AS BOARD CHAIR, however, Noyce did have more time to devote to interests outside Intel than had been the case when he was president. One of these interests was investing in young startup companies. Noyce liked the notion of reseeding the soil that had produced Intel and the other Fairchildren.
Noyce had done a small bit of seat-of-the-pants investing while he was at Fairchild, but in 1973, he decided to establish his own small investment business with Paul Hwoschinsky, who soon would also help him with the financial aspects of the divorce from Betty. “I’ve been doing a lot of venture stuff personally, out of my back pocket, and it’s not working,” Noyce had said, referring to the shoebox startups. “If you’ll start this investment partnership with me, I’ll put up the money and pay you a small salary [to manage it]. You’ll get a percentage of any money we make. I’ll eat the losses.”17
After a bit more discussion, Hwoschinsky agreed to oversee Noyce’s angel investing through a partnership that Hwoschinsky suggested they call the Callanish Fund. Callanish is the name of a Stonehenge-like structure in Scotland that some believe represents an ancient use of binary logic.
Noyce established the Callanish Fund with about $1 million. Hwoschinsky rented an office on Sand Hill Road for $70 per month. The office held nothing more than a desk and chair, but it was the Sand Hill Road address that was important. Over the past few years, Sand Hill Road office complexes, a stone’s throw away from a major highway but nestled among lovely trees atop one of the highest hills rimming Silicon Valley, had become the epicenter of the region’s venture capital industry, which by 1975 included some 150 firms.
Among the Callanish Fund’s new neighbors was Eugene Kleiner, who in 1972 partnered with an engineer-turned-Harvard-MBA named Tom Perkins to launch a venture capital company called Kleiner Perkins. Kleiner’s experiences at Fairchild had convinced him that it was best for entrepreneurs to remain independent for as long as they could. And after seeing the returns Davis and Rock achieved after seven years of supporting independent entrepreneurs—Kleiner had worked as a consultant to Rock’s venture capital business—Kleiner was convinced that he could make a decent amount of money as a venture capitalist. The early 1970s were a funders’ market: the increase in the capital gains tax had scared away many casual investors but not significantly shrunk the pool of entrepreneurs looking for funding.
The first Kleiner Perkins fund was $8 million, half of which came from Henry Hillman, a Pittsburgh steel magnate, and half from various limited partners, Noyce most likely among them. These limited partners were simply sources of money. The firm’s managing partners—in this case, Kleiner and Perkins—chose the companies in which to invest the fund’s assets (provided by the limited partners) and decided how much to allocate to each company. In exchange for this work, the general partners earned what is called a “carry”—a fixed percentage of the fund’s overall returns.18
In much the same way that Arthur Rock had helped Noyce and Moore incorporate Intel and draw up a business plan, Kleiner Perkins sought to go beyond the traditional investor’s approach that Eugene Kleiner once described as “putting in money and then hoping for the best.” Kleiner Perkins and the other Silicon Valley venture capital firms that soon followed its example recruited on behalf of the companies they supported (called “portfolio companies”), helped the firms contract for accounting and legal work, facilitated introductions to potential customers, and sponsored networking events in which the CEOs of various portfolio companies could discuss common problems and concerns. Kleiner Perkins also developed business ideas in-house with the assistance of “entrepreneurs in residence” or “business incubation” divisions. These ideas were then spun into portfolio companies in which the venture capitalists invested.19
Kleiner Perkins’s first $8 million fund returned more than 40 times over. Today, Kleiner Perkins Caufield and Byers is the world’s premier venture capital firm, with assets worth more than $1 billion under management.20
NOYCE PLAYED NO ROLE in deciding where other venture capitalists invested his money, but his own investment decisions for the Callanish Fund were guided by a philosophy that his partner Hwoschinsky summarized as “That’s an impossible task. Let’s do it.” Noyce liked to say, “You can only lose 100 percent, but the multiples on the up side are fantastic.” In some sense, Hwoschinsky’s most important job was to protect Noyce—who did want to make money—from his own “let’s do it” instincts.21
Callanish’s first significant investment, in 1974, was roughly $50,000 to support a physicist and a businessman who believed that they could use computers to find underwater oil reserves. Several large companies had already plunged millions of dollars into this “measurement well drilling” effort without success. This alarmed Hwoschinsky, but Noyce was impressed by two pages of simultaneous equations that the physicist, Norman MacLeod, showed him to explain why his ideas ought to work. Hwoschinsky rated MacLeod Labs “an eleven” on a one-to-ten scale of risk; Noyce gave it a six, and Callanish funded it. Noyce had little to do with the operation after this influx of dollars, but Hwoschinsky helped the founders weather a rough period and then sell MacLeod Labs to oil services giant Core Labs. The transaction netted Hwoschinsky, who eventually bought Noyce’s stake in the company, a good profit.22
Callanish supported an eclectic congeries of small companies: computer software companies Siderial and Dynabyte; Compumotor, a software company for stepper motors; Benz, a project to convert a wheel chair into a street vehicle; Nortron, the first machine that balanced automobile tires using microprocessors. Callanish also backed Sonoma-Cutrer winery in Napa and for a brief time owned the second-largest peach orchard in California, which had valuable riparian rights to the Tolumne River. Through Callanish, Noyce invested in a salmon fishery near Santa Cruz in which Gordon Moore also had a stake. Almost every Callanish investment was small—no more than about $50,000—and targeted to move an idea from a paper proposal to a commercial reality. Noyce rarely invested beyond this “seed stage”; it was helping to start something new that he loved best. The Callanish Fund was not a success on the scale of a Kleiner Perkins, but it was profitable, and it satisfied Noyce’s hunger for new ideas and novel approaches.
But one investment particularly captivated Noyce: Caere (pronounced “care”), the company that built OmniPage, the first successful software for computer scanners. Noyce was involved with the firm so intensely and for so long—it existed for 13 years before it went public, leading Noyce, rather ruefully, to call it “the world’s oldest startup”—that some described it as “Noyce’s other company,” after Fairchild and Intel.23
In 1974, Brian Elfman, the founder and president of Caere (which was then called TypeReader), contacted the Callanish Fund. Elfman wanted seed money to build a hand-held wand that would operate much like the bar-code scanners that today can be found throughout the world. The TypeReader wand, however, would not need specially coded lines to function; instead, it could electronically read simple alphanumeric text—typing, for all intents and purposes. Elfman believed that this wand would greatly simplify inventory control and sales tracking.
Noyce was intrigued, less by Elfman’s vision for inventory control than by the broad concept of type recognition. Noyce had long thought that until the tedious and error-prone task of typing data into computers was eliminated, the machines would never achieve their potential for speed, efficiency, accuracy, or power. The TypeReader product offered a way around the keyboard. Noyce invested $30,000. His interest was sufficiently piqued that he also accepted a seat on the TypeReader board.
The company struggled technically. Every month, Noyce invested another small amount of money so that TypeReader could continue to operate. After a year passed with little technical progress, the board, on Noyce’s recommendation, hired a new president and two top-flight engineers from Fairchild.
The personnel changes helped the company, which by now had changed its name to Caere, to hit several key milestones. By the end of 1976, J. C. Penne
y had agreed to test the scanning wands in select stores. This progress enabled Caere to raise a $10 million round of venture financing. Noyce, who was now board chair, invested another $130,000 in this round and also convinced several of his friends in venture capital and at Grinnell College to invest.24
When Caere shipped its first product in 1977, the company fully expected the market for its handheld scanner to ramp up quickly. They soon discovered, however, that the scanner was too temperamental to be useful. It could accurately read the numbers and letters on a tag only if the clerk held the wand in precisely the right way.
Caere quickly retooled the scanner as a bar-code reader. The device now worked well—it is a far less complex thing to read a series of lines than text—but the bar-code reader market was already mature and dominated by a few huge companies such as Hewlett-Packard, IBM, and Recognition Equipment Incorporated.
Caere chugged along, never making more than a small profit. Noyce took to arriving early for board meetings so he could talk to the Caere employees, especially the engineers and technical managers. He enjoyed asking them to update him on their progress and problems, and he never hesitated to offer technical suggestions of his own. It is unlikely that his ideas proved particularly useful, but the morale boost that the Caere employees received from Noyce’s attention was substantial. To have the founder of one of the Valley’s most successful companies and chairman of the Caere board take an interest in one’s work was heady stuff indeed.
In 1979, Caere’s president left and Noyce decided that the company should not rush into hiring a replacement. He wanted to wait for the right candidate, and in the meantime, he would manage the company himself in tandem with Bob Teresi, Caere’s vice president of finance. On one of their first days as co-presidents, Noyce called Teresi into the office that Noyce had begun using at Caere. Noyce asked, “What do you think we should do?”
Teresi thought the company’s future in the highly competitive scanner market looked bleak. He said, “I think we should let it go, file for bankruptcy.”
“No way,” Noyce said emphatically. “We have people [about 30 employees]. We need to keep it open. We have a responsibility to the employees and their families.”
Noyce then took out his checkbook and ripped out a check. “Pay to the order of Caere Corp.,” he wrote. Then he signed his name. He left the rest of the check blank and handed it to Teresi. “Don’t write it for more than a million dollars,” Noyce said. “That’s all I have in that account.”25
Teresi held on to the check but did not cash it. After roughly nine months as co-presidents, Teresi and Noyce hired a new CEO, Jim Dutton. One of Dutton’s first questions to Noyce was the obvious one. “Why are you screwing around with Caere? You could be doing anything.”
Noyce’s response came quickly. “It’s kind of my way of just paying back the system,” he said. By which he meant: it was how he reinvigorated the environment that had made his own success possible. “Besides,” Noyce added, “I know that if we can figure out how to make this work, it’s a useful technology. It will save people a lot of work.”26
Shortly after Dutton joined Caere, he and CFO Teresi decided that the time had come to cash Noyce’s blank check. The two of them sat together for a long time, trying to determine what numbers to write in the space above Noyce’s signature. “The funny thing was that because Bob trusted us to use our judgment and not take more than we needed, it somehow put pressure on us to take less than we would have asked for,” Dutton explains. “We knew he had not offered that money in a cavalier way, and we wanted to be damn sure to live up to his trust.” Finally Teresi filled in six figures—Dutton guesses it was probably between $250,000 and $350,000—and deposited the check into Caere’s account. That was enough to keep the company going a while longer. Meanwhile, Noyce told no one, not even his investment partner Hwoschinsky, what he had done.27
IN 1976, 28 INDEPENDENT SECURITIES ANALYSTS named Intel “Electronics Company of the Year.” A candid photograph from the awards presentation shows Noyce receiving the commemorative plaque and sharing a hearty handshake with the presenter. Grove stands next to Noyce, beaming a full-wattage grin straight into the lens of the photographer’s camera. On Noyce’s other side is Gordon Moore, but he is hardly visible, his body half-way out of the frame.28
The photograph perfectly encapsulates the popular perception of the relative importance of the three men to Intel’s success. Noyce deserves the accolades, Grove is at the center of the action, and Moore does something inscrutable in the margins. This image, of course, was entirely inaccurate. The few sheets of correspondence that survive from the mid-1970s make it clear that Moore ran Intel after Noyce became board chair. Moore had the final say on products, acquisitions, growth, pricing, and budgets. Moore was the one planning board meetings, writing to potential partners (“I propose that it would be sufficient if the exchange consisted of the following …”), directing senior staff (“would you two please look at what would be involved”), defining essential problems (“you should concentrate on the most important advantages and disadvantages and educate us with respect to the economics”), articulating Intel’s approach to growth (“Intel is not a loose conglomerate that is interested in acquisitions because they are antidilutive; rather we are an operating company and are interested in large developing markets that utilize our technological base”), and informing employees about major changes (“Ann Bowers, Intel’s Personnel Manager since the company’s formation, has announced her intention to resign”). And Grove, meanwhile, was “amplifying” Moore’s direction. “I tend to see things in delicate shades of gray,” Moore explained, but Grove honed in on the black or white aspects of a decision and made sure Intel took action. By all rights, the attention paid to Noyce when he was president of Intel should have shifted to Moore, and possibly to Grove, after 1975.29
But it did not. Indeed, in the years after Noyce became board chair, his visibility and prestige as one of Intel’s founders continued to grow even as his direct involvement with the company was shrinking. This apparent contradiction can be explained in simple terms of time and inclination. Because Moore was consumed with the day-to-day running of the company, and because he was far more reserved than Noyce, he did not mind functioning as Intel’s stealth CEO. In dozens of interviews that Moore has granted over the past four decades, only once did he make any comment indicating even the slightest resentment of Noyce’s visibility. He told an interviewer in an aside that Noyce’s “personality was so outstanding that people kind of gave him credit for everything that happened.” But almost immediately, Moore added, “Bob was truly an unusual guy—an exceptional intellect, an amazing personality—people like that don’t come along very often.”30
In contrast to Moore, Noyce had time to grant interviews and speak to various organizations that wanted to understand the secret to Intel’s success. He generally enjoyed the exposure, and he and Moore agreed that it was important to keep Intel in the public eye. Every favorable article served as an invitation to potential investors, employees, and customers and a reminder to existing investors, employees, and customers that their decision to affiliate with Intel had been wise.
Regis McKenna, whose agency handled public relations for Intel, believed that the best way to get a company in the news was to put a human face on it. “What really differentiates a business [in the eyes of the public],” he said, “is people. … The idea of infusing personalities into this started back very, very, very early.” Noyce—father of a critical invention, humble millionaire, Midwestern preacher’s boy made good—possessed ideal characteristics to “infuse” into the public’s sense of Intel.31
Moreover, Noyce’s soft-spoken, thoughtful communications style was very persuasive—as he well knew himself. When his broker Bob Harrington, himself a minor radio personality, complimented Noyce on his “tremendous delivery,” Noyce, looking a bit embarrassed, admitted, “Yeah, I know. I was just born this way. The way I talk, the way I think—it has jus
t worked really well for me in my life so far.”32
In 1976, McKenna arranged for Noyce to appear on the cover of Business Week, leaning over a chess board, under the headline “New Leaders in Semiconductors—Intel’s Robert N. Noyce, Masterminding a Radical Change in Technology.” The article compared Intel and National Semi-conductor—on the inside cover flap, Noyce’s good friend Charlie Sporck was playing black to Noyce’s white. The Business Week article introduced smiling “youthful-looking semiconductor pioneer” Noyce to the general business reader as “the innovator-entrepreneur” of the industry and Intel’s “most articulate spokesman.” Later that year, Noyce was the subject of a New York Times profile.33
At this point, nearly all of the $6 billion semiconductor business depended on integrated circuits very similar to the planar-based device Noyce had conceptualized at Fairchild. As the importance of this invention grew increasingly obvious, the scientific community began to bestow important honors on Noyce. In 1978, he received the Medal of Honor from the Institute of Electrical and Electronics Engineers (IEEE) “for his contributions to the silicon integrated circuit, a cornerstone of modern electronics.” A distinguished member of the IEEE wrote to Noyce, “It is rare that a truly revolutionary major invention, the direction of the development of the invention, and its successful exploitation in the marketplace are the work of a single individual. You deserve, far beyond most winners, this highest honor of the IEEE.”34
At the White House in 1979, President Carter presented Noyce the National Medal of Science, the highest award granted for scientific achievement in the United States. Noyce was one of 20 recipients that year; sharing the stage with him were such luminaries as quantum physicist Richard Feynman, DNA pioneer Arthur Kornberg, and nuclear physicist (and Noyce’s one-time MIT professor) Victor Weisskopf.
The Man Behind the Microchip Page 37