Failure Is an Option

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?' ''