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It s a market that s disappeared now completely, but workstations were personal computers that sat on a desk of an engineer or scientist that they could use for computing rather than having to send their job to a centralized computer facility, run it, and then get the results back the next morning Workstations began to really take off in the mid 80s Sun Microsystems and Apollo Computer pioneered that As that was coming, the personal computer was getting faster and faster all the time So many of our large customers Bell Labs for example stopped buying the large computers like Vaxes and our kinds of machines and started buying workstations and personal computers At the same time that was going on, the Cold War was coming to an end Many of our customers were defense-related.

Major customers were large intelligence agencies in the United States, for example, or other defenserelated applications So that market dried up Revenues turned down very steeply in the late 80s..

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We have a couple of places that are a little bit larger, that are like venues, that will have, you know, they do the whole wedding package thing and then they have six or eight people in the office, but mostly it s just one person in a single office Smolin: So was this the first product that you commercialized J Murphy: Yes Smolin: Most of these things are sweat equity Did you have to invest any hard dollars to get it to the point where you could start to sell it D Murphy: Oh yeah J Murphy: Oh yeah, oh yeah Our computers needed hardware upgrades and more computers We needed lots of software D Murphy: The first version was pretty much just what we had, was Access 97 And then we ran into some issues because we were outputting reports, and at that time Snapshot format was popular.

Livingston: How did your investors react Gruner: We had a situation where a lot could be learned about the pros and

cons of using venture capital. Things were going south quickly and badly. We at the board level had to make a decision as to what we should do. One part of the

board was saying, Let s take our time; work this thing through; live with this for 2 or 3 years; get things fixed; transition into another segment, and move in that direction Another segment of the board was saying and I don t mean this in a derogatory way Let s take more risk, roll the dice If it works, it will work out big, and, if it doesn t, it disappears and let s move on to the next deal One of the things that I think is dogma within venture capital is that you don t want to manage what they call the living dead.

I don t know what the numbers are now, but back when I was working with venture capitalists, their rules of thumb were: typically one out of ten companies is a really big hit; roughly three out of ten go belly up pretty quickly, and you get rid of them The other five to six are what they call the living dead They grow nicely, organically, but don t generate spectacular returns, and they take management time and energy Those are the kinds of companies they prefer not to deal with, because it simply doesn t make sense They have a fiduciary responsibility to their limited partners to generate a significant return, so they want to deal with firms that will tend to do that The lesson I learned at Alliant in dealing with venture capitalists was that they re quite impatient with a difficult situation They have to be.

There was an issue there, and some versions could not put out Snapshots There was a second edition and a first edition So at that time, and she was just getting ready to release this at a trade show in like three weeks, when we realized this that it wouldn t work for some people s computers So then it was go buy a new computer, go buy Office XP at that time, Office XP Professional and install her, go buy the Wise installer and the SageKey scripts So it was new computers, new Office, and all that stuff So there was a lot of money there Smolin: So to get to the starting line, how much did you invest D Murphy: I d guess for that go around, just to do the development it was like five grand Smolin: OK J.

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