Something Ventured Page #3

Dick's letter was very intriguing.

He's just generally knowledgeable

and on the same, uh, piano as I was.

And then I found out later that there were

over a thousand responses to the article.

And that Arthur had a handwriting

expert that analyzed my letter.

Isn't that funny?

So that's how I got

in the venture business.

Well, you know,

there are no firm rules...

in the venture capital business,

except that there are no firm rules.

Did you have any problems

in convincing your colleagues?

Oh, yeah, they thought I was

out of my mind on this one.

By the early '70s, inspired

by the success of Arthur Rock,

more members of the Lunch Group

began to quit their day jobs...

and setup

their own venture funds.

Reid Dennis gave notice

to his boss at American Express.

He said, "Reid, are you sure

this is what you want to do?"

I said, "Bill, I've never been

so sure of anything in all my life."

He said, "Well, we really

don't want you to go,

but if you're determined to go' you ought

to take some of our money with you."

And that's what gave

us the impetus...

to start Institutional

Venture Associates.

A career in venture capital

now seemed so alluring,

and potentially so profitable,

it was attracting people

outside of finance.

Two Silicon Valley engineers,

Eugene Kleiner and Tom Perkins,

formed what would become

one of the most successful...

venture firms of all time.

Well, I sort of got into venture

capital by the back door.

I was working for the

Hewlett-Packard company...

when I had an idea for a

radically improved kind of laser.

And then I started a company...

to manufacture the lasers.

When it was all over I realized,

gee, I had been

a venture capitalist.

I put up the money.

I put up the management.

So then when I met Gene Kleiner,

who had left Fairchild,

we were both planning to go into

the venture capital business.

And we realized

we complemented each other.

I mean I'm pretty intense

and high-strung'

and Gene was

sort of calm and portly...

and had a soothing

Viennese accent.

Eugene was just brilliant.

He was fun to be with.

I remember once we met

an entrepreneur,

and after he left I said, "Gene,

you know, do you trust him?"

And Gene said, "I would trust him

with my life, but not my money."

And that's how it started.

We hung out our shingle'

and nothing happened.

The phone didn't ring.

We had a part-time secretary-

We called out, nobody called in.

We saw some deals,

and we did some deals.

We lost money

in our original deals.

And I'll mention them,

even though they were very embarrassing.

The most notorious,

and maybe the funniest'

was a company called Snow Job-

Which was a scheme to convert

motorcycles into snowmobiles...

and back and forth.

Which actually worked,

and it was a lot of fun,

But one of the fuel crises landed at about the

time we were ready to go into production,

and we couldn't get distributors,

and, uh, so it failed.

So Eugene and I thought'

you know, "This is not working.

We've got to do

something differently."

Tandem was a huge risk

for Kleiner Perkins.

If Tandem had failed, there would have

never been a second Kleiner Perkins fund.

I think I was 33.

I was young, in terms of people

starting companies,

but there weren't a lot

of people starting companies, so-

Well, Jimmy Trey big-very smart guy.

Very impressive.

He had this idea,

which he'd carried-

not the technical part of it,

but the need...

for a truly fault-tolerant

computer.

A computer

that would never fail.

At that time, for instance,

the New York Stock Exchange...

would fail about every day,

or every other day.

And something would go wrong in it,

and it would destroy data.

People knew the problem,

but they didn't have a solution.

So just think of it. I mean, credit

checking, airline reservations, banking.

All financial things.

- Hospitals.

- All communications.

Just all kinds of things...

where it's just not acceptable

to have the computer go down.

We knew-Tom and I knew-

that if we could figure out a different

kind of computer architecture...

to solve this problem,

that we could create a big company.

The problem was IBM had won

the mainframe battle in '74.

And there was an article that said there

would never be a new computer company.

Never. That was '74.

And the cover was a picture

of a shark,

and IBM was eating up

every company.

When you think about

what decisions are being made,

you got IBM wiping out GE,

Siemens.

So it would be easy not to

want to go after that, right?

So you have to be brave. I mean, you have

to see it, and you have to be brave.

And being brave is one thing

you got to say about Tom.

You gotta look to get money

from strong people.

Because weak people

don't invest in tough times.

But that's when most of

the big winners are created.

Well, first of all, we didn't want

to be the only backers of Tandem.

We tried to raise venture capital.

I made a trip back east.

I remember the first time

we gave the pitch.

Jimmy was straight out of Texas,

a real character,

and I didn't think he'd go over

very well on Wall Street.

He had to take me to buy a suit.

He probably shared that.

I literally took him to Brooks Brothers.

And shoes, socks, the works.

He always said, uh-

I forget what he said,

but, "He could buy the suit,

and that still didn't help."

And took him back to Wall Street,

and of course the first thing he said is,

"Well, how do I look?

Tom dressed me!"

You know-

Tom was, uh, a little more

sophisticated than me.

But we didn't get the money.

Untried management.

An unlikely idea.

Most people would not have thought

this was gonna be a big winner.

But I felt strongly enough

about Tandem that, uh,

even if we had to put up

all the money, we would do it.

And then finally, at the last minute,

Pitch Johnson put in a small investment.

I like to think that

Tom felt my presence...

would be helpful

in raising money elsewhere.

It ratified our concept.

I was credible in those days.

Hi. I'm standing here next to

a beautiful Tandem computer.

I think everyone recognizes

this fine computer.

It took us a long time

to get that first order.

The very first customer

was Citibank.

But when we got the first order,

and the computers performed

as expected, even better,

the growth took off

and became explosive.

We went seven,

25, 50, 100 million,

200 million, on up to a billion,

and we were a Fortune 500

company in '82.

You use a Tandem computer today...

pretty much any time you use

your credit card for anything.

When I started

in the venture business,

it never occurred to me

that we would have multiple funds...

that would easily exceed

a billion dollars.

I got into the business

somewhat fortuitously.

When I made the decision,

I had already put in 13 years

working in real companies.

In 1972, Don Valentine decided...

to trade on his connections

in the semiconductor industry...

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