»Trips Blog » DON VALENTINE

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A journalist was working on a lifetime milestone story about Don Valentine, the famous VC. I have a long history with him and in responding I ended up with some fun historical material to post here. Much of this is about Don and some is about the early days at Apple and EA.

I spent a decade planning the foundation of EA. I actually planned back in 1975 that I would found EA specifically in the year 1982, which in fact I did. I realized that it would take time for me to complete the education I would need, and for computers to become more available in homes in order to support a market for games. I also wanted to work for a company where I could sell computers into the home and learn how to run a company before founding EA.

As a result I began work at Apple in 1978 and remained there until I resigned on January 1, 1982 – right on schedule. It was while I was at EA that I learned about Don Valentine. The Apple co-founders, the two Steves, had approached him in the early days. They were far too rough around the edges for a VC investment so Don referred them to Mike Markkula. Mike helped them develop a business plan and fell in love with the business. He then guaranteed a $100,000 bank loan, which was Apple’s first capital. By the summer of 1978 when I was hired, Apple had sold the first 1,000 Apple II computers and was able to close a first round of VC money in the Fall of 1978; this included an investment from Don’s firm, Capital Management (the name prior to the use of the name Sequoia).

What was odd is that Don sold out their position in 1979. They got a nice return but they missed out on more than 100x more return they could have had within a few years. Steve Jobs and I had a big laugh about it at the time because we agreed that they were making a mistake. But I found it fascinating and was curious about this person who was smart enough to get into Apple early but then found something he didn’t like and got out fast, and too early. They probably thought that Steve was out of his mind. That’s what most of us thought. My first week at Apple I said to Mike, “we have to do something about that”, and pointed to Steve. Mike agreed, and then explained to me that I should appreciate the more civilized 1978 version of Steve and noted that in 1977, Steve had been as uncivilized as Tarzan (postscript: today I consider Steve to be the most remarkable CEO in history).

After I resigned from Apple, Steve Jobs and Mike and others twisted my arm and made a lot of promises and I felt bad about leaving and agreed to un-resign for a period of time to see if things would improve. I felt I owed them that much; they had believed in me and had given my career a tremendous boost. Soon thereafter I read an article about Don in an in-flight airline magazine. One anecdote mentioned that Don was so tough that one time a visitor in his office got so nervous that Don made him pass out on the floor. I decided that I just had to meet Valentine, and figured that he might be the kind of disciplined, tough thinker that would be a good board member for my new company.

I got an appointment and went to see him in February of 1982. I expected him to tell me that I wasn’t finished at Apple and should follow-through on my projects there as a responsible adult (the business value system at the time). Instead he told me he liked my ideas for EA and told me I should leave Apple as soon as possible. He offered me free office space in his office which was then a far smaller office in the back at 2200 Sand Hill Road (not the current and famous 3000 Sand Hill).

I deeply appreciated what I had gained from my time at Apple and felt obligated to try to make things work, but my heart was not in it – it was 1982 and it was time for me to found EA!! So I left Apple for good in April of 1982. I worked at home in my home office, began traveling and having meetings and working on contracts and then on my own I incorporated EA and funded the company officially on May 28, 1982. I put about $200,000 in cash, equipment and software tools into it and the company lived on that for the rest of the year. I continued to make further plans in June and July and one of them is that I took Valentine up on his offer and we agreed that I would have a small office at my disposal beginning in August. By this time I had most of the founding principles and strategies for the company figured out. Being in an office building made it easier to begin hiring employees so I made offers to several people and the first 3 joined in August, then another 2 in September, 2 more in October and another 3 in November. I got offers from many VC firms to invest and spent time playing them off against one another; it was far from conclusive that Valentine would even get into the deal. I had to use Brook Byers and John Doerr of KPCB to set a more competitive price by making it clear that KPCB would not get in the deal at all unless they did so. Valentine did not like the price but he went along with it and I let Valentine take 50% of this first round; KPCB had 25% and Sevin Rosen had the other 25%. Unlike most Founder/CEOs, I was not dependent on getting VC money to start my company; instead it had already been founded months before and I could continue to fund it myself indefinitely. So I was able to take my time and get better terms. I was also generous with some early employees including making a personal loan to enable one of them to buy the stock I offered them. Frankly, I was pretty naïve at the time and wasn’t afraid of anything simply because I did not yet have enough exposure to failure. It helped boost my confidence that the VCs were so interested.

In the beginning of our relationship, Valentine took me to lunch at the Menlo Park Country Club and told me that he was going to regularly tell me what to do. However, he said, if I was only going to do what he told me to do, he was not interested in investing. In other words, he wanted to make it clear that I had better have better ideas about how to run my company than him, or, to quote him exactly, “what the hell would he need me for?” I was very excited to hear this because I have plenty of backbone and was prepared to welcome and utilize his challenges, but found it empowering that ultimately he wanted me to fight for what I believed in. He then went on over the years to give me the fight of a lifetime. It was very frustrating at times but in the end I consider him one of my most important mentors. He and I would agree that he was my, “hair shirt”.

My favorite anecdotes about Don:

1. One day in July 1984 I opened the mail and found a financial report I had sent to Don. He’d pinned it open to a page of the financials and in his famous green pen ink had simply circled two numbers – cash burn and remaining cash. And written, “two months left”. To the top he had clipped his business card in case I was not sure who had sent it, and to avoid the need to sign his name. This was his undiplomatic way of saying that we were about to go out of business! The record shows that we ended up being profitable that very quarter and did not need to raise any capital then or for the next several years. Maybe I was too inexperienced to be properly afraid or intimidated but I laughed at his note because I “knew” we were turning the corner and were about to make it. But most new, young CEOs would have been crushed by such a note.

2. In 1985 we had to make radical changes in our channel strategies and business models and we set out to break several of the precious rules of our new industry. At a board meeting, Valentine basically told me I was crazy and that we were breaking too many rules. I said, “We have to do it, it is the only way”. He acquiesced but was seething. At the next board meeting, we reported our stunning success from these radical moves. Valentine became very emotional and literally pounded on the table with his fist, Khrushchev style, and announced, “We have to continue to challenge convention!” Now, that was more like it!

3. He got me so demoralized later on that I went to his office in consternation that he was only ever giving me negative feedback. He showed no positive emotion and bluntly said to me, “you have a choice; either I can tell you what you want to hear or I can tell you what you need to hear.” I didn’t think it had to be binary but he knew I would opt for the latter.

4. After watching him be a terror in countless board meetings – lying in quiet wait like a crocodile on a shore that everyone knew was going to suddenly leap out and bite everyone in the room – it was refreshing to bump into him socially from time to time where he was relaxed and you could get the vintage Valentine wit without being the target of it. We bumped into each other during a break at the symphony one time. It was the kind of program where the first piece was a modern one that the performers were no doubt excited about playing, but the patrons had all come for the famous Beethoven’s 6th that would follow. The piece was barely melodic and hence I asked Don for his opinion. “I didn’t like it,” he said. “It interfered with my sleeping”.

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  1. wes miller
    September 4, 2009

    fascinating! and i never read blogs:) I especially liked th part about playing the VCs against one another. They need to have that done on a regular basis, lest they succumb to delusions of grandeur.

  2. September 7, 2009

    Phenomenally candid post…
    Running the VC circuit can be an excruciating process for a startup and to be in the self-funded position in the best place to be. The dedication you’ve had over the years obviously shows through in the companies you’ve grown and something that is hard for a lot of entrepreneurs to stomach.

    Challenge convention – isn’t that the truth…

  3. Carolina Torres
    September 8, 2009

    Trully compelling post. Really an eyeopene for everyone in the biz. However, lucky you at the time for being young and inexperience and unknowingly being strong enough. For all us young followers out there posts like this are best mentor material! Cheers and regards to Valentine…if you see him at the symphony again!

  4. November 24, 2009

    I really enjoyed reading your blogpost, keep up posting such interesting posts.

  5. February 29, 2012

    Enjoyed every bit of your blog. Awesome.

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