Startup Read online

  Table of Contents

  Title Page

  Table of Contents

  Copyright

  Dedication

  Prologue

  The Idea

  The Deal

  The Company

  The Financing

  The Customer

  The Proposal

  The Partner

  The Announcement

  Photos

  The War

  The Spinout

  The Switch

  The Bubble

  The Reversal

  The Showdown

  Epilogue

  Author’s Note

  Chronology

  Appendix

  Glossary

  Index

  Copyright © 1994 by Jerry Kaplan

  All rights reserved

  For information about permission to reproduce selections from this book, write to Permissions, Houghton Mifflin Harcourt Publishing Company, 215 Park Avenue South, New York, New York 10003

  www.hmhco.com

  The Library of Congress has cataloged the print edition as follows:

  Kaplan, Jerry.

  Startup : a Silicon Valley adventure / Jerry Kaplan,

  p. cm.

  Includes index.

  ISBN 0-395-71133-9

  1. GO Corporation—History. 2. Computer industry—California—San Mateo County. 3. Entrepreneurship—United States—Case studies. 4. Pen-based computers—History. 5. Kaplan, Jerry [Samuel Jerrold Kaplan]. I. Title.

  HD9696.C64G615 1995

  338.7'6100416—dc20 94-45110

  CIP

  eISBN 978-0-544-39127-7

  v1.0614

  For Lily Layne Kaplan

  Born August 28, 1994

  Prologue

  GOING, GOING, GONE. The auction was over. The last of the obsolete personal computers, engineers’ cubicles, and other debris of a corporate shipwreck was finally liquidated, sold piecemeal to a crowd of hopeful entrepreneurs looking for a bargain to help float their new ventures. A few curious bottom fishers hovered around the stacked remains of electronic pens, flat-panel displays, and plastic cases, picking over the artifacts of the dead company’s product: a portable computer operated by a pen instead of a keyboard.

  To those of us who had pinned our hopes on this novel concept, the auction seemed vaguely sacrilegious, like watching treasure hunters dredge up human remains in their search for valuables. But it was clear to me, as the person who had launched the enterprise in the first place, that our passions and ideas had simply outlived their host, only to take root elsewhere in Silicon Valley. GO Corporation, and its offspring, EO, never quite found its market, but the concept of a pen computer remains as seductive as ever.

  Still, I had to accept that impossible, final truth: GO was gone. Six years, hundreds of jobs, $75 million—all gone. If statistics were all that mattered, the story would end here. But behind the numbers lies a portrait of life at the edge of the corporate universe, where the intrepid and the imprudent play a perpetual high-stakes game of creation. The goal is to establish new companies, magical engines of prosperity that spawn products, jobs, and wealth. The price of admission is a radical idea, one powerful enough to motivate people, attract investment, and focus society’s energy on improving the way people work and play. But there is also a darker side to the story, a cautionary tale about what can happen to a young company when its timing is wrong, its technology too speculative, and its market not yet ready.

  As the winning bidders arranged to pick up their goods, I realized that the origin of GO could be traced back well before its founding in 1987, to a day in early 1979 when I first learned the truth about scientific progress from my Ph.D. dissertation advisor at the University of Pennsylvania.

  A shy Indian man with a shiny, balding head and an occasional stutter, Dr. Joshi was widely known for his brilliant work in artificial intelligence. Our weekly meetings to help me find a thesis topic were more like therapy sessions than academic discussions. Most of the time he would sit silently behind his desk, watching me wrestle with some difficult question at the blackboard. When I was particularly down, he would offer a cryptic bit of encouragement: “You’re not wrong, you know.”

  I had spent the past several months puzzling obsessively over an obscure problem in computational linguistics. One day, I explained to Dr. Joshi that I had searched the entire library for a clue to the solution, but without success.

  “Perhaps you should try a different approach, Jerry.”

  “Like what?”

  He pointed to the clock on his wall. It was round with no numerals, only single tick marks for the hours. “What time is it?”

  “Four-thirty.” I thought he was pointing out that our hour was up. Instead, he walked over and rotated the clock a quarter turn to the right.

  “Now what time is it?” In its new position, the clock looked exactly as it had before, except for the position of the hands.

  “Seven forty-five.”

  “Are you certain? Rotating a clock doesn’t change the time, does it?” He had a point, but I didn’t know what to make of it. “It only says four-thirty because someone decided that’s what it means. What’s on the wall is a dial with two hands, yet what you see is the time.” I was still confused. He sighed, then continued. “All that’s happened is that you’ve walked to the edge of the great mosaic of human knowledge. Up until now, you’ve been living in a world full of ideas and concepts that other people have set out for you. Now it’s your turn. You get to design a piece of the mosaic and glue it down. It just has to fit with what else is there. And if you do a good job shaping your tile, it will be easier for the next person to fit his around yours.”

  “You’re saying that I’ve been looking for an answer when really I should be making one up?”

  He looked relieved. “Don’t believe the bull about science being only an objective search for truth. It’s not. Being a scientist also requires the skills of a politician. It’s a struggle to define the terms, to guide the debate, and persuade others to see things your way. If you’re the first one there”—again he pointed to the clock—“you get to say what it is that others will see.”

  As I drove back to my apartment, the answer to my problem came to me. When I got inside, I called Dr. Joshi and gave him a hasty review of my thinking. I could hear the sound of chalk against blackboard as he worked out the logic. After a long silence, he finally spoke. “Beautiful. Now all you have to do is write it up and get out of here. There’s nothing else I can teach you.”

  Surely, I thought, he was being funny—this was just his way of complimenting me on a good idea. “Come on, that’s not true at all!” I said.

  “I suppose there is one other thing.” He suddenly sounded more serious.

  “What’s that?”

  “Just remember that ideas last longer than people or things. Your ideas will go further if you don’t insist on going with them.”

  You know, he was not wrong.

  1

  The Idea

  “IS THIS THING war surplus?”

  “Huh?”

  The taxi driver didn’t get it. We were racing down a narrow road in the suburbs of Boston, lurching from pothole to pothole. Each bump rattled the vehicle as though a shell had exploded nearby. The maroon logo on the door read “Veterans Taxi.” The driver was vintage antiwar sixties—short graying beard, ponytail held by a rubber band, and a Cossack hat with ear flaps as a concession to the bitter February cold. I was to meet Mitchell Kapor at Hanscom Field at nine A.M. sharp to check out his new toy, a personal jet. The trip from the Cambridge offices of Lotus Development Corporation—the company he had founded in 1982, only five years earlier—was supposed to take less than thirty minutes, but I was late, and lost. Mitchell had
been clear that he wanted to depart promptly so we could arrive in San Francisco in time for his lunch appointment.

  The pavement widened without warning, and a stoplight signaled our reentry into the civilized world. The access road circled the field to the Butler Aviation terminal, where the private planes were parked. As instructed, we drove through an unobtrusive gate onto the field. Several small planes and a single jet sat in the passenger loading area, randomly scattered like animals maintaining a safe distance at a communal watering hole. I was relieved to see Mitchell just ahead of us, pulling suitcases and tote bags from the trunk of his dark gray 1984 Audi sedan.

  The unmarked jet was painted a nondescript brown and beige. A narrow gangway of four or five steep steps was carved out of its middle. Two large men in vaguely official dark blue outfits sporting epaulets and caps stood at ease on either side of the stairs, waiting for a limousine to deliver their new boss, the founder of the world’s largest independent software company. They nervously eyed the two young men in blue jeans struggling toward them with bags hanging off both shoulders.

  “Can we get some help, please?” Mitchell bellowed. The two men froze momentarily, realizing that this young guy with shirttails hanging out the back of his ski jacket was their man. They ran forward to relieve us of our luggage.

  “Good morning, Mr. Kapor,” one of the crewmen said.

  “Call me Mitchell, and this is Jerry. He’s hitching a ride today. We’re splitting the gas.”

  Mitchell laughed at his own joke. The operating cost of the craft was more than a thousand dollars an hour, much of which was high-grade jet fuel. The crewmen glanced at each other in disbelief and then introduced themselves as the pilot and copilot.

  We climbed the steps to find a cramped, tubular cabin decorated in dark brown fabric and wood paneling. It looked like a miniature old-fashioned men’s club. There was a narrow aisle down the middle, just tall enough to stand in, with four seats along the right but only two seats along the left, followed by a couch long enough to lie down on. I imagined that the couch was there in case the jet’s owner got lucky with a passenger—a sort of airborne version of the mattress in back of a pickup truck. Mitchell, a devoted family man, wouldn’t see it this way, but I was single and more attuned to such possibilities. A custom-made bar, with cutouts for bottles, displayed the varieties of hard liquor favored by the previous owners—a bank whose executives had lived well before falling on harder times. There were also several Cuban cigars and packs of playing cards.

  “We can get rid of this stuff,” Mitchell said. “Some Diet Coke and sugarless gum would be fine.”

  His face impassive, the pilot made a note.

  I first met Mitchell Kapor in 1984, when he wandered into my office unannounced and asked what artificial intelligence might mean to personal computers. I was a logical person to ask, having completed my Ph.D. in the field five years earlier.

  After graduating from Penn in 1979, I joined the research staff of Stanford University. Stanford had the pace and style of a country club, with research grants blowing in through every open window. After slaving away for years on graduate studies and working every odd job I could find to support myself, I felt as if I had died and gone to heaven. It was a dream job, with virtually no responsibilities other than to think about something interesting and write up my ideas once in a while. In the absence of any objective measures of success, the tenured professors in the computer science department took to alternative means of establishing their self-worth, mainly by infighting and collecting academic titles. After about a year and a half of pastoral bliss, I concluded it was unhealthy to retire at the vital age of twenty-eight.

  Early in 1981, everyone in sight was starting companies. I was unexpectedly offered the opportunity to join a new artificial intelligence company called Teknowledge, formed by a group of Stanford professors. Teknowledge built expert systems, computer programs that used knowledge gleaned from human experts to reason through complex problems, like diagnosing obscure forms of cancer.

  Accustomed to the academic environment, the researchers did their work on large, symbolic computers called LISP machines, oblivious of the personal computer revolution taking place around them. The LISP machine was a classic boondoggle, built mainly under government grant and sold mainly to government research projects. An expensive, high-performance computer, the LISP machine was to the personal computer what an F-15 fighter jet was to a Cessna 150.

  About two years into this endeavor, I suspected that similar results could be obtained at far lower cost on a personal computer. So I commandeered an IBM PC and started to write programs in my spare time. Within a few months, I had a number of promising prototypes up and running. In a remarkable coincidence, this was precisely when Mitchell came to visit, asking his question.

  We immediately hit it off, and talked about how to design a flexible database to manage personal information—notes, ideas, to-do lists, phone messages, and the like—as opposed to corporate data such as billing and inventory records. Mitchell offered me a consulting contract to develop these ideas into a product, working directly with him and another scientist named Ed Belove. I could work at home, in the wooded hills just west of Stanford, with occasional visits to Lotus’s offices in Cambridge.

  For the next year or so, I lived and worked alone for extended periods, accompanied only by my cat, Critter P. Spats, the sole remaining evidence of a long-gone live-in girlfriend. Realizing that I might benefit from greater human contact, I took the proceeds from the sale of my Teknowledge stock and purchased a condominium on “crooked” Lombard Street in San Francisco. The constant flow of tourists down this cobblestoned landmark made me feel as if I had moved out of the wilderness onto the banks of the river of humanity. The cat loved the extra attention.

  Shuttling to Boston about once a month, I worked closely on the Lotus project with Mitchell and Ed. Our efforts resulted in a new type of program we dubbed a personal information manager, or PIM. As the project neared completion, we officially named the product Lotus Agenda. In February 1987, I was hitching a ride back to San Francisco on Mitchell’s new jet to show him some extra features we’d added to the product at the last minute.

  Once we were on board, Mitchell started to search through his luggage. There were tote bags and briefcases everywhere. It was essential that the discriminating technophile travel with a variety of computers, portable phones, organizers, chargers, adapters, cords, and extra batteries, as well as the latest industry weeklies, computer magazines, and newspapers. I wondered if this was why Mitchell felt he needed his own jet—checking all this stuff on a commercial flight would be a nightmare. When he was comfortably ensconced in a fortress of electronics, he took off his ski jacket, revealing his trademark outfit: a formal Hawaiian shirt (white background) over loose-fitting jeans. Mitchell was a big man, nearly six feet tall, and walked with a boyish bounce. He had a wave of dark hair with a touch of gray at the temples, betraying his thirty-six years. His two front teeth were slightly askew, giving him the faintest aspect of a woodchuck, which was seconded by his zeal and diligence. I could see that he was perspiring lightly from our hurried boarding.

  I looked like a junior Mitchell, the same height but twenty pounds lighter, though my hair was a bit more gray. The same ill-fitting designer jeans—crafted for some platonic GQ ideal, not a son of Abraham—curved under my waist and hung loose around my rear. Inevitably, the bottom button of my shirt fell above the belt buckle, leaving the shirttails free to wander their separate ways, revealing a roll of flesh. Like Mitchell, I was locked in perpetual battle with my weight, but the stakes were higher—I couldn’t afford to carry the girth of a typical middle-aged husband, for fear of never becoming one.

  We settled into the front pair of seats.

  “Put your seat back in the full upright position, and fasten your seat belt tight and low across your lap,” Mitchell admonished me with mock seriousness.

  We spent the next several minutes repeating verbat
im the inescapable Big Brother rituals of the commercial airlines. We were soon laughing hysterically, and the pilots must have thought we were nuts. After taxiing a short distance, we were off the ground, climbing at a steep angle. We sat in silence for the next few minutes, watching the ground recede and feeling very regal.

  As soon as we leveled off, Mitchell pulled out his latest gadget—the lightest, most powerful portable computer available. This remarkable machine, the Compaq 286, packed all the power of the most recent generation of desktop personal computers into a box about the size and weight of a small sewing machine. The numeric designation 286 was not selected at random. It indicated that the product contained at its core a microprocessor chip called the 80286, designed and manufactured by Intel Corporation.

  In the mid-1980s, computer cognoscenti had a penchant for substituting technobabble for plain talk. This served a useful purpose. Learning to use a computer—much less to program one—required a level of personal commitment commensurate with learning the piano, and a similar level of innate talent. It attracted people who had difficulty with the messy business of human relations, preferring instead the company of predictable and infinitely patient machines. This devotion was rewarded with valuable skills and friendships. Former wallflowers suddenly found themselves accepted into a new society of like-minded people who were more comfortable communicating through electronic mail than face to face. Now they could mask their awkwardness behind CPUs, RAMs, and modems. Geeks became chic.

  A secret language was the key to the club, like the lingo used by each generation of teenagers to identify kindred souls and exclude ignorant grownups. It made the members of this new caste feel special, smarter than everyone else. The embarrassment that ordinary people felt about their lack of computer knowledge only reinforced this feeling. But just knowing the model number of a computer wouldn’t help you join the secret society—you had to know how to pronounce it. Nowhere was it written that 80286 should be read “eighty, two eighty-six,” as opposed to “eight-zero-two-eight-six” or some other variation. Welcome to the club.