Failure Is an Option

The dream behind Exponential Technology was bold -- to build the world's fastest computer chip. The reality was messy. The end was bloody -- $30 million of wasted capital, four years of wasted effort. So why are so many people grateful for the experience?

An impeccably dressed man careened through San Francisco's Union Square, muttering incoherently, weeping without concern for the stares of tourists and shoppers. Just moments earlier, before an Olympian gathering of financial analysts and investment bankers, he had made what he had thought was the speech of his life. In reality, it had been a final, desperate plea for the life of the Silicon Valley startup that he ran. But his words had yielded mainly indifference -- certainly nothing in the way of life support. And that reaction to his words had yielded, in him, a moment of shattering clarity.

Rick Shriner found his car and headed south on U.S. Highway 101. "It's over,'' he repeated to himself, choking on his tears. In his head, he rehearsed what he would say to Gordon Campbell, a legendary Silicon Valley entrepreneur and the chairman of his company's board. Shriner also began composing his next speech, the one in which he would tell his team at Exponential Technology Inc. -- more than 70 engineers, managers, and staffers, who had burned through nearly $30 million in capital and through four years of effort, much of it measured in 15-hour days -- that their dream of building the world's fastest microprocessor was over.

As he drove south, Shriner cursed Apple Computer -- his startup's first outside investor and its most important potential customer. Apple had given Exponential life; now, in the wake of a dramatic repositioning, Apple was helping to end that life. And he cursed himself, engaging in what-might-have-been speculations. What might he have done to postpone this day of reckoning? How had his miscalculations contributed to Exponential's demise?

"I let myself believe that we were onto something really great," Shriner, 55, says today. "I told myself, 'If we can just keep going, we'll make it.' That was a big mistake.''

Reality bytes.

Not every Silicon Valley startup becomes Cisco or Yahoo! or Sun Microsystems. Short lives, followed by quick flameouts, are the more common trajectory. Plenty of startups fail because of ineptitude. The technology doesn't work; management doesn't execute. That's not true in this case. Exponential was a small (and perhaps unavoidable) casualty of one of the biggest comeback stories in recent business history: the rebirth of Apple Computer. Today Apple is enjoying fast growth, healthy profits, and a surging stock price. But all that's left of Exponential is a forlorn sign on an office building in San Jose -- and, naturally, a massive bout of litigation. (Exponential has sued Apple for $500 million; Apple has countersued for breach of contract.)

What's so instructive about the Exponential saga is that the company did many things right -- but failed nonetheless. It failed mainly because the odds of success for any startup are incredibly long. What's so poignant about the Exponential saga is that many of the characters in it are grateful for the experience -- and would even go through it again. "As a parent," says Paul Nixon, 41, a microprocessor engineer who left Apple to join Shriner's outfit, "you teach your kids to play hard and, if they scrape their knee, to rub it, clean it up, and play the game again. My kids got to see me doing the same thing. That's how you learn and make progress. Our fight for survival was like a PhD program in team dynamics, leadership, and high-tech business strategies."

Startup

"How would you like to have the world's fastest chip?"

Startups that aspire to greatness begin by identifying a big market opportunity. Exponential's opportunity was big -- but it was also rooted in a power struggle among several big companies. In 1992, Apple, IBM, and Motorola formed an alliance (called AIM) to make one last-ditch effort to turn back the Microsoft-Intel juggernaut. The goal of AIM was to produce a microprocessor that would set a new performance standard for the industry. The name of this device was the PowerPC, and its mission was to drive a series of personal computers that would be so blazingly fast that consumers would give the Macintosh operating system (Mac OS) one more chance against Windows.

Unfortunately for AIM, Intel did not stand still. Rather, Intel chips just kept getting faster. Gordon Campbell, 54, founder of two well-known semiconductor companies, was aware of Apple's plight. He and two engineers -- George Taylor, 43, and Jim Blomgren, 38 -- began kicking around new ideas for hyperfast chips that would run the Mac OS. They proposed a design that would use BiCMOS technology, which was ultrafast but which burned too much power and expended too much heat. In the spring of 1993, while Taylor and Blomgren addressed engineering challenges posed by BiCMOS, Campbell assigned a finance specialist named Stephanie Dorris, 36, the task of drawing up a business plan for a new company, which he called Renaissance Microsystems.

Meanwhile -- and not by accident -- Campbell bumped into Mike Markkula, then Apple's chairman, at a reception. "How would you like to have the world's fastest chip?'' Campbell asked. At the time, the fastest chip in Apple's arsenal ran at about 50 MHz. Intel chips were pushing 60 MHz. What Campbell was proposing was a chip that would be tailored to Apple's operating system and capable of running at a stunning 533 MHz.

The timing of the encounter could not have been better. Apple was desperate to build its muscle within the computer market. Not only was Michael Spindler, Apple's CEO, committed to selling more powerful machines; he was also planning to reverse the company's long-standing refusal to license its operating system to other computer manufacturers. Within months, Apple agreed to grant licenses to third-party manufacturers to produce clones -- Apple-compatible computers that Spindler hoped would expand the market for machines built around the PowerPC processor. These clones, in turn, represented another big market for Campbell's chip.

Campbell met with Spindler and struck a deal. Apple invested $1.5 million in the company, which soon renamed itself Exponential Technology. Exponential agreed to develop and supply Apple with high-speed chips for a new generation of computers. Apple also got a seat on Exponential's board.

From the beginning, Campbell and his colleagues recognized that the partnership wasn't perfect. (But then, what partnership is perfect?) Apple urged Exponential to negotiate an agreement through which Motorola, a partner in the AIM alliance, would manufacture its chips. That agreement was good politics for Apple -- but bad business for Exponential. "At just about this time," says Stephanie Dorris, "the cell-phone market took off, and Motorola got swallowed up in that boom. Besides, our fabrication requirements were far more complicated than anything that Motorola had done before. We had serious doubts about its ability to perform."

Wisely, Exponential tried to hedge its bets. Campbell and Ivonne Valdes, 40, who was Exponential's vice president of sales, flew to Tokyo to persuade Hitachi Ltd., which operated a BiCMOS fabrication plant, to make Exponential's prototype chips.

Other problems were brewing. Exponential had hoped to leverage its purchase agreements with Apple to attract more capital. But years of bad strategic decisions and poor execution were beginning to take their toll on Apple. Internal dissent was mounting, the rate of defection was increasing, and market confidence was flagging. Exponential's patron was looking more vulnerable than ever. "That made it difficult for us to go out and raise money,'' says Dorris, the new company's CFO. "At one point, Gordie Campbell wrote a personal check for $1.5 million to help tide us over.''

Still, Campbell and Dorris managed to raise nearly $7 million: Exponential's chip had that much promise. They also convinced Rick Shriner, a vice president at Apple who was also a veteran of Intel, to come on board as president and CEO in November 1995. "I talked with Michael Spindler, and we agreed that one part of our strategy was to have the company plant a flag, so that Motorola and IBM would be challenged to meet it,'' recalls Shriner, a mannerly, upbeat man who appears to have about as much guile as Mr. Rogers. "We saw things going one of two ways: Eventually Apple might look to acquire us, or we would go public. It was an exciting opportunity.''

At about the same time, Power Computing Corp., an aggressive startup based in Round Rock, Texas, began rolling out the first Macintosh clones. By the end of the following year, its revenues hit $400 million; it had become one of the fastest-growing PC companies in the United States. Other manufacturers began to enter the market scene as well, among them Umax Technologies Inc. (a Taiwanese-owned Mac-compatible maker based in Silicon Valley) and a branch of Motorola that sought to develop high-performance workstations. Shriner and his team had a growing roster of potential customers. "There was so much optimism," Valdes remembers. "We were in a heads-down, tails-up mode.''

Rise and Fall

"Our phone didn't stop ringing."

The planets seemed to be in alignment for Exponential. Even bad news looked good. In February 1996, Michael Spindler was fired as Apple's CEO. His replacement, Gil Amelio, promised that Apple would regain market share by producing big new things that worked -- a strategy that entailed strengthening Apple's ties with Exponential. Apple went ahead with a plan to pay the young company $5 million in a prepurchase agreement that would channel all of Exponential's first- and second-generation chips to Apple during the first nine months of production. The agreement did not prohibit Exponential from negotiating with clone makers for chip sales after that nine-month period. So Ivonne Valdes did just that, locking up purchase orders from Power Computing and Umax.

Meanwhile, George Taylor and his engineering team completed the first "tapeout" of their microprocessor. (Tapeout is a critical milestone in the creation of a chip.) But there were sticking points. Hitachi refused to begin fabricating the Exponential chip without approval from IBM, which said it needed approval from Motorola -- and Motorola was developing a chip that Exponential's chip would be competing against. "We kept thinking, it shouldn't be this hard,'' Dorris recalls. Eventually Motorola gave its consent, and Exponential's blueprint was sent to Hitachi in January 1996.

Then the meteor shower began.

Amelio announced that Apple would lose $740 million for the second quarter of 1996. The company had been hemorrhaging, but this loss was staggering. By this time, Shriner's team in San Jose had grown to nearly 60 people, and Exponential's burn rate was approaching $1 million per month. Shriner and Dorris had to secure another round of funding, and they hoped that the venture-capital community would not look too unkindly at Exponential's alliance with Apple. Valdes, hoping to secure more orders, intensified her talks with Power Computing and Umax. "It was becoming clear to us that we would need an escape door from Apple,'' she says.

It was also becoming clear that Exponential would miss the target date for the rollout of its first chips: Hitachi was late in delivering parts. On July 17, Taylor and his engineers loaded the X704 microprocessors into a Macintosh machine for the first time. The processors ran at 410 MHz -- which was 40 MHz below what Exponential had promised Apple for its first milestone, but double the speed of Intel's fastest chip. The results were by no means perfect, but they were remarkable. "It was 4:45 in the afternoon when the system booted up," recalls Dorris. "Everyone was pretty excited. Champagne corks were flying.''

In October, Exponential unveiled its microprocessor at a bash that it threw for Apple and for the press at the Fairmont Hotel in San Jose. And in November, at Comdex, the company unveiled the processor before a more general audience, earning rave reviews by using the device to run amazingly realistic 3-D animation.

"I remember the kickoff party," recalls Isabel Gonzalez, 44, Shriner's administrative assistant at Apple, who rejoined him at Exponential. Her husband, Victor, also joined the company, as a systems administrator. "You could see the excitement on everyone's face. On that day, we introduced our product to the world.''

The world liked it. Despite Apple's troubles, Exponential raised more than $12 million in additional venture money. That was the good news. The bad news: The money was already spoken for. Shriner had not been blind to the problems at Apple. So he had recruited another team of engineers, and charged them with developing superfast chips for the Intel-compatible market. It was a smart move -- but it carried financial and organizational costs: The two teams of engineers were spending piles of money. And the Mac-compatible team was doing its best to run the Intel-compatible team out of San Jose. "It got real ugly,'' Shriner recalls. "It came down to a battle for limited resources.''

Hoping to avoid a civil war, Shriner talked with Paul Nixon, a manager and microprocessor engineer with whom he had worked at Apple, about moving the Intel team to Austin, Texas. Nixon liked the idea and began recruiting engineers in Austin. Within two months, he had 20 employees -- most of them engineers -- on his unit's payroll. Now there were, in effect, two Exponentials.

Then came a pair of back-to-back blows that would ultimately seal Exponential's fate. On December 20, Apple agreed to buy Next Computer Inc. for $430 million. Along with the company came Steve Jobs -- Next's CEO, Apple's former CEO, and now a key adviser to Gil Amelio. Among Jobs's first pieces of advice: Drop the OS licenses, ditch the clones, reverse course.

A little more than two weeks later, Amelio announced that Apple had lost $120 million during the previous quarter and that layoffs would follow, as would other severe cost-cutting measures -- including a reduction in R&D spending. "It was clear then that our future would be with the clones,'' says Shriner. As if to reinforce the point, Power Computing stole the show at that year's Macworld convention, held in San Francisco -- and Power Computing executives were proselytizing Exponential's chips. Macworld magazine, in the issue coinciding with the convention, named Exponential's chip "the most promising technology'' for the year to come.

"Rick was the belle of the ball,'' Valdes recalls. "I'm telling you, our phone didn't stop ringing.''

Meanwhile, Hitachi had produced an inventory of more than 7,000 410-MHz chips, and Exponential began to stockpile them. But there were no buyers. Apple balked, saying that the chips weren't up to standard. Furthermore, John Rubenstein, Apple's newly installed vice president of engineering and formerly Jobs's lieutenant at Next, announced that Apple had become intrigued by a promising PowerPC chip that IBM was developing.

There were problems with the clones too. Power Computing and Umax both said that, according to their licenses with Apple, they couldn't use Exponential's chips unless Apple specifically agreed to let them do so -- even though they had already placed purchase orders. Moreover, Apple would have to agree to reengineer a small but significant portion of its machine's architecture, called ROM, thereby allowing the clone makers to alter their Mac-compatible motherboards. Only then could the clones fit the Exponential chip into a "common reference hardware platform." "You couldn't just drop this thing in,'' explains Jeff Thomas, 43, who served as vice president of engineering at Exponential.

On March 3, 1997, Campbell and Shriner again met with Rubenstein, who reiterated what the whole world knew by now. Apple was in a serious financial predicament. Drastic measures had to be taken, among them a reduction in Apple's engineering staff. Then Campbell and Shriner received a message that they would not have believed just a month earlier: Apple could no longer sustain an engineering team for the purpose of enabling Exponential chips to be built into Macintosh systems. Despite its purchase agreements, its financial backing, and its seat on Exponential's board, Apple was signaling that it would not be a customer for Exponential's product.

It was a crushing blow -- but for Apple, it might have been the only option. "Clearly, Apple had its back to the wall," says Tim Bajarin, one of Silicon Valley's most respected analysts. "It was in survival mode. The clones were eating its lunch, and so were the Intel guys. On the other hand, from a design and performance model, the Exponential chip made a lot of sense. Anyone who comes to you and says, 'We've got a 400- to 500-MHz chip,' gets your attention.'' Shriner and half a dozen members of his team -- including Dorris, Thomas, Valdes, and Peter Mehring, who was then VP of research and development at Umax -- insist that a commercially viable chip was within reach. "I felt like I'd been knocked off my horse,'' Shriner says. "We'd solved our problems. We were nearing completion of a second-generation chip that would have attained our goals. We were doing what everyone had agreed that we would do. And then they killed the deal.''

The Reckoning

"I think this is going down."

Shriner returned to San Jose. he stood for a moment in the parking lot, composed himself, and went into Dorris's office to ask his CFO how long the company could keep going. "Our feeling was that if we could just get the chip out the door, we'd be able to rescue the company," Shriner says. Dorris had already been on the phone with Campbell. Unless Exponential got a quick infusion of cash, she told Shriner, the company would issue its last paychecks on April 1, which was a little more than three weeks away.

Shriner called a staff meeting, assembling his top team in the company cafeteria while Dorris called Nixon in Austin. "We thought we'd better face this head-on and inform everyone about where we were going,'' Shriner remembers. He conveyed the news of Apple's decision but reminded his staff that Exponential was still negotiating with the clone makers. Besides, Shriner added, he and Dorris were about to set out on a third round of fund-raising. They hoped to bring in $15 million to $20 million.

Amazingly, the staff meeting didn't turn into an insurrection. It turned into a declaration of resolve to produce the world's fastest chip. "We were within weeks of laying people off,'' Shriner says. "But people on our team told us that they wanted to keep on pushing. I knew I had to do whatever was possible.''

So Shriner and Frank Marazita, 43, Exponential's vice president of manufacturing technology, went to Tokyo -- where, as Marazita puts it, "we fell on our swords.'' They told Hitachi executives about Apple's pullout and begged for a break on prices. "There were 12 executives on one side of the table," Marazita says. "They just got up and left us sitting there for two hours. When they came back, they told us they would lower the prices.''

Bolstered by that news, Shriner and Valdes went back to John Rubenstein and asked him to remove the obstacles that Apple had imposed on the clones when it had refused to reengineer the ROM. If Apple wouldn't do the engineering work, Shriner asked, would the company at least release the license to the ROM so that the clones -- if not Exponential itself -- could do the work on their own? The idea went nowhere. Apple's intention was to begin charging higher prices for the Mac operating system, not to let clones engineer around it. "We had been traveling 100 miles an hour,'' says Shriner, "and then we hit a wall. Without the ROM, we couldn't work with the clones. Without the clones, we were about dead.''

Still, Shriner and Dorris threw themselves at every lead in the investment community -- and beyond. They opened talks with a small investment firm based in Marin County, hoping to garner a $10 million infusion. They met with people whom they had never heard of, or had time to investigate -- all the while explaining what they had in the way of a chip, the various agreements to purchase it, and their plans to have a 500-MHz version ready by midsummer. Says one former Exponential executive: "We got so desperate, we would have gone to the Mafia for money.''

On the first Monday in April -- April Fool's Day -- Shriner convened another meeting in the cafeteria: "I explained where we were and what we were doing. I told our people that we were still seeking funding but that as of this date, we could not pay them. I said there'd be no stigma attached to anyone who wanted to leave.''

Again, no one left. If anything, the pace of the engineering work picked up. The engineers were working for free -- and in a strange way, they were finally free to focus on producing a faster chip. "Engineers are able to accept nonspecific data,'' says Jeff Thomas. "If events are pushing you around, eventually things will shake out. In the meantime, this chip still had a shot. We all believed that."

Even as Shriner tried to reassure his team, Isabel Gonzalez remembers his demeanor becoming more and more downbeat. "I had vowed to Rick that I would do everything in my power to remove the obstacles, professional and personal, that would get in the way of our success," she says. "There was nothing going on that was ever out of my view. I could see the staff beginning to complain. I could see Stephanie [Dorris] beginning to look panicked. Victor and I talked, and we agreed to stay. We had enough in our bank accounts to hold us for about three months.''

"I remember not being able to sleep at night,'' recalls Ivonne Valdes. "It was just about unbearable. By now, emotions were right on the edge. People who had worked well together were blowing up at each other at the drop of a hat." Shriner remembers going home and blurting out to his wife, Peggy, "I think this thing is going down. I just want to know that we maxed every opportunity.''

Days later, Apple officially notified Shriner that it would not purchase any Exponential microprocessors. Apple said that the chips were slower than advertised and that Exponential had missed its deadlines. As far as Apple was concerned, the company's contract with Exponential had been breached.

Meanwhile, Paul Nixon and his Austin group, which was now 30 people strong, sent an encouraging message: They were making headway on a fast chip for Intel-compatible operating systems. Shriner and Dorris decided to share news of this development at a last-ditch presentation to analysts and investors at Hambrecht & Quist's annual conference, which was held at the St. Francis Hotel in San Francisco on April 28. It was an unusual and desperate act, tantamount either to giving away trade secrets or to pitching vaporware. But these were unusual and desperate times. Among the attendees at the conference would be an executive from the Marin-based investment firm that Shriner had been negotiating with.

"I really thought we were close to a deal with this investor,'' Shriner remembers. "No question, it would have let us live, and it would have let us produce and ship our chips.'' He pauses, replaying the memory. "There were meetings going on in six or seven rooms. I spoke to a pretty large audience at one meeting. It was a good pitch, no question. Afterward, Stephanie and I went to the lobby with that investor. We sat down and had a discussion. But he was very vague, very guarded. We had been negotiating for some time, and I thought I had delivered a piece of information that would get the deal done. But then he said, 'I'll have to talk it over with my partners.' I realized that nothing mattered now. This had been my last shot.''

Perhaps it was an accumulation of stress and fatigue; perhaps it was an overdue moment of clarity. But after that meeting, Shriner finally realized that Exponential's run was over. He walked out into the sunlight and began crying. "I just kept thinking, I've got to get to Gordie [Campbell] and tell him that it's over and that we have to begin laying off some of our resources.''

Isabel Gonzalez, who has three kids, says that the company was "becoming completely dysfunctional and awash with rumors. You couldn't have a meeting without an argument breaking out. People were demanding to know what was going on -- and not just here. We kept getting calls from Texas too. Rick and Stephanie were doing their best to respond. But you'd hear things being said like 'Who is running this company?' ''

On Monday, May 8, when Gonzalez walked into work, a receptionist told her that the administrative assistants were being laid off. "She said, 'That means you and me,' " Gonzalez recalls. "Rick wasn't around. No one approached me. But I was really upset. I started cleaning out my desk. After lunch, Rick came in, and I remember him saying, 'Is there something you want to talk about?' "

Shriner and Gonzalez had been together for four years. "I had vowed to Rick that I would never allow him to be blindsided. And now I was being blindsided. I hated it," Gonzalez says. "He became emotional and broke down. He said that the hardest thing he had to do was tell me, and he just couldn't do it. I asked, 'Is Victor being laid off too?' Rick said he was.''

Shriner looks pained when he recounts Exponential's last days: "Isabel was so angry with me. We both sat down and cried. I was responsible not just for the company, but for all the people who had been part of it. People were hanging onto every promise.''

Epilogue

"I've given you three years of my life."

On that fateful Monday in May, 25 members of the Exponential team -- nearly 40% of the staff -- lost their jobs. But of those who did not lose their jobs, few decided to leave. Why did these people stay?

"We were in a state of delusion,'' says Dorris, after recounting the schemes that Exponential's management concocted during all-night or weekend meetings. Ivonne Valdes, now a sales-account manager for Sun Microsystems, walked into Shriner's office one morning during the second week of May and shut the door. "I said, 'I'm not a quitter, but this has gone as far as it can go.' Rick got very emotional and said something like 'I can't believe you're throwing in the towel.' I said, 'Rick, I've given you three years of my life.' ''

What good is tragedy without a little irony? On May 15, the day that Shriner planned to call a final meeting to announce that he was laying everyone off -- even himself -- some engineers burst into his office. "We just want you to know that we got it done,'' one of them said. They'd worked all night, and they were sure that they had made the final breakthrough: a 500-MHz chip. Shriner felt only sadness and resignation as his team broke out the champagne. They were completely out of money -- and out of customers. Adding to the irony, members of a development team from Hitachi arrived for a meeting that had been scheduled weeks in advance.

"I can remember the shock on their faces when I told them that we'd be shutting our doors,'' Shriner says. Afterward, he drove home to Half Moon Bay. The next morning, he went to work in his garden, and that's where he spent his days for the next couple of weeks.

More than a thousand miles away, Paul Nixon called his staff together. Many of his people had been listening to conference calls between Nixon and the team in San Jose. They had been working without paychecks too. Few were surprised when Nixon told them that Exponential was dead. Even so, no one decided to leave. Those who stayed accepted short-term contracts while Nixon worked on a business plan. It didn't take long. On May 23, Nixon gathered his team and said, "Congratulations. We lost a company. Now we own one.'' After some negotiations with top local companies -- and after deciding to work without pay and to max out their credit cards -- Nixon and his team launched their own startup. The company, called EVSX Inc., designs high-performance chips.

Stephanie Dorris and Fran Costa, 56, who was the purchasing manager at Exponential, were among those who stayed behind to conduct a corporate fire sale. "It was just awful,'' Costa remembers. "People were picking over the furniture like we were a carcass.'' Dorris sold Exponential's patents for $12 million. Creditors got paid, and the Exponential team received back wages.

For one brief, cruel moment, Exponential even enjoyed the promise of life after death. An unnamed angel investor came onto the scene, reportedly ready to put $15 million into play. At Shriner's urging, Jim Stair, 44, Exponential's COO, called the company's recently laid-off engineers, most of whom had already found new jobs, and asked a question: If Exponential were resuscitated, would they return to work? Most said that they would -- but with conditions. They wanted to see a new board of directors. And they wanted to see new management at the top.

"It was like a palace coup, and I really couldn't blame them,'' Shriner says ruefully. "Only there was no palace.'' It turned out that there was no angel either. Jeff Thomas thinks that was a good thing. "In the long run, what we were doing didn't matter anymore," he says. "Apple wasn't going to let the clones break away.''

On June 24, 1998, Rick Shriner hosted a barbecue at Poseidon Technology Inc., a startup that he now runs. Poseidon occupies the same space that once housed Exponential. An Exponential sign is still displayed outside the front door. Gordon Campbell, an investor in Poseidon, attended the event, and Shriner got to reminiscing about their previous venture.

"In the end," Shriner says, "it comes down to what we should have done and not done, what we should have known and acted upon. We should have started our Texas operation much sooner. We should have thought more globally and perhaps looked for more partners. Should we have gone to IBM and tried to get them to buy us? Should we have foreseen the ROM problem?''

Those are strategic points. What about the human fallout from the experience? "Some people were really angry at me," Shriner says. "Some people say that I was unduly optimistic, that I led them along." He pauses, trying hard to convey what he is feeling. "Really smart, dedicated, and loyal people with huge personal obligations were saying, 'Give it up, for everyone's sake.' But I just couldn't."

Ivonne Valdes offers her own epilogue. "People really have to understand that it's all or nothing,'' she says. "You can make it big, you can die a slow death, or you can die a quick and violent death. We died a quick and violent death. I'm glad that we didn't get that last round of funding."

Sidebar


Who: Stephanie Dorris
Role at Exponential: CFO
New role: Founder, Beans Plus Inc.
How could it have been different?: "I don't think that we could have done anything differently. We didn't realize that there was a disclosure issue with Apple concerning the ROM, and that became essential to whether we could go forward. How can you change something that you don't know about?"
What did you learn?: "Not to be so trusting. We were dealing with large, respected companies. We trusted them to behave properly."
Would you do it again?: "On advice from the attorneys handling our lawsuit against Apple, I have been advised not to answer this question."

>

Who: Paul Nixon
Role at Exponential: Engineering manager
New role: CEO, EVSX Inc.
How could it have been different?: "Given that Apple had a change in business direction, I'm not sure that things could have been different. We were smart in how we worked with our board to search out every possible way to survive. We poured our energy into making Exponential work until the very end."
What did you learn?: "How resilient people are. After the money was gone, very few people bailed out, either in San Jose or in Austin. We kept working to try to spin threads into cloth."
Would you do it again?: "Absolutely. There was a lot of value in the learning experience. We knew we were taking a risk. That's why we were granted stock options."

Who: Ivonne Valdes
Role at Exponential: Vice president of sales
New role: SAP account manager, Sun Microsystems Inc.
How could it have been different?: "I would have hired Rick Shriner to be president and CEO from the beginning. I would not have wasted time on working with Motorola as a manufacturing partner. I would have worked with the engineering team to make sure that the processor was independent of the ROM."
What did you learn?: "Startups don't have the luxury of time. You have to put your personal life on hold, and you have to dedicate yourself 200% to making your dream a reality. When you win, you usually win big. When you lose, you usually lose big."
Would you do it again?: "Yes."

Who: Rick Shriner
Role at Exponential: CEO
New role: CEO, Poseidon Technology Inc.
How could it have been different?: "I could have turned to Paul Nixon's Intel-compatible team earlier. When you realize that you have to develop a different strategy -- or, in this case, to enter a different market -- you have to do it with a real sense of urgency."
What did you learn?: "Don't squander great ideas and great people on trying to enter a shrinking market. Play in a big market, no matter how difficult the competition may be. That's why there's so much action with Internet companies today."
Would you do it again?: "I am doing it again! Poseidon is doing quite well. I just closed another round of venture funding -- for $5 million to $6 million."

Pat Dillon (pdwolf@aol.com) writes for Fast Company on the culture of Silicon Valley. His latest book is "Lost at Sea: An American Tragedy" (The Dial Press, 1998).

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