Startup

by S. Jerrold Kaplan

  Even under these difficult circumstances, Randy was more than a little amused. “What’s he going to do out there?” It was completely dark, and the narrow concrete slab outside the door provided no means of escape.

  Robert shrugged. Without a word, John walked back in, crossed the room, and exited through his office door instead. “Should I clock him?” Robert asked.

  But there wasn’t time. Within ninety seconds, John walked back into the room and flopped into a chair. “All right, I’ve calmed down. Thanks for your patience.”

  While the discussion dragged on, the other side cooled their heels, waiting for the group to emerge with something to say. But no one could bring himself to take action. Finally John noticed that Atkinson was heading toward the lobby, and went out to intercept him. He returned a minute later. “There goes the only source of funding for GO and EO! Atkinson is going back to his hotel. He’s taking the first flight out tomorrow morning!” Bill walked out quietly to chat with Atkinson.

  Though Bill was out of the room, John decided it was time to take action. “I’m calling for a vote,” he said. “I move that the board authorize the management team to close a deal on terms equal to or better than the ones on my whiteboard.”

  Everyone was startled. In the nearly six years since the company was founded, no one had ever formally called for a board vote except for routine matters like approving minutes and stock options. Vinod seconded the motion. But no one spoke up.

  Robert was uncertain of the purpose of John’s motion, but it seemed innocuous enough. “OK, I guess,” he said. Then Vinod and David mumbled their concurrence, mainly so they could get on with the strategy discussion. Now John said “It’s approved!”

  Just then Bill walked back into the room, and he expressed surprise when he learned of the board’s vote. He’d just been chatting with Atkinson; the situation hardly seemed as desperate as John had described. But John’s motion sparked Bill into taking some action of his own. “Why don’t we propose five million shares and twenty-five million warrants, at fifty cents for seven years. And they have to take over the IBM loans.” At least now they had a proposal.

  Just as Bernie Lacroute arrived, the others walked into the conference room. Rossmann was clutching a bowl of popcorn to his chest, picking up kernels one by one and stuffing them into his mouth. As Bill outlined the proposal, Rossmann grunted and nodded at each of the figures.

  Now it was their turn. Atkinson, Rossmann, and Lacroute disappeared into a separate room for half an hour, then returned to present a final offer. Lacroute wrote it on the board: five million common shares of EO stock and warrants on fifteen million shares, exercisable within four years at one dollar a share. John held his breath as Lacroute moved on to the IBM loan. “We can’t accept the IBM liability as it stands. They could call the loan right now and bankrupt the whole company. But we can agree to do two things: take over the loan if you can convince IBM not to call it, and put one million dollars in escrow to cover severance for your people in the event that your negotiations are unsuccessful.”

  Randy did a quick calculation, then leaned over to Bill. “I’d say that’s the equivalent of four to one, around twenty percent,” he whispered. His pupils dilated at the thought of turning over responsibility to EO for the shelf full of tangled IBM agreements, which were sitting in his office like a decaying pile of hazardous waste.

  Bill looked around the table, focusing in turn on each of the people facing him, searching for one last hint of flexibility in their poker faces. There was Dave Atkinson, who months ago had convinced him to forgo the Reg D offering with assurances that AT&T would help keep the company funded; Bernie Lacroute, who was trying to walk an impossible line between his obligations to EO, KP, and GO; and Alain Rossmann, who had never delivered the $3 million payment and who, in a fit of pique, had threatened to destroy Penpoint.

  Then he turned to his own side of the table. He looked at John Doerr, whose unflagging determination and support over the years had hardened into a determination to save the jobs and project at whatever price they could get; Randy Komisar, whose loyalty to Bill and the team was now the only thing standing between himself and a nice long vacation; and Robert Carr, who watched stoically as the baby he loved so much was about to be handed over to more affluent but less qualified foster parents.

  Everyone stared at Bill Campbell in silence as he considered the fate of the two hundred people inside GO and the hundreds of others around the world who had devoted their time and reputations in pursuit of a shared dream. He imagined the human resources team back at the office, working so diligently to ease the pain of those he would lay off tomorrow, not knowing for sure whether they themselves would have jobs at the end of the day. And he thought of me, presumably trapped in an airplane, fighting a losing battle against technology to participate in this crucial meeting.

  It was time for him to reveal what only he knew for sure: in the end—when he was confident that he had wrung every last drop out of the other side—he would stop his posturing and gallantly surrender the company, for the ongoing welfare of the people and the project.

  “We have a deal,” he said softly. Everyone exhaled in relief.

  The next day—Friday, August 13, 1993—was a whirlwind of activity. First thing in the morning, Bill assembled the estaff and the senior managers, to report on the results of the negotiations and to put in place the breakneck schedule he had worked up with Rossmann and his staff. At this meeting, we were to complete the cut list and distribute termination folders to each of the responsible managers. At one o’clock, Bill would send an e-mail message to the company, requiring that all employees assemble in the training room at three. Between those times, the managers would meet one-on-one with the people to be laid off, explain what was happening, and hand them their checks. “Be sure to have plenty of tissues on hand,” Debbie B cautioned. “Give them a chance to vent if they want.” As a veteran of many layoffs at Apple, she understood the importance of a swift announcement and decisive action. “Let everyone know that their voice mail will remain active while they look for a new job, and I’ll be setting up a placement center where they can work on their resumes and check job listings.”

  At three o’clock, Bill would preside over the final comm meeting. There, he and Randy would explain the reasons behind the merger and reinforce that the executive staff was fully in favor of it. Then Bill would announce that both Robert and I would be leaving as well, and give us a chance to speak. When the meeting started, and before the news could leak to the media, EO, GO, and AT&T would all issue simultaneous press releases, focusing on the benefits of the merger and thereby distracting attention from the layoffs. The last scheduled event was at five, when GO’s executive staff was to leave the room and Rossmann would address the crowd.

  “Remember that people are likely to be pissed,” Bill said to the managers. “It’s your responsibility to minimize the pain and make this thing come off as smoothly as possible.”

  Well before three, a line formed outside my door, as word of what was happening quickly spread through the company. To my amazement, people weren’t angry at all. Quite the contrary, they were understanding and supportive, prepared to sacrifice their jobs if necessary so the project could continue. For the most part, they just wanted to talk.

  “I never suspected we’d be able to last this long without revenues,” said Todd Agulnick, our youthful first employee. “But I guess that’s just life in the Silicon Valley jungle. By the way, thanks for supporting me while I finished up my B.A. at Stanford. There were a lot more foxes there than at Yale.” It took me a moment to realize he was referring to the coeds.

  Phil Ydens, the laconic operating systems specialist, came by to let me know he was planning on sticking it out. “I’m not looking forward to working for EO,” he said, “but I guess it’s just something that has to be done.”

  During breaks in the flow, I passed the time by calling the investors and bringing them up to date. First I called
Scott Sperling of Aneas. “Scott, the way I analyze the numbers, your EO stock is worth seventy-five cents for every dollar you invested in GO, at the very best.”

  After his support in so many rounds of financing, I expected him to be upset, but he said, “What are you doing about finding new jobs for the people who got laid off?” I told him about Debbie B’s outplacement plans.

  Next I called Jake Tarr of Arete Ventures. He and his partners had gone way out on a limb for us. But his reaction was the same as Sperling’s. “How’s the job market out there? If you want to send me some resumes, I’ll be happy to circulate them to our other portfolio companies.”

  Jay Hoag of Chancellor Capital, who by now was a friend of mine, offered comforting words. “Sure I’d rather make money. But bear in mind that this happens all the time. It’s a numbers game. Everybody understands that your first responsibility is to take care of your people. Let me know if there’s anything I can do.”

  Last, I put a call in to Norm Vincent of State Farm. “Even though I’ll be leaving, I want you to know that the people at EO will continue to support you in every way they can.”

  Norm was philosophical. “I imagine this is a big disappointment for you, especially after what happened with IBM. But if you ever happen to be in Bloomington, there’s a pizza at the Lucca Grill that’s got your name on it.”

  Just before the company meeting, Bill took Robert and me aside. “Guys, this is going to be hard enough, so keep it short and sweet. And whatever you do, don’t make everyone cry.”

  For once, there were no stragglers when Bill called the meeting to order. “I’m sure you all know the news, but I wanted you to hear it directly from the executive staff, and to have a chance to ask questions.”

  I was watching the crowd, sprawled across chairs, tables, and the floor, paying close attention to Bill’s every word. But then I realized that Bill had stopped talking. I turned around to find him so overcome by emotion that he was unable to speak. Powerless to regain his composure, he put his hands to his face and burst into tears. Within seconds, half the people in the room followed suit.

  I looked over at Robert, who glanced back at me, suppressing a wry smile. Despite the sadness of the moment, we both saw the ironic humor in it: after all, he was the one who’d admonished us about making everyone cry.

  Eventually the meeting got under way. After an explanation of the merger by Randy, Robert took over. “I just want to say how sorry I am not to be able to personally see the project through to completion.” As he spoke, I heard quiet sobbing from around the room. “It’s been a great pleasure working with everyone, and I look forward to seeing you guys set the standard for pen computing with the next version of Penpoint. Whenever I interviewed someone at GO, I told them I wanted them to learn and grow in their job. Part of our culture is to embrace change. And now we have a major change to embrace, and I think in the end it will work out well for everyone.”

  One of Robert’s most endearing qualities was the loyalty and respect he’d earned from his people. Despite his upbeat tone, I could see that for everyone, from his director of applications development to his administrative assistant, losing Robert was like tearing their hearts out.

  Then it was my turn. “When I went off to college, I remember wondering how my mother could be so proud and yet so sad at the same time. Now, for the first time, I understand how she felt. Building a company is like raising a child. It goes through phases where it demands your undivided attention, requires your protection, needs your guidance and approval. But eventually it grows up. You have nothing left to teach it, and it goes off to find its own way in the world.

  “GO is no longer the tender little startup that Robert, Kevin, and I nurtured so many years ago.” I cradled my arms as though rocking a baby. “And we just have to accept that this is a natural part of the corporate life cycle. The goals that all of us have worked so hard to achieve will be better served under the wing of AT&T, as GO reunites once again with our colleagues at EO.

  “But I have one last request. Those of us who are lucky enough to be staying with the company through this transition bear a heavy responsibility to those of us who must leave: a responsibility to keep the vision alive, to make sure that all the hard work and sacrifices weren’t made in vain. I hope you’ll carry forward the ideals and values of our company with pride—treating our partners with courtesy and respect—and go on to find happiness and success in the marketplace.”

  I looked out at the faces with red, swollen eyes. “And don’t forget to write home once in a while!” The room exploded in cheers and applause, which continued until well after each executive staff member had shaken the others’ hands and slipped from the room.

  The sound echoed as Robert and I walked down the long white hall, then faded like a cloudburst dwindling into gentle rain. Behind us in the distance, I noticed Alain Rossmann standing in the lobby, looking restless as he waited to speak.

  “So,” Robert said to me, “I guess this is it. I feel like I’m leaving my own funeral.”

  “I feel like fuckin’ Moses,” I said, “wandering in the desert for forty years only to be told I can’t enter the Promised Land.”

  “You’re starting to talk like Bill,” Robert said. Then he smiled. “But I suppose there are worse role models.”

  He suddenly stopped walking. “Remember that first lunch we had in San Francisco—when you brought that silly leather portfolio and plopped it on the table?”

  “Uh-huh.”

  “You told me that day that we would get one chance to make our point to the world.”

  “I also said we’d get a shot at the brass ring.”

  “Yeah, well, maybe we reached a little too far,” Robert said. “But I just wanted you to know that I’m not disappointed. I think we got our chance and made our point. We just have to let it go—let other people finish our dream for us.”

  “Thanks.”

  After returning calls from the press for several hours, I headed home from my last day at work around eight o’clock, and fell onto the couch. Layne, who was wrapped up in her own professional battles, had just finished eating dinner.

  “So, how was your day?” she asked.

  Epilogue

  THE EO-GO MERGER was formally consummated on January 7, 1994, after a difficult battle to persuade at least 90 percent of the GO stockholders to vote in favor of the transaction. Despite the fact that GO was now gone, the struggle continued.

  Of the original GO executive staff, only Mike Homer joined Alain Rossmann’s team, feeling that at least one of us should see things through until the next version of the product was shipped. He worked diligently to combine the two organizations and their product plans into one coherent offering. Predictably, the first task was for GO’s development teams to complete EO’s products and support only AT&T’s Hobbit strategy. EO soon stopped development of the Intel version of Penpoint, then halted all work on the Japanese version as well.

  Just two weeks after the merger was complete, a senior AT&T executive, Carl Ledbetter, visited EO to discuss a variety of matters with the staff. Ledbetter was forty-four, considered young by AT&T standards. He had been recently hired away from Sun Microsystems to head AT&T’s consumer products division, and therefore inherited the responsibility for EO. The meeting turned out to be anything but routine. He informed the EO executive staff that AT&T Microelectronics had decided to kill the Hobbit product line entirely, and so he recommended closing down EO entirely.

  As recently as a few weeks before Ledbetter delivered this news, AT&T executives were still pitching rights to the Hobbit to the Taiwanese, as an integral part of the proposed relationship with AT&T and an investment in EO. One of AT&T’s slides, entitled “Why AT&T Microelectronics Is Your Best Long-Term Partner,” had as its first bulleted item “AT&T’s Corporate Strategy Guarantees Continuing, Large Investment.” With the Hobbit gone, it seemed likely that the Taiwan government would no longer be interested in putting money into EO. Since th
is was a major component of the financing strategy for the company, the prudent course was to shut EO down.

  But Rossmann, Homer, Lacroute, Khosla, and Doerr immediately sprang into action. They spent the weekend developing a radical new plan to cut expenses, switch back to Intel processors, and focus future product development on “smart” cellular phones. Unfortunately, this meant the layoff of 100 of the company’s remaining 230 employees. Lacroute tracked down Kavner and arranged a Monday evening meeting with him and his staff. Despite the slim chance for approval, the EO-KP team was still hard at work on the proposal on the flight to New Jersey. To everyone’s surprise, Kavner and his staff agreed to keep the doors open by providing $18 million in additional bridge financing, pending a final decision at the February 22, 1994, EO board meeting.

  But there may have been another reason for AT&T’s renewed commitment, not yet disclosed to EO’s management: AT&T’s potential liability to minority shareholders, including GO’s stockholders. According to an internal AT&T memorandum addressed to Kavner, the primary reason AT&T agreed to make the $18 million in interim funding available was to minimize the risk of a legal claim. The memo estimated that the potential damages, if AT&T lost such a suit, could range as high as $100 million.

  Rossmann promptly announced to the company that within a week half of the employees would be let go. Their attention was instantly diverted from their work to sending out resumes. Rossmann reluctantly laid off 100 people on February 3.

  At the February board meeting, Carl Ledbetter abruptly decided to replace Rossmann with a consultant named Bob Evans. Not long afterward, Rossmann allegedly threatened to take legal action over the matter of his termination, but settled instead for a generous severance.

  At the same meeting, the EO board failed for the second time to approve a Memorandum of Understanding to acquire Pensoft, whose product, a personal information manager, was now central to the company’s strategy. Having already turned over the software, employees, and assets in good faith, John Zeisler, Pensoft’s CEO, was outraged. On May 11 he filed a lawsuit against EO and AT&T for fraud, breach of contract, and conspiracy.