies they prefer not to deal with,
because it simply doesn’t make sense. They have a fiduciary responsibility to
their limited partners to generate a significant return, so they want to deal with
firms that will tend to do that.
The lesson I learned at Alliant in dealing with venture capitalists was that
they’re quite impatient with a difficult situation. They have to be. They have no
choice.
So it came down to making a decision. What were we going to do with the
company and how were we going to transition it? I was in disagreement. I was
saying, “Let’s take the slower, more methodical approach over time, and we can
work it out.” The other approach was, “No. Let’s change the architecture of
the computer, move into the newer technologies quickly, etc.” You can argue
either one.
So I left the company. I left the board of directors. I was chief executive for
10 years. I basically got fired when it came down to saying, “I can’t live with this
strategy because I think it’s wrong.” They said, “We understand that; we respect
you; but you can’t stay.” So I left.
And, unfortunately, it didn’t work out. A year later, the company was bankrupt.
Certainly, at the point that I’d left, I’d left a lot of problems for them to
clean up. The company was not healthy; it was headed in the wrong direction.
So I share a good deal of that responsibility.
But then I was at the stage of, “What am I going to do next?” Here I was, in
my early 40s, and clearly the computer designer in hardware development was
a dying breed. Back in the ’60s and ’70s, there were lots of people designing
computers, mainframes and minicomputers, and all kinds of things—because
they were all built out of parts. But with microprocessors, there’s only one Intel
and a few other smaller firms like AMD. You only need a few dozen designers.
So that went away.
I said, “I’ve got to change careers.” I had to think about what I wanted to do.
I had some offers to join venture capital firms, which I thought about. There’s
always the role of corporate consultant. But I decided I really enjoyed being an
entrepreneur, and I wanted to go off and do it again.
Livingston: How did you decide what to do?