Venture Capital

“Writing the check is the easy part.” Genentech, Apple, Intel, Cisco, Oracle, … none of them would exist, nor would a hundred others that created billions of dollars worth of new wealth by delivering new inventions.  More than the money – though there was that – venture capitalists brought expertise in management and marketing, guiding start-ups, connecting people with each other, sometimes even making the most difficult of all decisions, to fire the founder CEO for the good of the company.

 

Everyone knows Steve Jobs and Steve Wozniak; many recognize Nolan Bushnell, Gordon Moore, and Mike Markkula.  Fewer have heard of Arthur Rock, Tom Perkins, or Don Valentine.  Something Ventured (website here) is their story, the viewpoint of the venture capitalist.  They are a humble lot.  At the end of the movie, they admit that writing the check is the easy part. Without the inventors, the creators, the innovators, the visionaries, they would have nothing in which to invest.  But, invest they did – and do. 

 “They saw opportunity where others only saw risk.”

Arthur Rock was working as an investment banker when his firm received a letter from a group of engineers and scientists who were unhappy working for Nobel laureate William Shockley and were looking for an employer to take them all as a group.  Rock convinced them to start their own company.  Rock approach thirty-five companies – Chrysler, National Cash Register, Curtiss Wright, Borg Warner, Ford, Champion, Motorola, Magnavox, … - and no one wanted to invest.  Then, Arthur Rock met Sherman Fairchild.

Fairchild Semiconductor led to the “Fairchildren” the entrepreneurs within the “Traitorous Eight” of Shockley’s lab who would go on to form their own firms with other venture capitalists backing them. 

“I do not know how to write a business plan. I only know how to read them. We start at the back; and if the numbers are big we read the front to see what kind of business it is.”  (Tom Perkins investor in Genetech, AOL, Compaq, and Amazon).

When Dr. Tom Kodadek spoke to the post-doctoral biological student association at the University of Texas (see Disruptive Diagnotics here), he touted “angel funding” and warned against venture capitalists who take 30% of your firm.  Like a good scientist, he admitted that his narrative was a personal story.  Thirty percent is much less than the half that others have been willing to trade for $1 million or $2 million in start-up funding for an idea that might be (at best) three pages badly written.  Venture capitalists have vision.

“We turned down Jobs and Wozniak.” (Don Valentine) “What are you going to do with a computer in your home? Put recipes on it?” (Pitch Johnson)  “I sent my partner down to look at it and he said, the guy kept me waiting for an hour and he’s very arrogant, and of course that was Steve Jobs!” (Bill Draper)  “They offered me a third of Apple Computer for $50,000 and I said, ‘Gee I don’t think so… ” Nolan Bushell.  “… but I said, ‘Call Don Valentine.’ … and Steve asked me, What do I have to do to have you finance me and I said, you need someone who knows marketing and distribution and he said, Fine, send me three people and one did not like him and one he did not like and the third was Mike Markkula. Mike Markkula worked with me at Fairchild before he worked at Intel.” – Don Valentine. 

Mike Markkula wrote the check for Apple and his first order of business as CEO was to build a board of trustees and his first call was to Arthur Rock.  “Arthur said, ‘I want to put some money in that company,’ and I said, ‘Then you have to come on the board.’ His expertise was in marketing and distribution and how to choose people.”

“I was 32. I was retired from Intel, but that’s what I did on Mondays: I helped people write business plans, just because I liked meeting bright people with fire in their belly. ... The business plan said that with $142,000 we could be cash flow positive in nine months.” – Mike Markkula about Apple.  

• Mike Markkula -- $142,000 

• Arthur Rock -- $57,000  

• Don Valentine -- $150,000  

• Apple's 2010 Market Value: $220 billion

The Austrian School of Economics advocates consistent laissez faire.  They are different from the Chicago School, made famous by Milton Friedman.  The Chicago school argues macro-economic policies with its Keynesian rivals.  The Austrians focus on individuals.  Israel Kirzner, Frank Knight, Peter Klein, and others have attempted to understand and formalize—and continue to investigate – entrepreneurship.  However, as individualists, they argue what the word means, not how to produce more of the same by some cookie-cutter process.  That cannot be done.

The "Traitorous Eight" of Shockley Semiconductor
Who Formed Fairchild Semiconductor

Arthur Rock grew up clerking in his father’s candy store from the time he was six or seven.  Don Valentine’s father was a union organizer and once he understood what a union was, they fought constantly.  Dennis Kramlich was about twelve or thirteen when he bought half a freight car of light bulbs from Sylvania and sold them from his wagon.  “I called it the Bright Boy Lightbulb Company.”  Tom Perkins earned a degree in electrical engineering from MIT and found the work incredibly boring. He then went to Harvard Business School where his professor, George Doriot, taught a unique class in entrepreneurship.  (Doriot’s own company, American Research and Development, made only one insightful commitment, to Ken Olsen’s Digital Equipment Corporation.) Doriot’s students included Perkins, Kramlich, Pitch Johnson, and Bill Draper. 

"These were companies with a lot of things missing.  And our approach was always, ‘Is our Rolodex strong enough to help these people?’”  -- Don Valentine.

This film glorifies that individualist tradition of entrepreneurship and investment capital.  No formula exists.  No formula can exist.  Each of the venture capitalists in this documentary has a unique narrative.  In every case it reduces to the same primary: “I thought that it was a good idea.”  Not everything turns a profit.  Ultimately, something does, some ventures do. 

“At the time we started Genentech, there was no such thing as genetic engineering. The risks were enormous.” 

A quarter million invested in Genentech in 1976 became $47billion when sold to La Roche in 2009.  Five million invested in Intel became $90 million.  $1.4 million invested in Tandem Computers in 1974 became $3 billion when Compaq bought the company in 1997.

I was told by a guy at Salomon Brothers, "We’ve heard the pitch, but you did not go to Harvard Business School.”  -- Don Valentine, founder of Sequoia Capital, investors in Apple, Cisco, Oracle, Electronic Arts and LSI Logic. 

• “There are no firm rules in the venture capital business, except that there are no firm rules.”  Reid Dennis
• “I would trust him with my life, but not with my money.”  Eugene Kleiner.
•  "You gotta get money from strong people because weak people don’t invest in tough times, but that is when most of the big winners are created. ”Jimmy Treybig, co-founder Tandem Computers.  
• “I am not interested in entrepreneurs who want to do things our way. I am not interested in entrepreneurs who come with a dress code. I am interested in entrepreneurs who want to something new that preferably becomes big.” -- Don Valentine

 For all of its individualism – and Donald Valentine is a supporter of the Ayn Rand Institute – capitalism depends on the bourgeois virtues of community. (See the works of Dierdre McCloskey.)  To fund Atari, Sequoia found Fidelity Ventures and the Mayfield Fund to share the burden of risk in return for the opportunity of profit.

PowerPoint was like the Night of the Living Dead, a company that never failed, but just sucked a lot of life out of other people…. until it was sold to Microsoft…

Something Ventured movie website here.

PREVIOUSLY, ON "NECESSARY FACTS" 

Entrepreneurship
Atlas Shrugged's John Aglialoro
Capitalist Culture: Cairo 1600

Tribute to Steve Jobs

The One Percent are the Atlases 

Fortune Cookie in Hex Code

Twenty years ago, a friend of mine with two satellite dishes to the Chicago Board of Trade and the Chicago Mercantile Exchange had a problem. His IBM-PC/ATs, running the “Windows” interface for MS-DOS, and programmed in Basic, could not properly translate data.  The trading floors identified futures contracts by codes representing commodity and date.  Most troublesome was “26” because ASCII code 26, control-Z, looked like “End of file” to his computers. 

I had him lock me in his office on Friday and let me out on Sunday morning.  We actually worked together, ate breakfast and lunch, but overnight, I was alone with the computers and Peter Norton’s books on IBM-PC Assembler.  Working in Debug, after re-keying versions of the same code over and over, I said to myself, “I wish I had an editor” and I heard the voice of Obi-Wan Kenobi: ”Beware the dark side of the Force.” 

The project was successful. 

Afterward, I wrote a “Fortune Cookie” program for myself.  It is an old hack. On boot-up, the computer displays a random good-luck saying. I chose 60 of them and called the seconds counter of the system clock to point to one.  I wrote it in hex in Debug. 

B4 2C

CD 21

B0 46

F6 EE

05 20 01

89 C2

B4 09

CD 21

BA 18 01

CD 21

CD 20

Debug has an Assemble command to display a more English-like translation of the hex codes. Each of the sayings was limited to 80 characters with 40 more spaces for some margin and to create a buffer offset.

B4 2C        MOV AH,2C       Get the clock

CD 21        INT 21          execute

B0 46        MOV AL,46       Get the seconds

F6 EE        IMUL DH         multiply the DH by the seconds   

05 20 01     ADD AX, 0120    add 120 to that

89 C2        MOV DX,AX       put that number in the DX register

B4 09        MOV AH,09       display to screen

CD 21        INT 21          execute

BA 18 01     MOV DX, 0118    end of line

CD 21        INT 21          execute

CD 20        INT 20          quit

Negotiate to the Command Prompt. Enter DEBUG.
The command "d" is for Display memory.
The ? Question Mark brings up all available commands.

These are some of the 60 sayings:

Beam me up, Scotty: there's no intelligent life down here $

8 + 8 = 10 $

4 + 4 = 10 $

5 + 5 = 0Ah $

5 + 5 = &12 $

Daisy, Daisy, gove  m   y  r   ans er  ru  $

Hello, Dave, it's good to be working with you again! $

TRON to user: Send me a disk. $  

In the beginning was the Word $    

If A is A, how can X = X + 1? $ 

A program is a selective recreation of reality...$   

... according to the psycho-epistemology of the programmer$ 

I am alive and I have rights!$ 

ALSO ON NECESSARY FACTS
Basic: Turing's Truth
Claude M. Watson
Kemeny Knew: We Shall Have Computed
Visualizing Complex Data
The Code Book

BASIC: Turing's Truth

Alan Turing showed that any finite-state machine can model any other.  That is how the team at Bletchley Park built the Bombe to imitate the German Enigma machine.  Today, we have “virtual machines” that let us put Unix and Windows on a Macintosh or Linux and Windows on a PC and so on.  The C language is actually an extension of itself, a realization by Kerninghan and Ritchie that inherent extensibility would allow programmers to create a language that would never become archaic.  And today we have C+, C++, and C#.  In fact, Ruby is just a set of macros written in C.  Once you have that, you can create your own Ruby objects, classes, and methods.  

 

The “Venture Rocket” blog presented a cute history of computer languages.  While one graphic did acknowledge Visual Basic as the seventh most popular development language, their history below that ignored Basic entirely. (They did cite Fortran and Cobol.) 

Earlier this month, I answered a challenge from the Praetorian computer security company to decipher this block of text.

Mpyza johsslunl ZWXY, Zluhabz Wvwbsbzxbl Yvthubz (Aol Zluhal huk Wlvwsl vm Yvtl), aolzl hyl aol budhclypun hsslnphujlz vm Aol Wyhlavyphu Nbhyk, luaybzalk if Jhlzhy av wyvcpkl aolpy lspal zljbypaf zlycpjlz huk luzbyl aol zhmlaf vm aol nsvihs Yvthu Ltwpyl. Hz aol zhfpun nvlz, "Hss Yvhkz Slhk av Yvtl", ovdlcly aol whao vm h Wyhlavyphu pz ulpaoly zayhpnoa uvy klalytpuhal. Aolyl hyl zlclyhs whaoz av qvpupun aol Wyhlavyphu Nbhyk, iba aol whao dlss-mvbuklk pu tlypa pz aol tvza ovuvyhisl. Pa pz mvy aopz ylhzvu aoha Jhlzhy ohz klcpzlk aopz zlyplz vm johsslunlz av qbknl aol tlypa vm wvaluaphs Wyhlavyphu yljybpaz. Fvb ohcl wyvclu fvbyzlsm ylzvbyjlmbs, iba kvu'a sla fvby nbhyk kvdu hz mhy tvyl kpmmpjbsa johsslunlz spl holhk. Av hjjlwa fvby ulea johsslunl, fvb dpss ullk av zluk tl h tlzzhnl vu Zrfwl. Av hkk tl hz h jvuahja, zluk h jvuahja ylxblza jvuahpupun aol alea "Zluhabz Wvwbsbzxbl Yvthubz" av "wyhlmljabz.jhzayvybt", aolu zluk tl h joha tlzzhnl av sla tl ruvd fvb'yl aolyl. Zll fvb vu aol ihaaslmplsk.

To do that, I wrote this program in BASIC.

10 REM Mike Marotta. June 21, 2013. Praetorian challenge.

11 REM: Claudic.bas compares cipher with known transposed key

12 REM: prints deciphered text

15 ON ERROR GOTO 199

20 P1$ = "ABCDEFGHIJKLMNOPQRSTUVWXYZabcdefghijklmnopqrstuvwxyz"

22 C1$ = "TUVWXYZABCDEFGHIJKLMNOPQRStuvwxyzabcdefghijklmnopqrs"

40 OPEN "i",1,"praeto.txt"

42 OPEN "o",2,"plain.txt"

50 LINE INPUT #1, X$

53 E = LEN(X$)

60 FOR I = 1 TO E

62 Q$ = MID$(X$,I,1)

63 REM Accept punctuation as is

64 IF ASC(Q$)<65 THEN PRINT#2,Q$;:

70 FOR J = 1 TO 52:

73 IF Q$=MID$(P1$,J,1) THEN PRINT#2, MID$(C1$,J,1);

80 NEXT J

85 NEXT I

90 GOTO 50

199 CLOSE 1: CLOSE 2

200 END

The program returned this decipherment.

First challenge SPQR, Senatus Populusque Romanus (The Senate and People of Rome), these are the unwavering allegiances of The Praetorian Guard, entrusted by Caesar to provide their elite security services and ensure the safety of the global Roman Empire. As the saying goes, "All Roads Lead to Rome", however the path of a Praetorian is neither straight nor determinate. There are several paths to joining the Praetorian Guard, but the path well-founded in merit is the most honorable. It is for this reason that Caesar has devised this series of challenges to judge the merit of potential Praetorian recruits. You have proven yourself resourceful, but don't let your guard down as far more difficult challenges lie ahead. To accept your next challenge, you will need to send me a message on Skype. To add me as a contact, send a contact request containing the text "Senatus Populusque Romanus" to "praefectus.castrorum", then send me a chat message to let me know you're there. See you on the battlefield.

Of course, this is merely a transliteration.  I already broke the cipher.  I found the common three-letter words, and guessed “the.”  I also guessed that the longest word would be “Praetorian” which then validated two of my letters in “the.”  All I wanted to do next was avoid the grunt work of writing out the answer. Computers are good for that.

Previously on Necessary Facts

A Tribute to John Kemeny, inventor of BASIC.
Fortune Cookie in Hex Code
Claude M. Watson
Visualizing Complex Data
The Code Book

Awesome Austin Foods

Locally crafted foods abound here in Austin. The list of "must" places to eat runs for long pages in the Chronicle.  Even The Onion is basically a few columns of timely humor wrapped around page after page of bars and restaurants.  Oddly enough, perhaps, for me, food is something my body demands that my mind pay attention to.  I weigh 140 pounds (64 kg) soaking wet.  Mostly, I eat food to provide uptake for vitamin pills.  And yet...  

Lovebean (here) (or info@lovebeanfudge.com) produces a confectionery fudge made from coconut oil, coconut nectar, and cacao beans.  A jar costs about $13 retail and contains the weight of four or five bars.  The problem is stopping at one bar.  I do not have a sweet tooth. I do not eat deserts.  But this stuff is great. It would be perfect with peanut butter for long bicycle treks.  They say:

"Our line is certified USDA Organic and all our ingredients are sourced for their nutritional and planetary benefits. Here’s the low down: . . . The Original Vegan Spread starts with lots of fresh-pressed Organic Coconut Milk. . . .  Our Raw Vegan Fudge Spread is never heated during processing. Not to say we don’t go over 115 F or anything, we don’t need to heat it a bit. All the magic happens at room temp in the Lovebean Raw Fudge Machine. We simply combine our 100% Raw Organic Coconut Nectar with Organic Raw Cacao Powder and Organic Raw Coconut Oil. We top it off with a touch of Raw Organic Vanilla Bean Powder . . . "

Jade Monk® Chai Spice, Cranberry Blood Orange, Lime Blossom, Palau Peach

Jade Monk (website here) teas are packets of powders.  Again, for the trekker, or your office backpack or desk drawer, I found them handy, tasty, and healthy.  The powders could dissolve a bit faster, but zen teaches patience to all grasshoppers.  You can find them on LinkedIn.  Of themselves, they say: 

Jade Monk® offers a healthy and delicious alternative to the processed, syrupy tea beverages of today's market. By blending the potency of legendary Matcha green tea with all-natural low calorie sweeteners and flavors, Jade Monk® distinguishes itself as a beneficial and alluring instant powdered functional beverage.
Ample scientific research shows Jade Monk ® matcha green tea assists the body in maintaining excellent health, serves to reduce stress and calm the mind, and provides sustained energy for up to six hours. 

But man does not live by tea alone.  We drink a lot of beer here in Austin.  Even in IT, traditionally a crowd that opts for CNS stimulants such as coffee, colas, and energy drinks, presentation meetings at user groups feature beer with the pizza.  High tech social hours are everywhere. We even have a Meetup called "Social Techies" (as if the others are just putting on).  That said, Texas beers will not win contests.  This is a southern state, recently dry, still heavily regulated.  Compared to Chicago or Portland, the local beers are just PBR and Budweiser dressed up in cowboy names.  However. . .

Technically, not local to Austin, Perdenales Brewing is located in Fredericksburg.  I met the president, Lee Hereford, at Whole Foods.  He was demonstrating his product.  You get that kind of entrepreneurship here, where the guy normally in the paneled corner office is actually behind the counter or at a desk. Personally, I like IPAs, but I had to admit that most are over-hopped.  His is not.  It is balanced, with a good grain base, and a light spice finish. 

Baby Zack's smoked hummus brings an array of Texas flavors to this international staple and snack treat.  Dip your favorite chips, or spread it on bread when making sandwiches, including burgers and franks.  Myself, I often pass up hummus because the first ingredient is water.  I prefer to pay for garbanzos (cici or chickpeas, call them what you will). With Baby Zack's you get hummus.  The spices are there for flavor, not to optimize the cost of production.  

PREVIOUSLY ON NECESSARY FACTS
South by Southwest 2013 here and also here
Dressed for Success in Austin
Austin at Night
South by Southwest 2012

Meanwhile ...

For the past three weeks, several projects took me away from blogging. "Documentation for Developers" was the topic when I addressed my Ruby on Rails group.  I spoke on the subject of private security to my local DefCon group.  Then, last week, I volunteered to present a chapter of exercises from Wireshark 101 to an OWASP lunchtime study cell.

Over the years, working on projects for different companies on different platforms for different audiences, I developed a set of guidelines for creating documentation.  The focus of this presentation was that developers can begin that process by relying on tools such as Microsoft Visio to design their systems.  Other tools include Nassi-Shneiderman charts and Warnier-Orr diagrams. "Do not design in code" is the only mandate.   Creating a software system and then calling in a technical writer is like building a house and then calling in a drafter to draw the plans. Documentation is specification.

I also drew on the allusion from Joseph Weizenbaum of the compulsive programmer as a compulsive gambler.  The code developer's superstition is that one more patch, one more fix will overcome a lack of knowledge of the substantive literature of the application field.
(The slides are on Slideshare here.)

For the hackers at DefCon 512, my goal was first to overcome the common myths about security guards.  We are subjected to ridicule.  Self-deprecating humor works for Big Bang

Theory because we have A Beautiful Mind, Sneakers, Johnny Mnemonic, and Hackers (with Angelina Jolie) to provide depth and drama.  Nothing like Law and Order: Special Victims Unit exists for private security.  That pro-police propaganda is contradicted by the absolute facts that more money, more resources, more personnel exist in private security, as much as three-to-one over public policing. Most people do not know that 36 private guards died when the Twin Towers came down.   I have worked with a Ph.D. philosopher, a nuclear engineer, two ministers, and an airline flight attendant.  Security guards are not the buffoons we are caricatured to be by mass media presentations in service to the central government.  Moreover, if you let us, we prevent problems because that is the nature of all businesses: business looks to the future; government attempts to remediate the past. My PowerPoint for this is on Slideshare here.


Wireshark is a tool for computer network security analysis.  Our study group is sponsored by OWASP, the Open Web Application Security Professionals.  They meet once a week at lunch for an hour to work out of some chosen book.  Our current project is Wireshark 101 by Laura Chappell.  I volunteered to work all of the labs in Chapter 3: Display Filters.    As a technical writer, I do this all the time, coming in to some technology, getting a handle on it, and presenting it to others.  

This is Chappell's smaller book on Wireshark.  The labs are direct, step-through exercises to show how the toolbars, menus, options, and selections all work.  I captured one or more screens for each lab, and made them into a PowerPoint presentation.

Previously on Necessary Facts
The Shifting Paradigm of Private Security
Private Security in the 21st Century
Locksporting
Redshirts: Expendable in Fiction and Fact