Due terzi compiuti

Pensieri e esperienze di un’anatra selvaggia di ottanta e un anni.

Avram Miller by the sea
EN | IT

587 post pubblicati dal 2006

Categoria: Capitali di rischio

  • L'opportunità personale per il clima

    The Earth is heating up very quickly, and the things we needed to deal with climate change, we did not do. Governments have talked, held conferences, made commitments and set targets. Some progress has certainly been made. But not enough, not nearly enough.

    In Paris in 2015, nearly every nation on Earth agreed to hold warming well below 2°C and try to limit it to 1.5°C. A decade later, the world is still heading toward roughly 2.5°C or more under current trajectories, and 2024 became the first calendar year to average more than 1.5°C above preindustrial temperatures. We must continue trying to reduce emissions. But we also need to confront an uncomfortable reality: a substantially hotter world is no longer a distant possibility. It is the world we now need to prepare for.

    I wish I was wrong, but I think we need to begin with the assumption that the Earth is going to become a much more unfriendly place in which to live. Elon Musk wants humans to live on Mars. I fear we will find ourselves living on “Venus” instead.

    Most of the climate discussion is still about how to stop the Earth from getting hotter. Of course we must continue trying. But since we cannot count on governments to solve this in time, we also need to ask a much more immediate question and one that can be answered on a personal basis:

    How are individual human beings going to live on a much hotter planet? My answer is something I call personal climate. Before explaining what I mean, consider the problem.

    (altro…)

  • Il mio libro autobiografico, The Flight of a Wild Duck, è ora disponibile gratuitamente su Substack grazie a Claude Cowork.

    https://avram.substack.com/p/the-flight-of-a-wild-duck-start-here

    Mi sono volute tre anni per scrivere il mio libro autobiografico. Il primo anno è stato dedicato alla ricerca, il secondo alla scrittura e il terzo all'editing. Mi è piaciuto molto il processo.

    Durante la stesura del libro avevo in mente tre gruppi di lettori: il primo erano persone come me o i genitori di persone come me che non potevano seguire la normale traiettoria della vita; il secondo erano lettori interessati alla storia della tecnologia e all'industria informatica; il terzo erano persone affascinate dagli investimenti in fase iniziale, dall'innovazione e dall'imprenditorialità.

    Questa combinazione rendeva il libro un po’ non convenzionale. Ma non potevo davvero scrivere tre libri separati.

    Avevo anche intenzione di includere una sezione intitolata “Lezioni”, centinaia di brevi lezioni, ciascuna lunga solo una pagina. Ma fino a quel momento il manoscritto era già lungo 340 pagine e avevo dedicato tre anni a questo lavoro. Invece decisi di pubblicare quelle lezioni separatamente un giorno. Intendo comunque farlo.

    Il libro è stato pubblicato nel 2021. Sono state vendute meno di mille copie. Non mi aspettavo che diventasse un bestseller e certamente non l’ho scritto per soldi, ma questi numeri sono comunque deludenti.

    Credo che il libro sia allo stesso tempo ben scritto e di grande valore storico. Dopo tutto, sono stato presente quando molte delle decisioni che hanno plasmato il mondo tecnologico in cui viviamo oggi venivano prese e spesso anche decise da me. Ho ritenuto che parte del mio contributo al futuro della tecnologia consistesse nel contribuire a documentare il suo passato. Ma se nessuno legge il libro, è difficile raggiungere questo obiettivo.

    Ho scelto di pubblicare il libro da sola invece di lavorare con un editore tradizionale perché volevo una completa libertà editoriale. Ma questo significava anche che non avevo molte indicazioni su come commercializzare il libro e, in seguito, ho commesso un errore strategico.

    Ho deciso di promuoverlo principalmente attraverso interviste in podcast. Guardando indietro, probabilmente non è stato molto intelligente. Se qualcuno ascolta un’intervista di un’ora con me, potrebbe pensare di già conoscere la storia e non aver più bisogno di leggere il libro. E sospetto che molti ascoltatori dei podcast leggano semplicemente meno libri.

    La vendita del libro tramite Amazon ha creato un altro ostacolo: le persone dovevano acquistarlo, anche se non mi importava molto della parte finanziaria. Ho anche trovato il Kindle Direct Publishing sorprendentemente poco amichevole e poco chiaro. Ci sono persone che sanno come truccare il sistema e massimizzare la visibilità, ma non capivo questi trucchi né volevo perdere tempo imparandoli.

    Da un po’ di tempo pensavo di pubblicare il libro su Substack. Non volevo che fosse dietro un abbonamento. Volevo semplicemente che l’intero libro fosse disponibile gratuitamente. Su Substack le persone possono condividere link non solo al libro stesso, ma anche ai singoli capitoli. Questo crea almeno la possibilità che il libro possa diffondersi in modo organico.

    Ciò che mi ha impedito di procedere era imparare i dettagli di Substack. Ma ieri Claude Cowork e io abbiamo finalmente fatto tutto questo. Non è ancora perfetto. Voglio comunque aggiungere dei video poiché Claude non è riuscito a trasferirli automaticamente. Ci sono alcuni problemi di formattazione. Ma già il 95% di ciò che speravo di ottenere è stato realizzato. In futuro aggiungerò il resto.

    Per questo vi invito a leggere tutto o parte di Il volo di un’anatra selvaggia. E se ritenete che sia utile, sarei molto grato se condivideste il link con i vostri amici sui social network e con chiunque possa apprezzare la storia.

    https://avram.substack.com/p/the-flight-of-a-wild-duck-start-here

    Grazie.

  • Founders and Venture Capitalists: Not on the Same Page

    I was the co founder of Intel Capital and Vice President of Business Development at Intel.  I left in 1999 to  advise companies, sit on corporate boards and invest in early stage companies for my own account.  While many considered me as a venture capitalist (for instance I was listed as number eight in the Forbes Midas List in 2003), I never thought of myself that way. At Intel, I saw early stage investing as a tool for achieving strategy.  That is why I referred to myself as an activist strategist.  But in my role at Intel, I worked closely with venture capitalist and as well as with founders.  But I did not identify with either.  I never started a company because I considered that too risky.  While I had many significant opportunities to join venture capital and private equity firms as a partner, I knew I would not feel comfortable in that role.  But all this experience has given me a perspective on the inherent conflict between founders and venture capitalist which I am sharing here.

    Venture capitalists (VCs) and founders are often not aligned—but it’s the VC’s job to convince them that they are.

    VCs pitch themselves as more than just capital. They say things like, “We’re not just money—we’re partners on your journey.” They’ll list all the ways they can help the startup succeed. And indeed, a good venture firm can add significant value.

    But what they won’t do is explain the fundamental conflict: VCs and founders define success differently. For founders, success means building a successful company and creating personal wealth. For venture funds, success means generating returns for the fund and making themselves rich in the process. These are not the same thing.

    In fact, with the unlikely outcome of a major liquidity event, the next best thing that can happen to a founder is an early failure. I’ll explain why.

    How Venture Capitalists Make Money 

    Venture capitalists invest in portfolios—usually 20 to 50 companies per fund. This diversification is key to their success. Founders by contrast, are all-in on one company. That’s where the conflict starts.

    VC returns are driven by what’s known as a power law distribution—just a few companies return the majority of the fund’s profits.

    Here’s a simplified example:

    • Total invested: $20M
    • Total return: $79.1M
    • Fund multiple: ~4x

    VCs earn a 2% annual management fee and a 20% carried interest (the share of profits). Top-tier funds sometimes negotiate even better terms. Most of their focus is on expected return: a weighted average of all outcomes. VCs typically target a 10x return per investment, knowing full well that only one or two companies will achieve it.

    A typical portfolio might look like this:

    • 70% fail (return $0)
    • 20% return $1–3M
    • 7% return $10–40M
    • 3% return $100M+

    From the Founder’s Perspective

    Let’s consider a founder’s odds:

    • 70% chance of failure
    • 20% chance of a small or break-even outcome
    • 10% chance of a meaningful return

    And remember—VCs usually hold preferred stock while founders and employees hold common stock. So even if a company is sold for a modest return, VCs might recover their investment while the team walks away with little or nothing.

    Realistically, founders have about a 1 in 10 shot at a significant payday—and some studies suggest it’s closer to 2%. Even if there is a successful exit, it can take 7–10 years. Many founders work for a decade and end up with little or nothing.

    Not All VC Firms Are Successful

    VC fund returns also follow a power law. Fewer than 20% of VC firms deliver strong returns for their limited partners. That further reduces the odds for founders, depending on which firm they partner with.

    Success among VC firms is not about having more winners, but about having bigger ones. Being backed by a top-tier firm may increase expected value, but it doesn’t improve the founder’s probability of a meaningful payoff.

    Diverging Interests

    Here’s the real divergence: VCs are playing a portfolio game. They’re often willing to increase the risk of failure for a company if doing so raises the fund’s expected return.

    For example:

    Scenario 1:
    • 50% chance of $10M exit
    • 50% chance of failure
    → Expected value: $5M

    Scenario 2:
    • 20% chance of $50M exit
    • 80% chance of failure
    → Expected value: $10M

    The expected value doubles, so the VC favors the riskier path. But the founder may not—because they only get paid if the company survives.

    I recall a startup where two founders each held 25% of the equity. A VC owned 40%, and I held part of the remaining 10%. The company was doing well. I found a buyer willing to pay $160 million. That would have meant $40 million for each founder—not bad for two guys in their twenties.

    But the VC thought the company could be worth $1 billion and persuaded the founders not to sell. I urged them to take the deal and use their proceeds to fund another startup. They declined. The year was 1999. The internet bubble burst shortly after, and the company was wiped out.

    Are Founders Irrational?

    Some founders don’t fully grasp the financial structure of venture capital. Others do, but believe they’ll beat the odds due to their brilliance and vision. It’s not unlike roulette.

    Over my career, I’ve invested in over 20 startups, including a few successful ones like Pluto TV, Oura Ring, and Neutrino. I’ve had five complete failures and five companies still in flux. I’ve never wanted to be a founder myself—but I’m grateful that others are willing to take that leap.

    The nature of venture capital means wealth often flows from founders to investors. It’s not that VCs don’t want success—they do. But they also understand how random outcomes can be. As I often say: luck is the strongest determinant of success, and the greatest mistake is confusing luck with being smart.

    What About Limited Partners?

    Limited Partners (LPs)—the investors in VC funds—are usually institutions like pension funds or insurance companies. Fewer than 20% of LP dollars come from high-net-worth individuals. LPs are aligned with VCs, not with founders.

    I’ve been an LP in several VC funds, sometimes on favorable terms in exchange for guidance—and I’ve done very well.

    And Then There Are Angel Investors

    Angel investors fall into two broad categories:

    1. Professional Angels: Wealthy individuals with early-stage experience and strong networks. They behave like mini-VCs, investing early with high risk and occasional high return. Deep pockets are needed, especially to survive recapitalizations (or ‘cram-downs’).

    2. Friends and Family: Typically lack both capital and diversification. They often suffer the same fate—or worse—than the founder they back.

    Final Thoughts

    The disconnect between founders and venture capitalists is structural, not personal. It’s portfolio math versus personal risk.

    Founders bet everything and mostly end up with nothing. VCs spread their bets and may win big. While They need each other—but don’t be fooled into thinking they’re on the same page.


  • For Strategic Investors, You Are a Tactic

    As a founder and one of the leaders of Intel Capital, one of the world’s most successful corporate venture groups, I am frequently approached by entrepreneurs seeking advice on securing investments from strategic investors.

    Strategic investors primarily invest to bolster their strategic objectives. For example, during my tenure as Corporate Vice President of Business Development (1991-1999), our primary mission, as expressed by Intel’s CEO, Andy Grove, was to expand the Personal Computer Market. Intel, at the time, had approximately 85% of the market share, trailed by AMD and a few others. It was clear that increasing the market size would not only benefit us but would potentially benefiting our competitors. But given are market share, that did not really matter. Our focus was on stimulating demand for high-performance personal computers, as we were the leading supplier of these high-performance microprocessors.

    We actively sought opportunities to grow the market. We were open to investing in companies that presented innovative applications for personal computers. Some notable early examples include Audible, Ancestry, Match, Broadcast.com, and Launch Media in the consumer sector.

    During my tenure, we always invested in conjunction with a professional venture capitalist. This is the optimal strategy if a company is seeking strategic investors. A venture capitalist typically has a more objective perspective on valuation than strategic investors. Strategic investors are more focused on the potential benefits to their own business if the venture succeeds. The valuation of such success often exceeds any profits from the eventual sale of the early-stage company. This bias might even lead to the strategic investor promoting strategies that may not be in the best interest of the company. Nonetheless, strategic investors can offer valuable benefits such as customer access, endorsements, and PR opportunities.

    At times, early-stage companies may prefer to exclusively partner with a strategic investor, believing they can secure a higher valuation. While this may be true in the short term, it may lead to complications in subsequent fundraising rounds. If the strategic investor loses interest and opts not to participate in the next round, the company could face a down-round due to the previous high valuation.

    Strategic investors often seek a business relationship with the company. While this can be beneficial, it requires careful consideration. Financial investors may view this as effectively reducing the price the strategic investor paid. Sometimes, strategic investors may demand certain terms, such as the first right of refusal on a sale, which can significantly decrease a company’s value.

    Having a seasoned board and advisors, particularly independent board members not employed by the investors, is crucial. Those with extensive deal-making experience can weigh the pros and cons of various configurations. Competent lawyers with relevant experience can also provide valuable advice and recommendations.

    In conclusion, while strategic investors can add substantial value, it is recommended to diversify and include investments from professional venture capitalists.

  • Ethernet at 50, an Important Through Line in my Career

    We are celebrating the 50th anniversary of Ethernet. Bob Metcalfe is considered the inventor of Ethernet, which happened at Xerox Research Center in Palo Alto in the 70s. It was there that Metcalfe wrote a memo describing Ethernet. At that time, many competing technologies intended to connect computers in the same physical space. The concept was called Local Area Network or LAN. 

    The birth of a Standard

    Metcalfe wanted to make Ethernet an industry standard and knew he must involve other companies. So, around 1980, he sought out Gordon Bell, the head of engineering at Digital Equipment Corporation, which was the second largest computer company after IBM. Gordon thought it was a great idea, and then these two companies brought Intel into the mix. The three companies collaborated to create an industry standard a few years later. In the meant time, Metcalfe left Xerox to start a network company called 3Com which would make ethernet products for the personal computer industry.  

    Interestingly, neither Xerox, Digital Equipment, nor Intel benefited directly through selling ethernet products. Still, of course, LANs played a significant role in the growth of personal computers, and of these three, Intel was the primary beneficiary. 

    First Ethernet Products

    I got involved 1981 when I was leading Digital’s efforts to develop a personal computer focused on knowledge workers called the Professional 350. Gordon Bell, who at that time was more or less my boss, asked me to add Ethernet as a capability. We did not build it but added a special connector to the packaging. We contracted with 3Com to provide us with ethernet cards. I believe this was the first significant order they got, but Metcalfe never mentioned it and chose to focus on delivering add-in cards for the IBM PC, but that came later.

    The initial design of Ethernet used a coaxial cable which was, for some reason, yellow. You used a clamp to hold and penetrate it if you wanted to connect to it. One day, Ken Olsen, Digital Equipment Corp.’s founder and CEO, walked into Gordon’s office when he and I met. Ken held the yellow coax cable in one hand and some telephone wires in the other, saying, “Maybe your university friends want this yellow cable, but my friends want telephone cables. Gordon got angry and told Ken that he could probably get a job as an engineer at Data General (Digital’s main competitor at that time) to develop that idea. Ken turned out to be correct.

    Sadly, the Professional 350 was not a commercial success and did not impact the development of the personal computer industry or local area networking.

    In 1984, I joined Intel as Director of Business Development and was promoted to Vice President a few years later. I started what became Intel Capital in 1988, although we marked the official start as 1991 when Les Vadasz, my boss, and I established Intel Capital.

    Intel Enters the Ethernet Board Business

    Intel had a division called PCEO which sold PC enhancement products. Around 1989, they wanted to sell ethernet boards retail. I strongly believe in the importance of networking and put my weight behind it. Unfortunately, Intel did not have a competitive ethernet chip offering. So we went to an early-stage company called Broadcom and made a significant investment. PCEO began selling ethernet cards for the PC and directly competed with 3COM.  

    At the same time, I was looking to get into the networking business and had gotten the Intel board to support this idea. I brought the idea of acquiring Cisco to Andy Grove, the CEO. At approximately $100 million, Andy told me it was too expensive. Then I considered 3COM, which would have been a lot cheaper. Andy said that the company was a pile of crap. I responded, “I get it. We can’t afford anything we would want, and we don’t want anything we can afford.”

    Intel Capital Invests in Networking Companies

    Instead, I started making minority investments in early-stage networking companies. One of these was Kalpana Networks which made an ethernet switch. It was acquired a few years later by Cisco.

    We increased our investment in Broadcom. By that time, I was leading Intel’s broadband efforts in developing cable modems and ADSL for the telephone network.  

    Residential Broadband and Home Networking

    In 1992, I started working on using the cable infrastructure to connect home personal computers to the internet. Broadcom and General Instruments were developing chips for digital television at that time. One chip did video decompression, and the other handled the networking. Looking at the Broadcom product, I recognized it, too, was a packet network similar to Ethernet. So, we developed a cable modem demonstrated in 1993 at a major cable industry conference. Eventually, the Cable Industry would develop DOCSIS, the cable modem standard incorporating much of our earlier work. The first cable modems were external and connected to personal computers via Ethernet, which was the only connection that was fast enough at that time. Later USB would be used for this purpose. Eventually, one computer per home was insufficient, so we began to see the development of home LANs. At first, these used ethernet cables, but ultimately, Wifi was developed and became the primary way computers and other devices communicated in the home.

    Ethernet a great Success Story

    Ethernet is a great success story and shows the power of standard. It has been able to evolve over the years from 10 mbits/sec to 10Gbps for instance.

    There is a lot more about all this in my book, Il volo di un’anatra selvaggia.

  • Living longer better

    I have not given this blog much attention since I started writing my book, The Flight of a Wild Duck, four years ago. It was published in September of 2021. I have a lot more that I want to write, but frankly, the effort of writing a 340-page book dampened my enthusiasm for writing. Now I compose posts in my head, but they seldom make it to the screen (I can’t say paper anymore). On the other hand, the response from the few that read my book has been overwhelmingly good. I wish more people would read it (including you if you have not already read it). You can order it here.

    Many of you will know (especially those that read the book) that I started my professional career doing medical science. 

    First, I was at Langley Porter-UCSF Medical School, where I developed the first EEG Biofeedback technology. Then I was one of the founders of the Thoraxcenter, Erasmus University, where I led the computer department, which created the first Catheterization Labs Computer Systems, as well as one of the first ICU monitoring systems. Later, I was an associate professor at Tel Aviv University in the Department of Cardiology, the first time I lived in Israel.  

    For the last ten years, I have slowly found myself back in medical technology as an advisor and investor. Here are the companies I worked/work with.

    www.sommetrics.com sleep apnea

    www.ouraring.com  sleep wearable sold my position major gain

    www.ensodata.com sleep test AI

    www.nutrino.com  nutrition sold to Medtronic major gain

    www.wisdo.com loneliness 

    www.innovega.com sight

    www.amulet-inc.com/ food allergies

    Now that I am really looking into this, I am pretty sure I will find some great investment opportunities. But more importantly, I might be able to do something that matters, once again.

    Also about five years ago, I became an advisor to the Executive Director of the Cleveland Clinic’s Research Institute.

    But frankly, other than Sommetrics, I was not that involved.  

    Lately, maybe because I am now 77 years old, I became interested in longevity or better said, increase health span. I became an advisor to Sheba Hospital, Israel’s largest and one of the top ten hospitals in the world. I am helping them set up a center for longevity. One of my roles is looking at early stage companies. I am learning a lot about what is called precision medicine. I am also learning about how screwed up a current way of treating people is.  

    So you might expect to have some blog posts on what I am learning and what I am thinking in the topic of increasing health span.

  • Goodbye Michael Johnson, you were one of a kind

    This has been a year of lost.  Four of my friends and former colleagues have died, way before their time.

    A remarkable man left us last Sunday.  My friend, Michael Johnson, died at his home in South Africa. I attended a memorial Tuesday evening on Zoom.  I think there were 20 or more attendees, friends and family from all over the world.   We all knew him at different times and it was amazing to hear everyone’s stories and how much impact Michael had in their lives.

    Michael Johnson

    I meet Michael in 1997.  He was working for Richard Li in Hong Kong.  It had been Michaels idea to buy a failed satellite, Hughes Westar,  from the insurance company that underwrote it’s launch. Michael, who was at that time living in South Africa, read about the failed launch in the news paper.  Somehow he imagined that  it could be used to broadcast video major parts of Asia including India which had very limited access to Television at the time. 

    He flew soon after to Hong Kong where he meet with people Hutchison Whampoa which was controlled by Li Ka-Shing, one of the richest men in the world. I don’t know how this meeting came about but evidently Michael pitched the idea to Li Ka-Shing’s younger son, Richard Li. Richard, just 25 years old, loved the idea and together with Michael was able to assemble a group of people. Most of the money came directly from Li’s father.

    They were successful in acquiring the satellite. The service was called Star TV. A year or so later, Rupert Murdoch invested $525 million for 2/3’s of the company and a in 1995 he bought the remainder for $299 million making Richard very rich on his own right. Richard used this money to start Pacific Century Group. Michael took some time off to live with his family in Italy. Richard was subject to a non compete in the Television business. Richard became interested in the Internet. I was introduced to him around 1996 by an other amazing man, John Evans of NewCorp. I helped Richard learn about the internet as a favor to John including advising him not to buy Web TV (which Microsoft ended up doing).

    One day, Richard calls me to say that he has an idea for something that might make sense for both Intel and his company. He asked me to talk with Michael Johnson and George Chan which I did via a video conference as they were in Hong Kong. Out of that, came a joint venture between Intel and Pacific Century Cyber Works (one of Richard’s companies) to use satellite to remote locations in China and provide a form of Internet. I go into this in my book, The Flight of Wild Duck, which will hopefully be published in September of 2021.

    Michael and his wife plus George Chan came to live in Silicon Valley to work with a bunch of Intel people to create the new service. Because of the growth of the consumer Internet, the strategy changed. Michael proposed a new service that would combine television and the internet which would be offered in Hong Kong and Europe. The service was called now.com. Intel, converted its shares in the joint venture into shares in Pacific Cyberworks which was no a public company. Michael moved to London where he created a studio and hired a lot of people. By this time, I was no longer at Intel. In fact, I was on the board of Richard’s company. The potential of now.com fueled the stock price of PCCW which became one of the most valuable internet companies in the world. PCCW wisely decided to utilize it high valuation to buy a real asset, the Hong Kong Telephone company.

    Michael and me at the now.com studio outside of London in 1999

    In 1999, I was on the board of both PCCW and CMGI, one of the leading American internet companies.  I introduced the two CEO’s and at my recommendation it was decided to set up a partnership to do early stage investments in Asia.  Michael was involved in the negotiations.  

    Richard Li, Dave Wetherell and me win the front, Michael Johnson on the far right, aboard Richard’s yacht, 1999.

    The world witnessed the melt down of internet company valuation in 2000.  now.com was advertising based and the adds dried up.  PCCW reluctantly downsized now.com. The venture with CMGI was also terminate. Michael, left the company and moved back to South Africa.  He and I communicated a few times over the years.  

    While writing my book, which chronicles my journey in the world of high tech, I had the opportunity to work closely with many renowned business leaders but I also worked with some very creative business minds.  Michael was right up there.  Not only was he creative and brilliant, he was driven to make his ideas actually happen.  I call people like this, Activist Strategies.  It is a term I sometimes use for myself.  Michael was right up there.  He could see things that other could not see and he could make them happen. He was a generous and caring man but also complex and could leave chaos in his path.   I will always be grateful for the times I spent with this man.

  • My book in the making

    Below is a description of sorts about I book I am working on. It is actually a great deal of work as I have to conduct a lot of research and assure its accuracy.  Now, I need some feedback. I am concerned that the companies, people and events may not be relevant to today’s readers. Any suggestions about how to make the book more appealing to readers that are under 40 would be appreciated.
    This book is primarily about my experiences in the computer industry from 1979-2004. This includes my time at Digital Equipment Corporation (1979-1983), Franklin Computer (1983-1984), Intel Corp (1984-1999) and as an investor, board member and advisor (1999-2004).

    While the book will have some autobiographical elements including how someone who never attended university and barely graduated from High School ended up as an Associate Professor at the age of 29 and then went on to be a corporative office at Intel at a time when it was one of the most successful companies in the world.

    My book will be a combination of history, antidotes, and stories but importantly, it will also contain lessons that I believe can be helpful to those creating and/or investing in high tech businesses. I have been fortunate to have known many of the leaders of the computer industry during my times, this includes Bill Gates, Steve Jobs, Ken Olson and of course Andy Grove and “being in the room” when important decisions were made.

    The book will explore topics like the transition from the Mini Computer/Vertical industry to the PC/horizontal industry. It will tell stories like how Intel tried to kill the microprocessor that eventually became the fuel for its success. It will cover Microsoft’s achievements and its many failures as well as covering the relationship between Intel and Microsoft which I witness closely.

    Since I played a principal part in the development of high-speed residential broadband, a significant portion of the book will deal with this in depth.  I think it is a really interesting story and much of it has not yet been told.
    As one of the founders of Intel Capital, I will discuss its history and accomplishments and discuss the role of corporate venture investing.

    The book will touch on my failures which were many as well as my successes. This will help guide some of the discussions on lessons. In doing research for the book, I have learned that I did a lot more and accomplished a lot less than I thought. It has been a humbling experience. I have also learned about the failures of others and how elusive and random success really can be. I have come to believe that not only does luck play an important role but it may be the most substantial factor in determining success.

    The book in a sense will be a collection of stories and wisdom told entertainingly that should give insight and perspective not only on the past what also on the future of the computer industry.

    Please send your comments to avram@avrammiller.com

    Thanks.

  • Drinking the kool-Aid (how billions were lost creating PDAs)

    As I try to decide if I should write a book, I have been reading or rereading various books about the computer industry.  I just finished Jerry Kaplan’s Startup, written in 1995. Jerry founded GO Corporation in 1987 to develop pen-based computers, and I still think the book has value today for those starting technology-based companies.  It would be hard for me to review this book objectively since I was involved with so many people, situations, and companies it discusses.  The book is richly detailed since Jerry kept many notes and recordings during the more than six years of GO’s existence (1987 to 1994). I wish that I had documented my experiences during my career. It would make writing my book much easier and more accurate!

    Reading Jerry’s book brought back many memories of this period for me. Although I don’t think I believed much in those early Personal Digital Assistants (PDAs), I did interact with many of the companies involved, especially GO and General Magic.

    Personal Digital Assistants (PDA)

    Many companies were formed in the late 1980s and early 1990s around the concept of the PDA, a logical extension of computing’s evolution. First came mainframes, which were not only used by many people at once but were also required a staff to maintain and operate them.  Next came minicomputers, often used only by one person at a time and which did not require staff to keep them operational.  Both mainframes and minicomputers required a fixed location, though sometimes users could be located remotely (time sharing) using a terminal.  With the personal computer, individuals could, for the first time, own and control their own computers.  However, until the development of portable or notebook computers, these, too, had fixed locations: so we went from having computers on floors to computers on desktops.

    Even back in the 1970s, then, many dreamed of having a computer that could fit inside a briefcase or, even better, inside a pocket or purse. Today, with smartphones (like the iPhone), we take this entirely for granted.

    PDAs required small size, ease of interactivity, and the ability to connect to more traditional, more powerful computer systems.  In a sense, then, these devices were akin to intelligent terminals.  Because size was such a significant consideration, a traditional, typewriter-style keyboard would not fit.  Therefore, it was believed that users would need to interact with such devices using a pen, a stylus, or their fingers.  Several companies developed user interfaces that combined handwriting, drawing, and gestures, including GO, Apple (with the Newton), and Microsoft (with WinPad), to name a few of the more prominent examples. General Magic, wisely realizing that accurate handwriting recognition would not be possible with the available technology, provided a screen keyboard that could be tapped with a stylus. There were also many attempts to add handwriting capabilities to traditional desktop computers.

    With the possible exception of Palm, which was formed in 1996, all the companies formed between 1987 and 1997 to exploit this perceived opportunity failed—after raising staggering amounts of money.  The people involved spent years of their lives following a dream they never realized.  Some were and are the most talented people in the computer industry.

    Why did so many fail?

    Why did so many invest so much money and time into the development of PDAs?  It’s a fascinating question.  Besides the key notion of portability, computers were considered to difficult to use, which restricted the size of the market.  The PDA was meant to be as easy to use as paper but as powerful as a computer; humans would interact with the device through a pen on a small screen. Handwriting was considered a more natural way to interact especially because so few actually knew how to type.

    Two things went wrong with this concept.  First, handwriting recognition is a difficult computational problem, and it was just not yet a feasible technology with the portable computing power available at that time.  It might seem amazing that so many great minds did not recognize this, but I have seen this pattern happen time and time again.  Second, people do not really want to use handwriting on their computers, as I think we can now clearly see.  Although we have the computational capability to recognize handwriting on portable devices, almost no one uses handwriting on such devices.  Instead, we are happy to type on glass as proven by today’s smartphones.

    So, why did so many venture capitalists and corporations invest so much in PDAs?  Well, I don’t think VCs are very strategic.  I’ve often joked that VCs approach market research by counting the number of entrepreneurs coming into their offices with virtually the same business plan.  If so many smart people want to start companies to do the same thing, they figure that thing must make sense.  Once a few VCs begin to invest in a particular area, other VCs jump in as followers.  Then, VCs need to find others to invest the bulk of the next rounds of financing.  Getting large corporations to invest is especially helpful, as they are generally thought to be less sensitive to valuation.  A few large corporations succumb to the notion that the idea must make sense because so many VCs have invested.  Other large corporations, fearing they’ll be left out in the cold, then decide to start internal projects, which eventually fail.  Seeking an alternative, the corporations buy the startups instead.  If the timing works out right, the VCs and a startup’s employees can earn significant returns before the business fails, but if it starts to fail before it sells, only the early-stage VC investors usually make any money.

    Considering the history of the PDA as an example of such institutional behavior, we might ask ourselves if this kind of thing is still going on.  I think it is and would point to Virtual Reality as one example.  Over $3 billion was raised by VR startups in 2017.  The most prominent being Magic Leap who has raised $2.3 billion dollars to date.

    GO never got going

    Turning back to GO, it turns out that Intel was an investor.  Though I knew that when I started Jerry’s book, I forgot the full story.  As frequent readers of this blog will recall, I was co-founder (along with Les Vadasz, one of the founding team of Intel)  of what became Intel Capital, we called it Corporate Business Development (CBD).  In Jerry’s book, I learned that I had not initiated Intel’s investment in his company.

    I started doing early-stage investments and acquisitions for Intel in 1988.  I had a few people working for me, and I reported to Les Vadasz, who managed Intel’s Systems Division in addition to trying to manage me.  Then Les went on sabbatical and taught at Harvard for a while, during which I reported to Frank Gill (who had taken over from Les) and later to Dick Boucher (who kept Frank from firing me—Frank was not interested in venture investing).  When Les returned to Intel in 1991, he decided to devote himself full-time to acquisitions and venture investing, and together we set up CBD.  Before that, some investments were made directly by the various business groups at Intel.

    John Doerr, a former Intel employee an partner at Kleiner Perkins, brought Jerry Kaplan to meet with Andy Grove about making an investment in GO.  Jerry’s book describes those discussions.  For Intel, the key was for GO to commit to move their product from the Intel 286 to the Intel 386 processor and to agree to always port GO’s operating system (PenPoint) first to the Intel Architecture.  Though Kaplan was unhappy about these requirements, he needed Intel’s money and blessing to help GO close a big round of financing.

    At some point, Les asked me to meet with the GO team, which was having some problems.  I went to their offices in a large building in Foster City, San Mateo.  There I met with the founder, Jerry Kaplan, and members of his team, including the legendary Bill Campbell, recently joined as CEO.  I had met Bill many years earlier when he ran Claris, then the software arm of Apple.  Bill and I later developed a friendship.  He was a fantastic man who sadly, died a few years ago.   After GO failed, Bill went on to a very successful career as CEO of Intuit, board member of Apple, and advisor to many prominent Silicon Valley companies.  He “coached” Steve Jobs, as well as Larry Page and Sergey Brin (the founders of Google).  Bill and I both lived in Palo Alto when I worked at Intel.  We would occasionally meet up there to chat.

    I’m not sure whether Intel lost money on its investment.  When GO started, it had a hardware group.  Later, it decided to concentrate on developing its pen-based operating system, spinning out the hardware group into what became EO, which got a large investment from AT&T.  Eventually, GO and EO both merged. AT&T invested enough to become majority owner of the new entity.  Part of that investment went to fund the combined company, but part of it bought shares from existing investors, including Kleiner Perkins and, I assume, Intel.  According to Jerry, Kleiner Perkins got their money back and more, while the founders and employees of GO got nothing in the end.  Kleiner Perkins was always very good at making sure they did well even when their portfolio companies did not, but that is another story.

    At the end of the book, Jerry rightly wonders not why GO failed, but why it lasted so long and could raise so much money.

    Besides Jerry Kaplan and Bill Campbell, GO had many successful alumni: Stratton Sclavos later founded Verisign ( a company in which Intel invested) Randy Komisar became CEO of LucasArts and later a partner at Kleiner Perkins, and Mike Homer was VP of Marketing at Netscape when it made its very significant IPO.

    The magic moment

    General Magic, spun off from Apple in 1990, was perhaps the most impactful independent PDA company—impactful, that is, in the sense that it was a highly visible failure.  It was founded by Marc Porat, Andy Hertzfeld, and Bill Atkinson.  Andy and Bill were the two people most critical to the development of the Macintosh.  Marc, strangely enough, produced a film commissioned by Digital Equipment Corporation to celebrate that company’s 25th anniversary, a movie in which I played the “leading role.”  I knew Marc very well professionally and personally.  He was a masterful storyteller which, combined with the pedigree of the other founders, made a very compelling pitch, especially to corporate partners.  General Magic raised $200 million from 16 strategic partners, including Sony and AT&T.  They also raised $96 million in an IPO. The valuation was $834M The stock price doubled on its first day of trading.  The professional investors who were able to buy stock in the IPO sold off their shares and price dropped back to close at the offering price.  That was the company’s high point.  Its PDA product was not at all successful.  Marc Porat was replaced a year after the IPO, and most of the team left.  The company staggered along for another eight years before bankruptcy.

    General Magic’s device was more or less an intelligent terminal.  They had a very sophisticated model of networked computing, with various computational tasks assigned to computers across the network.  Though their interface still used a pen, General Magic avoided handwriting recognition, displaying a keyboard on the screen which one could tap using the pen.

    I can remember that I was impressed with some of their concepts, especially their networking model which created a distributed system. I am pretty sure that Intel did not invest, but I’m not sure why. I know I had several meetings at General Magic, and I can remember explaining the company to Les and others.

    Even though General Magic came out of Apple, Apple only owned 10% of the company.  John Sculley, Apple’s CEO (Steve Jobs had already been forced out), started an internal, competitive PDA project, called Newton.  Many in General Magic felt that Apple stole ideas from their company. Newton had insufficient connectivity and relied on handwriting recognition, which was not very accurate, but it completely sucked the air out of the market for General Magic.  The first Newton units shipped in 1993, and the product was not successful.  The last Newton was made in 1998, and its failure helped turn the market against the idea of PDAs.

    The alumni of General Magic are very impressive.  Besides the founders, Ton Fadell later co-invented the iPod and iPhone and later founded Nest.  Megan Smith later became the CTO of the United States under President Obama (a position since eliminated).  Andy Rubin founded Android, Pierre Omidyar founded eBay, and Steve Perlman co-founded of Web TV, among many more.

    Recently, a documentary on General Magic was released.  I have not yet seen it, but here is the trailer.

    WinPad

    Besides Apple with the Newton, many corporations had PDA projects.  WinPad was one of these, which I only mention because I was involved.  In 1992, Andy Grove asked me to take the lead in coordinating with Microsoft to deliver their needs for consumer products.  Intel had no interest at that time in the consumer market, but Microsoft did.  My job was primarily to keep Bill Gates happy and make sure they did not turn to our biggest competitor, AMD.  My counterpart was Rob Glaser at first.  When he left, towards the end of 1992, to found Real Networks, I worked with Craig Mundie, who eventually became Microsoft CTO.

    We identified three major consumer projects.  The first project, which never really got started, was a game console.  The second was an intelligent set-top box. WinPad was the third.  I’ve written a lot in the past about the set-top box project (internally nicknamed Pandora’s box at Intel), because it eventually led to the creation of today’s residential broadband network (with no thanks to Microsoft).

    I coordinated a team to work with Microsoft to prototype the WinPad and help develop partnerships that could take it to market.  I thought the WinPad had a chance because it used the Microsoft code base and therefore would be appealing to corporations. I did not think it would be a consumer product.  Companies like Compaq, Dell, and even IBM started projects based on the WinPad.  However, the project ended sometime in 1993, probably because it could not meet its cost goal.

    Visionaries or Dreamers

    I like to say a Visionary is a Dreamer with a PR department.  Much can be learned by studying the history of the PDA.  Billions of dollars were spent pursuing an idea that was not only technically unfeasible but also undesirable, most likely, to its target market.  Brilliant entrepreneurs spent many of their most precious years chasing the dream of the PDA.  Some of the most successful venture capitalists invested hundreds of millions of dollars in early-stage PDA companies, and key firms in the computer and communications industries spent hundreds of millions of dollars either in investments into early-stage companies or on their own internal projects.  PDA companies taken public later failed entirely.

    Just as we have examples of such failures, we also have examples of success.  Once early-stage companies like Amazon, Google, and Facebook grew to become enormously successful.

    How is it possible to distinguish between the two?  You might have to wait for my book to find out.

    History of Pen Computing

    Bill Campbell

    Bill and Andy’s excellent adventure

    More on GM

    GM IPO

    Case Study of GM

  • Venture Capital and Sexual Abuse

    There has been a lot of discussion in the press about sexual abuse by venture capitalists.  As frequent readers of this blog will know, I am not very positive about the venture capital industry which really means I am not very positive about venture capitalists (with some important exceptions).  Since I was one of the leaders of Intel Capital, I frequently invested side by side with VCs so my direct experience was never as an entrepreneur looking for money and certainly not as a female entrepreneur.  I never thought of myself as a VC and never considered becoming one.

    I did a video interview a few years ago about early stage investing.  The part about VCs start a bit after the 7th minute. 

     http://avram.tv/afer-intel/bob-cringley-interview-on.html

    I invite you to read an excellent post on Medium by Mitch and Freada Kapor. 

    There is a continuous range of abuse of power. Clearly, saying to someone that if they do not have sex with you, you will not fund them or they will never work in Silicon Valley, is a massive abuse of power.  But what about just asking someone over whom you have some power,  to have dinner with you because you are alone and bored?  How can you make the person you are asking feel comfortable in saying no.

    I hope that I never abused the power I had but I would guess that would depend on where you draw the line.  Things get really complicated when we are dealing with members of the opposite sex.  And being too concerned about how things might look or be interpreted can also have a negative effect.  I have mentored many people both male and female.  I would hate to have to restrict myself to only helping men.  The most important thing we can do to deal with all of this is to have a conversation.  I hope you agree.