what’s inside Editor’s Note How do you raise money for your new life-sciences venture when you’ve been turned down time and again? Think big, says Helicos’s Stanley Lapidus (page 6). Huge, even. How do you build the right team for your startup? “It’s common to hire people you know,” says Brightcove’s Jeremy Allaire (page 8). “I didn’t do that.” How quickly do you staff up? “If you strongly believe in your idea,” says JumpTap’s Dan Olschwang (page 11), “I believe in going full speed ahead.” Why would you start yet another company when your success in technology has given you the independent means to indulge your real passion: racecars? Because, says Optaros’s Bob Gett, the lure of the open source model was as irresistible as the open road (page 16). Think big. Be smart. Start strong. 2 risks&rewards Keep going. Those are the mantras When the Money’s Gone Plus: It’s easy to be green; heading fueling growth across an industry that, offshore; due diligence on open software; dealing with data experts agree, is catching a new wave. breaches; Stan Lapidus’s big ideas; careful dealmaking; and the They’re also the mantras behind this skinny on D&Os, M&As, SOX 404 and document retention new magazine—which we hope you’ll find instructive, useful, inspiring and 8 COVER STORY even entertaining. Building the Team How—and whom—to hire (hint: not your friends), what—and how—to pay (hint: stock options have lost some luster). Plus: Weighing the intangibles; casting a wide net; navigating FAS123R

Winter/Spring 2006 14 interview A Custom Publication Produced for iRobot’s Helen Greiner and Colin Angle “A key element of Goodwin Procter LLP entrepreneurship is not taking things too seriously, while always by Leverage Media LLC believing you can make it. And if you don’t, you are always Dobbs Ferry, NY employable elsewhere.” Editor: Michael Winkleman 16 TECH4TECH Art Director: Carole Erger-Fass Production Director: Unclogging the Blog Plus: The move Rosemary P. Sullivan toward personalization; Bob Gett’s new ride; Copy Editor: Betty Pellet seven good reads; investing in insecurity; Cover Photo: Chip Simons protecting against consumer class action law- suits; and legal challenges for content providers © copyright 2006 by Goodwin Procter LLP. 20 a look back All rights reserved. The 30-Ton Big Idea Sixty years ago, John Mauchly and J. Presper Eckert led a team that launched the ENIAC—ushering in a brand new era in technology. And then they moved on.

This publication may be considered advertising under the ethical rules of certain jurisdictions. risksBY JEFF HEILMAN AND PETER& HAAPANIEMIrewards TREND WATCH: More Greenbacks for Green Energy

WHAT TO DO WHEN YOU ARE 69 Cleantech D&O ISSUES: Equity Investments RUNNING OUT OF MONEY 55 Total Equity 49 $425.4 M At a Minimum Capital Invested $368.8 M in Cleantech $311.7 M Seek Counsel 8.1% % of Overall Just being on a company board is Your revenue is dropping, your debt is est course is to act on the least suspi- Equity Capital risky in the Sarbanes-Oxley world rising, and payroll is coming due. You cion of distress, for inattention to the Too often, says Goodwin Procter 6.7% Invested in Cleantech of increased scrutiny, and venture may not know it, but you may have legal obligations of insolvency can bring business law partner Lizette Pérez- 6.1% capital and private equity firms entered the insolvency zone, and shad- severe penalties.” Deisboeck, companies are already in with multiple board seats can be owy, potentially dire times are ahead. the zone before they seek legal coun- Q3 2004 Q2 2005 Q3 2005 especially vulnerable. What to do? Apply Business Judgment sel. “The options for managing insol- SOURCE: CLEANTECH VENTURE MONITOR, THE CLEANTECH VENTURE NETWORK Fortifying traditional compa- Insolvency requires that the fiduciary vency decrease the longer you wait,” ny indemnification, Directors and Recognize You’re In the Zone duties of directors and officers expand she says, “and companies frequently Officers liability (D&O) insurance The first challenge is recognizing that from driving shareholder profits to chase risky salvage operations. The Kyoto Protocol, global warming, the war in Iraq, and concerns about is essential for protecting board you are close to, or already in, the zone. ensuring the best interests of all corpo- “Early involvement of counsel the energy infrastructure in the U.S. are among the drivers bringing hydro- members from personal liability. This is a gray area, says insolvency and rate constituents. That means shifting allows you to design and monitor an gen-powered cars, organic food, fuel cells, energy-efficient skyscrapers business reorganization specialist Gina duties to maximize recovery of credi- informed plan that can protect directors and other clean energy products and services to the mass market. Roger  Young companies should not Martin, a partner at Goodwin Procter. tors. “Rigorously apply the business and officers while fulfilling the duties L. Krakoff, a partner at Boston-based technology VC firm Sigma + wait to purchase D&O insur- “Courts apply two tests,” she explains. judgment rule—good faith decision- owed to shareholders and creditors,” Partners, notes that “the Green Revolution and energy conservation will ance but should have some min- “If liabilities exceed assets, you have making—to all corporate moves,” she adds. “Do you indemnify directors attract investment dollars in 2006,” adding that GE, for one, “has invest- imal coverage early on. ‘balance sheet’ insolvency. ‘Cash flow’ advises Martin, “for now, directors and and officers and carry sufficient liability ed in alternative energy sources such as wind power.” In addition, what insolvency means you cannot meet con- officers may face potential personal lia- insurance? Is your minute-keeping and has come to be called Cleantech is experiencing significant investment  More venture capital and pri- tinuing financial obligations when due, bility for any action that disfavors the reporting up to date? Will investors on growth in the alternative energy and water purification segments. Also vate equity firms are requiring such as loans or payroll. There is no creditors, which can include loans from the board who are now also creditors be focused on agriculture, manufacturing and transportation, clean technolo- their portfolio companies to standard test, however, and courts or the company, inflated salaries, dividend conflicted? Counsel knows how to assess gy companies pulled in around $56 billion worth of global investment capi- have at least some minimal accountants frequently find insolvency payments to shareholders and failure to the risk factors.” tal last year, according to industry tracker New Energy Finance. Key Q3 coverage at the outset—to be by one test but not the other. The wis- pay taxes or wages.” 2005 statistics from The Cleantech Venture Network’s Cleantech Venture evolved over time—with some Consult with Creditors Monitor clearly show that VCs are banking on a cleaner, greener future, as N O D

even offering policies through While funding options such as bridge Cleantech came in sixth overall for total U.S. venture investments in the R A E R

their own insurance brokerages. loans or second liens may save the quarter, the fifth in a row showing growth. —J.H. X E L A

company, says Martin, writing per- Y B

T R

 There is no formula for how sonal checks is inadvisable, and com- A H much coverage to carry, but the panies should consider the prospect C basic test is how much risk the of restructuring in bankruptcy. board is willing to tolerate. “Once in the zone,” she adds, “the i n Litigation risk and the likeli- emphasis shifts to preserving corpo- 4 Open Source Software 6 Lessons from the Front hood of major transactions are rate assets and optimizing creditor What it really means for you Stan Lapidus on his big ideas among several factors dictating recovery. Consulting with creditors s

actual coverage amounts. before making a move such as bank- The SOX Hop Document Retention i

ruptcy is often advisable.” Section 404, the new pressure point Minimizing surprises and liabilities d  For companies being sold or Overall, says Pérez-Deisboeck, be

going under, a multiyear run- realistic. “If negotiating a deal— 5 Offshore Development 7 Anatomy of a Deal e off policy provides continuing which may or may not close—can The ins—and the outs From the terms to the timing protection for directors and potentially return 50 cents on the officers while riding out the dollar, but winding down will return Data and Privacy Mergers & Acquisitions statute of limitations on possi- 20 cents, in many cases, the prudent Into the breach Creating the perfect union T T O

ble claims. —J.H. C decision will be, take the 20. Last- S

Y O

R minute saves are rare.” —J.H.

2 big ideas big ideas 3 risks&rewards

WHAT OPEN SOURCE REALLY TAX ISSUES: Charting the Offshore Path MEANS FOR YOU Complying For growing companies, the option of off- “Many providers will set up external dash- shoring software or product development boards that let you see where things stand with SOX 404 holds the promise of low-cost resources and problems that come up.” While open source software continues IP infringement, which can leave a and fast 24-hour work cycles. To make the to spur innovation and save individu- company responsible for defending Startups and public companies most of these relationships, says John Balancing domain expertise and exclusivi- als and companies money and develop- itself against any claims. alike are subject to a complex array Egan, a partner in Goodwin Procter’s ty. It’s important that vendors have both ment time, potential users need to If a commercial license agreement of tax obligations. Flow-through Technology Companies Group, it’s impor- the technical and industry expertise consider certain legal issues when does not offer sufficient protection treatments, royalty-producing tant to consider several factors: required. At the same time, however, a evaluating an open source project for against IP claims, an end user can software licenses, and debt-equity vendor with the right qualifications is like- internal development or inclusion in assess vendor risk by investigating characterization of corporate Tighter management processes. “If your ly to be working with similar clients—that products. the vendor’s reputation and business instruments are just the tip of the management processes are kind of catch- is, your competitors. Companies need to determine the best fit for their organiza- IP legal strategist Ira Heffan, an practices. “The inquiries can include tax iceberg in a sea of tighter as-catch can, you can probably make do if weigh the risks and benefits of working tion on the vendor-size continuum. associate at Goodwin Procter, says determining how much care the devel- scrutiny. Section 404 of the everyone is down the hall from each with such vendors, and sometimes, con- that companies should review the spe- opers exercised in avoiding infringe- Sarbanes-Oxley Act (SOX 404) is other,” says Egan. “But if you’re working sider using limited exclusivity agreements. An exit strategy. “If things don’t go well, cific terms of the agreement that ment and if they would be in a position one such new pressure point, with someone who’s 7,000 miles away, you need to know how to get out of the accompanies the software in the con- to modify or replace infringing code if requiring public companies to testi- you need clear-cut development processes The vendor’s size. A larger vendor is more relationship while still keeping your devel- text of its intended use. “Understand there is a problem,” notes Heffan. fy to internal controls over financial and the people in place who can manage likely to be stable over the long term, but opment efforts going smoothly,” says the level of risk you are taking in With open source, there is potentially reporting in their annual reports. these with a fair amount of rigor.” a smaller vendor is more likely to pay Egan. “Also, companies often start with strength in numbers. “End Designed and overseen by the prin- close attention to a smaller client, such as an outsourced service provider, but devel- users can rely on the pro- cipal officers and the board, SOX Staying in close touch. “Make sure you a startup. “You need to be realistic about op their own offshore capabilities as their ject’s community of develop- 404 sees to the reliability of finan- have a lot of visibility into what is happen- how important you’ll be to a service needs grow. Either way, you want to struc- ers to work together to cial statements and reporting in ing on a day-to-day basis with the vendor, provider; it may make sense to use a mid- ture the contract—and the processes—so defend against infringement accordance with accepted account- with the appropriate reporting procedures dle-market provider so you have enough you can manage the situation if you need claims,” he adds. ing principles, including informa- and change-order processes,” says Egan. sway,” Egan notes. Companies need to to unwind the relationship.” —P.H. A company should also tion on any material weaknesses. be mindful about its own IP rights. “It may not be possi-  Time- and labor-intensive, ble to protect, say, trade SOX 404 review and compliance TURNING UP THE HEAT ON PRIVACY secrets that are incorporated should be institutionalized, into open source software,” governed by a calendar covering warns Heffan, “or license all annual obligations from tax Reports of data breaches and the been proposed at the federal level. The Managing vendors and contracts agreements that can grant control testing to external con- resulting loss of personal information existing laws vary, making compliance closely. “Not only do companies need rights to your patents. A sultations with auditors. have become all too common, and challenging, says Jacqueline Klosek, an to ensure that they, themselves, have growing area, too, is manag- according to the Privacy Rights associate in Goodwin Procter’s implemented adequate technical, ing company contributions to  All tax accounts should be Clearinghouse, more than 53 Business Law Department and administrative and organization securi- open source code.” reviewed quarterly, and the million personal records a member of its Privacy and ty measures, they need to require the incorporating a vendor’s software into Open source software is also reasoning behind all tax deci- were compromised in Data Security Task Force, same of their service providers. And your own products,” he says. “For increasingly a due diligence item in sions should be recorded, in 2005. Those kinds of “but at a basic level, they this goes beyond contractual require- example, one vulnerability that most corporate transactions, and Heffan anticipation of outsider review reports have stirred a new require companies to notify ments,” says Klosek. “Companies also end users face in any software license says that necessitates careful over- and interpretation. interest in privacy-oriented consumers, either directly or need to do their due diligence and is exposure to third-party IP claims sight of all third-party dealings. legislation across the U.S. through mass media, regarding investigate all proposed service arising from use of that vendor’s soft- “Careless use of open source software  A project-management approach In response to the recent any breaches they suffered.” providers thoroughly. Recent enforce- ware. As a result, the provisions pro- can be costly,” he says, “and so compa- is also critical, as is staying flurry of data breaches, a majority of Klosek suggests taking a multi-lay- ment actions suggest that this is going tecting end users against patent, nies should institute internal proce- abreast of all tax reporting U.S. states are either considering or ered approach to keeping personal data to be an area of more intense focus.” trademark, copyright and trade secret dures to facilitate the review and requirements through ongoing have passed new laws that require com- safe. Steps to consider include: Training employees. Simple errors claims are often heavily negotiated.” ongoing compliance with license training and educational pro- panies to take action in the event they Auditing security procedures and by inadequately trained employees can T T O

Open source software licenses typical- terms, as well as evaluating risk fac- grams. —J.H. suffer a data security breach. More- making sure the most up-to-date secu- lead to huge problems for an organiza- C S

Y O

ly do not indemnify end users against tors in third-party software.” —J.H. over, a number of similar bills have rity mechanisms are in place. tion, Klosek notes. —P.H. R

4 big ideas big ideas 5 cover story building BY PETER HAAPANIEMI

When entrepreneurs start a company, they often turn to a logical place for help—their friends. the “It’s common to hire people you know, because there’s trust and you can communicate well with them,” says Jeremy Allaire, CEO of Brightcove, the Cambridge, Massachusetts-based online tele- vision and video distribution company. But when he founded Brightcove in 2004, he adds, “I didn’t do that.” team Instead, he gave a lot of thought to the kinds of executives the new The right people Wcompany would need and cast a net that went far beyond those he knew personally. “I specifically wanted to hire executives who had come out of the industry I was going into and who complemented me. for the right price in the I hired a top manager out of Comcast who had specific domain exper- tise that would bring a lot of credibility with the kinds of customers we right place at the right time. . . were going to be working with. I found a business development execu- tive out of News Corporation who had worked in the broadcast, satel- lite and content industries—again not someone I had known.” Allaire’s careful approach to building a team was based on his broad—and successful—experience with new companies. In 1995, he co-founded Allaire, a pioneer in Web-based application hosting, and he has been chief technology officer of Macromedia and entrepreneur-in- residence at General Catalyst Partners, a venture capital firm. At

PHOTO BY CHIP SIMONS

8 big ideas Compensation: ble in place right at the start. “If you strongly believe in your tax consequences could be very bad,” says Webster. Similarly, Stock Salary Other Compensation idea, I believe in going full speed ahead,” says Dan Sarbanes-Oxley has made the traditional practice of loaning A Premium for Olschwang, CEO of JumpTap, a Cambridge, Massachusetts, money to executive officers of a public company a criminal Chief Exec firm that provides a system for using wireless phones to offense, “and that law kicks in the day you file a registration Outsiders Founder search for online content. Quite often, he says, startups “get statement with the SEC, which is months before you actually Non-Founder the first two customers and then they get a little bit stuck go public,” he says. If such loans are in place, the company In building a team, the issue because they don’t have enough people to handle more needs to eliminate them before filing, and executives are not CFO prospects, and then they miss other opportunities—and com- always in a position to pay them off. of executive compensation Founder petition always appears.” With a more complete team, he When considering the use of stock in a compensation often comes down to the com- Non-Founder explains, the company will be in better position to “run fast package, entrepreneurs need to think about how far to extend after the first few customers” and then keep on going. ownership. Hadden says it’s not unusual to see an entrepre- panies and the individuals Chief Tech When building the team, founders quickly find themselves neur, driven by a spirit of inclusiveness, offer stock options to involved. However, notes Founder facing the issue of compensation—and the sooner they start virtually everyone in the company. “That may be laudable compensation expert Jack Non-Founder addressing it, the better. “Think about it right from the get- from an incentive perspective and getting everybody to be Dolmat-Connell, many start- Sales Exec go,” says Scott Webster, a partner specializing in executive rowing in the right direction, but it can also cause problems,” compensation at Goodwin Procter. “That’s when you can add he says. In an LLC, for example, a ups find that attracting Founder a lot of value by doing things a little bit differently.” person can’t be both an employee and Non-Founder non-founders to top roles For example, Webster explains, entrepreneurs who form an interest holder. “At one company I

requires paying them higher 8 6 4 2 0 0 $50 $100 $150 $200 $250 an LLC can provide executives and employees with “profit know, that meant that everyone, even % of Stock Salary/Total Compensation interests,” rather than stock, giving those team members a the person answering the phones, salaries and bonuses—while N potential financial reward without granting actual ownership. wasn’t an employee, but an owner who O D R

retaining larger shares of the A E In the early stages of a startup, those interests are, if proper- had to do their own tax returns, file R

SOURCE: DOLMATCONNELL & PARTNERS X E

L ly structured, “technically worth-

companies for the founders. A

Y B less from a tax perspective,” says T R A H

C Webster. The executive can declare them as income immedi- ately, using an 83(b) election, Brightcove, he now has backers that include AOL, on friends and colleagues. That’s not to say you should never rather than down the road when Finding the Right Fit IAC/InterActiveCorp, The Hearst Corporation and Allen & hire someone you know—just make sure he or she is right for their value has increased. When Company, and in November of 2005, Brightcove signed a syn- the job. “Often, you see entrepreneurs putting friends into the interests are eventually cashed In a startup, executives need to work closely together to drive the company for- dication and distribution agreement with AOL. positions that they’re not really suited to, and they’re not in—typically, at a certain revenue ward—which makes it critical to weigh the intangible qualities of personality It’s not unusual for entrepreneurs to focus on the technol- being set up to succeed,” says Jeffrey Hadden, a partner who stage or when the company is and style when assembling a team. Factors to consider include: ogy rather than the people issues that go into creating a heads up the Technology Companies Group at Goodwin sold—the profits are taxed at the strong team. But like Allaire, those with experience know Procter. “Remember that there are limits to how much people lower capital gains rate. The point, ENERGY AND DRIVE: “I look for people who are motivated. In my opinion, motiva- that having the right people in the right places is key. It can can really reinvent themselves. Be realistic about how much says Webster, is that properly tion takes precedence over experience,” says Dan Olschwang, CEO of JumpTap. help you avoid legal and tax problems down the road and someone will change to fit a new role.” structured arrangements let “A company will hit obstacles and difficulties, and what determines whether you make sure team members stay motivated. It can be instru- At the same time, however, it’s important to give execu- entrepreneurs get more bang for can recover or not is people’s motivation and ability to cope with it.” mental in determining whether a company can build momen- tives enough of a challenge. “I hire people who are very sea- their compensation buck, because tum and find success with investors and the marketplace. soned and have significant domain expertise, but I like to hire more of the money goes into the A BIAS TOWARDS ACTION: “In small companies, when you are limited in them into roles where they are going to be stretching,” says executive’s pocket. resources, you want people who are execution-driven,” says Olschwang. “What Finding—and Paying—the Right People Allaire. “I like to get people who can scale and be leaders, but The traditional stock and stock makes the difference between having a great idea and making it a successful who are going to have to step up. I find that you get a differ- options do not have the appeal company is your ability to execute.” The make-up of an effective executive team depends on the ent kind of energy from someone when they feel like they’re they had during the dot com days. company, the technology, the marketplace and the entrepre- going to prove themselves and have an opportunity.” But they have been coming back COMPATIBILITY: Brightcove CEO Jeremy Allaire tries to hire people who are neur involved. But in general, experts say, it’s wise to adopt Startups often build out the executive team gradually, but into the compensation picture, “exceptionally smart and exceptionally hard working, but also people who are Allaire’s approach of looking far and wide and not just relying in some cases, it may be worth getting as full a team as possi- says Webster. “People still want basically nice. It helps you make a place where everyone wants to go to work some upside compensation, but every day.” they are willing to give up some of it for the guarantee of a salary.” INTEGRITY: “I look for honest and straightforward people,” says Olschwang— Focusing on the people In addition, the stock compen- and he has a sound business reason for doing so. “You create an environment sation picture has become more where, if people don’t like something, they come and tell you. That keeps you complex, due to changing regula- open to fixing things, and lets you deal with problems in time.” issues up front can help you avoid tions and accounting rules (see sidebar). “If you’re not compliant legal and tax problems down the road with all these new regulations, the

10 big ideas big ideas 11 Early-stage hires often ASSESSING YOUR OPTIONS A number of legal changes have Legislation known as the American valuation of the company and to come from firms where they have signed made executive compensation more Jobs Creation Act of 2004 made a carefully document board delibera- complicated—especially the use of change to the tax code that puts tions concerning stock option agreements protecting ideas they worked on stock options. Goodwin Procter’s broad restrictions on deferred com- prices,” Webster says. Scott Webster points to two areas pensation, including stock options. One result of these changes is entrepreneurs should know about: “However, these restrictions do not likely to be at least a partial shift to Stock options as expense: apply to options as long as the the granting of actual restricted quarterly estimates, and all of that—which was pretty compli- Finding the Chemistry Traditionally, stock options were options are granted with an exercise stock in compensation plans, says cated,” says Hadden. basically free for the company offer- price at least equal to the fair mar- Webster. The new accounting costs Perhaps more troubling, the broad sharing of stock can Compensation is a key issue in building a core team, but ing them, says Webster: “There was ket value of the stock at the date of of options reduce their appeal rela- mean having to deal with a variety of employees when it other factors come into play, especially as the company grows no accounting charge—companies grant,” says Webster. If the option tive to restricted stock, he says, and comes time to sell the company. “There have been too many and expands. For example, entrepreneurs should be sure to: could give them out without any hit price is below fair market value, it restricted stock is not subject to the times where the company needs to go to all the option holders Consider prior employers’ rights. Often the hires at an to the income statement.” Under will be taxed as it vests, resulting in new deferred compensation rules. in order to get their consent to do what it wants to do,” says early-stage company come from firms in the same or similar new accounting rules that took effect “phantom income” and an additional What’s more, he explains, start- Webster. “It’s a real nightmare, and it can really hold up a industries and are likely to have signed agreements protect- for most companies on January 1— 20 percent tax for the recipient. All ups are likely to do the same thing deal.” ing ideas they worked on at those firms. “These agreements known as FAS 123R—that’s no of this makes the determination of that public companies typically do, In general, determining compensation can be an involved typically say that any IP that employees created at their longer the case. Stock options must fair market value key, and the IRS is and grant shares outright, rather process, but whatever approach you choose, put it in writing, prior employer that relates to that business—such as ideas, now be treated as an expense, scrutinizing those determinations than sell them to employees. That says Webster. “I’m amazed at how often people just go on source code or algorithms—belongs to that company,” says regardless of their structure. more and more closely. “So there’s a way, employees who cannot afford to verbal promises like, ‘I’m going to take good care of you.’ Mark Macenka, a partner in Goodwin Procter’s Technology Deferred compensation: lot of pressure to get a third-party buy the stock can be included. Properly documenting all the compensation stuff forces you Companies Group. “Sometimes, the agreement can capture to think about the most efficient way to compensate people, ideas the employee has worked on at night or on weekends.” and it helps manage everyone’s expectations, which makes Protect yourself. Make sure your key employees sign things much smoother later on.” non-competition agreements and that all employees sign

invention and nondisclosure agreements. Also, agreements hired great professional managers with great domain exper- with consultants and contractors should include similar pro- tise, but we brought in a culture that I wasn’t happy with.” tections. Macenka explains that consultants generally own Those managers had a hierarchical style, rather than the col- their work, unless it is specifically spelled out otherwise. laborative approach Allaire wanted. Looking Far and Wide Hire a hiring pro. As the circle of employees grows, it Goodwin Procter’s Schnoor recommends thinking twice can be helpful to bring in a dedicated HR professional, either before lifting a team out of another company. Aside from the as an employee or on a contract basis. That person can bring risk of legal retaliation, such a move can simply transplant an In today’s business environment, start- she may not be but it’s worth evaluat- discipline and focus to the hiring process, as the founders existing culture into the new organization. “As your organiza- ups need to cast a wide net to get the able to get back ing. As Macenka notes, become less hands-on. “You really have to work hard to avoid tion grows to include more people, you will then come up with best executives and employees. “It’s a into the country “venture capitalists will falling into the pattern of bringing in less-talented or less- a split between the folks who worked together at that prior global talent market,” says Goodwin easily. You could like the fact that you’ve motivated people as the company grows and then winding up company and those who came in later,” he says. “It can lead Procter partner Mark Macenka. burn a lot of cycles trying to fix that.” thought about these kinds of alterna- with a bunch of not-so-great people trying to execute against to an us-versus-them atmosphere, with a lot of people feeling While there is much technical tal- Federal law also requires compa- tives.” the founding vision,” says Bill Schnoor, a partner in Goodwin like outsiders.” ent overseas, bringing those people on nies sponsoring H-1B employees to Dan Olschwang, CEO of JumpTap, Procter’s Technology Companies Group. Finally, entrepreneurs should not hesitate to fix problems board at U.S. firms is not always sim- pay the going rate for their work, even agrees that it’s wise to look globally Practice continuous improvement. “You need to con- that arise. “I believe in firing people,” says Allaire. “If some- ple. H-1B visas, which let U.S. compa- when there aren’t projects for them— for talent—but not to be too virtual stantly re-evaluate the lifecycle of individuals in the company, thing isn’t working and is creating issues, you can let the per- nies hire educated foreign profession- a requirement that led one computer early on. “Even though the search is and the scale and challenges that you have,” says son know and give them a shot, but you shouldn’t hang on too als, are limited to 65,000 annually, services firm to pay $2.25 million in global, the work should be local,” he Brightcove’s Allaire. “People move on. Or they may have had long because you think they have guaranteed employment.” with another 20,000 for foreign back wages and a $400,000 fine. says. Several members of his executive five roles in the first phase of the company, and now you need Building the right team requires careful attention and nationals earning advanced degrees at Entrepreneurs should assess the team re-located so they could work them to focus on just one or two in the next phase.” often, ongoing care—but it can pay off. Having these team U.S. universities. value of offshoring some work and face-to-face—including Olschwang, Those who have been through the team-building process members working in the right culture is important for any Companies that employ foreign weigh the cost advantages against the who moved from Israel. “For a start- also recommend that founders remember that hiring is not company. But, says Allaire, “it’s especially important for a nationals need to maintain a high level risks of more-complicated project up, it’s good for [the team] to be seat- just about skills—it’s also about creating the chemistry that startup, because every team member counts for 10 times of legal diligence, says Macenka. “For management and, in some countries, ed in the same office, to go to lunch will make the company work smoothly. what a big company team member does.” And unlike execu- example, an employee may be on an limited protection of any IP that they together, and to spend out-of-meeting Allaire says that early in his career, “one of the mistakes tives at big companies, entrepreneurs have the golden oppor- important business trip overseas, but share with a partner. For a small com- time together. That’s where you grow a we made was that we didn’t pay enough attention to the core tunity to start with a clean slate—and like Allaire, build a if his or her visa isn’t in order, he or pany, offshoring may seem unlikely, culture and a spirit of teamwork.” cultural tenets that were important to us as founders. We team that will bring competitive advantage.

12 big ideas big ideas 13 BIinterviewfinal.lay 1/30/06 2:02 PM Page 15 interview HELEN GREINER, Chairman, and COLIN ANGLE, CEO, iRobot

How was iRobot formed, and what were your early challenges? COLIN: Dr. Rodney Brooks was pioneering artificial intelligence work at MIT’s robotics lab. When I applied to work there, he looked at my long list of childhood robot projects and talked about “epiphany.” We built the walking Genghis robot together, became friends, and when he proposed that we start a company, calling it Seeing Star Wars in 1977, young Helen an “adventure,” Helen and I jumped at the opportunity. Greiner was drawn to R2-D2, the intre- HELEN: In the beginning it was bootstrapping, credit cards and hard work, seven pid droid whose human-like traits days a week. Investors would not come until 1998. Having been grad students, though, we were conditioned to hardship. inspired her to create real-life robots. COLIN: Cash flow was our biggest challenge. Our initial revenues, from research Around the same time, Colin Angle, labs, barely covered salaries and expenses. Since our employees were less risk-tol- keen to “build cool stuff,” was experi- erant and certainly less fanatical than Helen, Rodney and I, we knew we never could miss payroll. And we never talked about quitting, even when the money was Smenting endlessly with LEGO and tight. A key element of entrepreneurship is not taking things too seriously, while Erector Sets. always believing that you can make it. And if you don’t, you are always employable Greiner says that while robotics elsewhere.

was still “science fiction” when she and How did you evolve from technical wizards to business pros? Angle met at MIT in 1985, the school’s COLIN: Helen was instrumental in securing contracts with the U.S. government for Artificial Intelligence Lab was making military applications. With those contracts came a greater emphasis on financial dis- cipline, and that’s when we started maturing as a company. With appreciable rev- advances in the field. After connecting enues and growing credibility, we were better positioned to attract investors. several times on a campus “rampant HELEN: We had a dual personality for a long time, slowly but consistently growing with entrepreneurship,” they began col- the military side of our business while exploring commercial opportunities. We worked with Hasbro on robot toys, Johnson Wax on supermarket-floor cleaning laborating. robots and Halliburton and Baker Hughes on energy solutions. The sum of these Today, robotics is a scientific reali- experiences left us highly proficient in robotics and low-cost mass manufacturing. ty, and for Greiner and Angle, the key We also realized that in order to evolve, it was time to shift from building robots for other companies to building our own products. to their business success. iRobot, the COLIN: We also learned from overcoming skepticism. When we first started talking “The“The spiritspirit ofof funfun ...... company they co-founded in 1990, went about our Roomba Vacuuming Robot, for instance, people were thinking the public in November 2005 and contin- Jetsons. But when we demonstrated the device, and people saw how well it cleaned speaksspeaks toto whowho wewe havehave been,been, andand the floor, we figured out our key to success. Consumers respond to functional, prac- ues to gain worldwide recognition for tical, fun, and affordable products; those became our criteria for creating robots. its behavior-based, artificially intelli- alwaysalways willwill be,be, asas aa company.”company.” gent robots. Greiner and Angle spoke to Genghis is in the Smithsonian; Roomba’s floor-washing brother, the iRobot Scooba, was named one of Time magazine’s Most Amazing Inventions of Big Ideas in Technology about the early 2005. Where do you go from here? years, about saving lives in addition to HELEN: Ariel was designed to clear amphibious mines. Our PackBot Tactical Mobile making lives easier, and about the Robot searched for survivors after 9/11 and scoured buildings and caves for ammu- nition and enemy forces in Afghanistan. In Iraq, PackBots search for roadside prize for winning the pie-eating con- bombs so our soldiers don’t have to. We will continue to make robots that save lives test. —Jeff Heilman and limbs. Wheels and tracks today, perhaps walking robots tomorrow. At iRobot headquarters, ready for COLIN: When we were down at the printers getting ready for our IPO, Mark anything: “I think we would be con- PHOTO BY FRANK RAPP Bettencourt, one of our lawyers from Goodwin Procter, told me, “You know, Colin, sidered adventurous,” said Colin. an IPO is like a pie-eating contest where the prize for winning is more pie.” And “We do snowboarding, paintball, hik- that became the thesis of the speech we gave to the company before ringing ing, canoeing, kayaking, scuba diving. NASDAQ’s opening bell. Afterwards, we celebrated with pie, and people kept send- And I have a petty superiority over ing us more pies. The spirit of fun there speaks to who we have been, and always Helen, because I’ve gone kite board- will be, as a company. ing three times, and she hasn’t.”

14 big ideas risks&rewards

IF I HAD IT TO DO OVER… M&A: Lessons from the Front Keeping Cool in

BY STANLEY LAPIDUS a huge market. Inevitably things chip having strong patent positions. a Hot Climate Starting a new tech business almost away at the available market—you Along the way, I’ve also learned not always requires raising money, and stumble or the market changes or your to mistake the simple for the trivial. Technology mergers and acquisitions this can be a slow, frustrating process. competition is smarter than you gave For example, many of us who have are hot again, leading a pack of U.S. We asked long-time life-sciences entre- them credit for being. technical training tend to undervalue M&A activity that topped $1 trillion in preneur Stanley N. Lapidus, presi- Have a clear value proposition— business concepts because they are 2005, according to FactSet MergerStat. dent and CEO of Helicos Biosciences, how is your idea going to be different? fairly simple and don’t require complex The 451 Group, a technology-industry what he’s learned about fundraising What can you do better than the other equations to describe them. But figur- analyst firm, notes that technology in the course of 20 years, during guys out there? ing out when to apply those principles M&A activity in the first three quar- which he has raised more than $200 Protect your idea—which means is not so easy—and so I wish I had ters of 2005 bested all of 2004, with million and founded companies taken more business courses or $219 billion funding 2,013 deals. with a total market capitalization earned an MBA. It took me 10 Well-executed mergers and acquisi- of nearly $3 billion. years to figure out those three basic tions produce efficient, profitable new rules, but that’s the kind of thing THE ANATOMY OF A DEAL entities. In poorly executed unions, When I started out, raising money that people who study business for- value drops, heads roll and competitors was very hard. When I would get mally learn pretty quickly. From the terms to the timing, every to perform audit-style housecleaning prey. As a prerequisite for M&A suc- rejected—which happened all the I’m something of an inventor, financing deal has its own unique in advance of a transaction ensures a cess, due diligence has assumed even time—I attributed it to the fact that with about 30 patents and many structure and body. However, all smoother process by eliminating any more significance in the Sarbanes- I was new at it. But I eventually more in the works. But none of deals share two essential structural distractions from the negotiations of Oxley era. If M&A is part of your realized it was the ideas I was pitch- them are for anything particularly components where early lawyer the substantive deal terms.” plans, thoroughly examine the follow- ing. You never can do better than complex, or make you smack your involvement is critical. The term sheet—the heart of the ing before investing time and capital: the idea that lies behind your busi- forehead and say, “Wow.” But some “Taking a thorough, item-by-item deal—is where inexperience or inat- ness, but you can always do worse. have become quite successful com- approach to due diligence and nego- tention to seemingly boilerplate lan-  In technology deals, IP assets are So I came up with three rules mercially. So for me, an important tiating the term sheet is central to guage can have adverse conse- the business. Depending on the around having a good idea: lesson has been that simple and any deal,” says Lizette Pérez- quences, advises Pérez-Deisboeck. strategic focus, diligence may P

Have a huge market—not a big trivial are not the same—and to P Deisboeck, a partner at Goodwin “A preferred investment has a big include a review of everything from A R

K market, not a good-size market, but understand that difference. N Procter whose transactional experi- impact on the ultimate economic out- IP assignments signed by employees A R F

Y ence includes representing both ven- come for founders who hold common to the potential infringement of B

O T

O ture capital groups and technology equity—from its general dilutive third-party rights to the strength H P companies. “Investors want a clear effect to the specific participation and protection of patents. understanding of risk and how a and preference terms of the DOCUMENT RETENTION: company will provide them with a investor’s equity.” Thinking ahead to  While finances and operations ment type. Tax and employment under control. return on their money. However, a potential liquidity event is especial- remain due diligence staples, exam- records are top priorities, but you many emerging companies reach the ly critical. “Whether it is a sale, ining everything from doing business No Surprises! should know which documents are  Have a company-wide notifica- venture stage having neglected cer- merger, IPO or wind-up,” she notes, with outlawed countries, to benefits subject to federal and state law, tion system in place that suspends tain aspects of their business that “real money and real costs are and pensions plans, to organizational Arthur Andersen’s paper-shredding especially when operating in multi- destruction of documents that may can create friction or sink the deal if involved, and here counsel is invalu- investigations have become equally in the Enron scandal trained a hot ple locations. be requested in a threatened or left unresolved. Young entrepre- able in optimizing the entrepreneur’s as important to identify and smooth spotlight on document retention. A actual litigation or investigation. neurs might have a handle on busi- position.” out disparate and potentially disrup- management system need not be  Electronic data is elusive. ness strategy and product develop- Confidence, sophistication and tive practices and policies. expensive, but not having one can be Circulated, annotated and recycled,  Preserving every document is ment, but they may be unaware of efficiency are key attributes of a disastrous. Here are some pointers confidential and potentially discov- impractical, especially for larger lurking skeletons—unassigned healthy deal, she says. “Partnership  Incompatibility in information sys- for minimizing surprises and liability: erable information can lurk in companies. Create a retention poli- inventions, careless use of open between the investor and the entre- tems can be serious. Understanding cyberspace. Think about hiring an cy you can live with and designate a source software, uninventoried IP preneur is the goal, and it’s critical the technologies and systems before-  Retention requirements vary by outside specialist who can bring person internally to implement and assets, expired or undocumented to set the right tone and strengthen hand paves the way for smooth data entity type, jurisdiction and docu- your e-mail tracking and purging monitor the system. —J.H. options—anything that can rattle the natural alignment of the parties’ integration, without which opera- investor confidence. Taking the time interests.” —J.H. tional efficiency and corporate deci- sion-making tend to fall apart. —J.H.

6 big ideas big ideas 7 tech4tech BY AARON DALTON

ONE COMPANY’S STORY What I’m Reading

Mark Macenka—partner, Goodwin Procter 1 “Paul Graham is an essayist, programmer and language designer, as well as a bit of a contrarian. He has written sev- Bob Gett didn’t need to start another eral articles [which can be found at www.PaulGraham.com] company. His stints with Cambridge suggesting that a lot of software business models would be Technology Partners and Viant (the lat- better off by not getting VC funding and that, in several areas, ter as CEO) in the 1990s had left him viable products and companies can be built for less than most In an insecure world, financially secure to the point where he VCs are willing to invest. He ties together some interesting could engage his passion for driving tech trends on blogging, virtual offices and the productivity that can invest in security. The International racecars. Then about two years ago, happen outside the cubicle.” Macenka finds other interesting essays Biometric Group predicts the world- open source software began to catch his and articles at Reddit.com. wide market for biometrics will rise attention. A whole wave of companies from $1.85 billion in 2005 to more than were being built on an open source Thomas W. Malone—author, The Future of Work; professor, $4.6 billion by 2008. As hardware model that made source code available MIT Sloan School of Management prices drop, fingerprint scanners are to programmers and gave customers “On Intelligence, by Jeff Hawkins, is a very stimulating perspective being built into laptops, a trend that the ability and legal right to make on how human brains are organized and may have interesting impli- will likely become ubiquitous over the changes to that code. At the same time, cations for how human organizations could be organized. Hawkins next few years, says biometrics expert many open source projects were reach- offers a new theoretical framework for tying together a plethora of Steve Campisi, CEO of Digital Defense ing a level of maturity that made them results from people who perform empirical studies of the brain.” Group. Staying one step ahead of com- useful to businesses. moditization, Hitachi has just become Gett was convinced there would be Jackie Klosek—associate, Goodwin Procter the first manufacturer to add LED-

a hunger for open source implementa- Y “Nanofuture: What’s Next for Nanotechnology, by J. Storrs Hall, powered vein recognition technology to H P A

tion at big companies. So in 2004, with R makes a number of interesting predictions, including the possibil- G

a laptop, and Japanese banks are O T

capital from two VCs, he started O ity that thin body suits will control body temperature or that H already forging deals with Hitachi to P

E

Optaros, an IT services company that, R innovative medical therapies will send artificial antibodies into build finger vein recognition into ATM O Behind the Wheel: Gett (#24) at the M S

rather than selling products or licens- N the bloodstream to destroy viruses.” Monterey Historic Automobile Race. U

machines to cut down on fraud. D

B

ing services, sells time and advice. O B Optaros helps its clients properly Tom Morris, philosopher, author and chairman of the incorporate open source software into working with its attorneys, had to do the open source community, not just Morris Institute for Human Values

e their IT operations. “This is an area was to work through the issues sur- taking, but also giving.” “I’m in the midst of reading some of the classics, and some of the 17 Books and Blogs with Big Ideas What nanotech, venture capitalists where there was a need for some pretty rounding those differences and “come Goodwin also worked with Optaros great novels of our own time: Moby Dick is a great cautionary tale d and Gilgamesh have in common sophisticated intellectual property up with an agreement that could bal- to develop employment agreements about the misuse of power and the passionate pursuit of self- i advice,” says Goodwin Procter partner ance the competing interests of Optaros and guidelines that would allow destructive ends. In The Epic of Gilgamesh, the world’s oldest epic

s Bill Schnoor. As Schnoor explains, the and its clients,” says Schnoor. employees to participate in open source story, Gilgamesh begins adulthood as a top achiever and 18 Navigating the Blogosphere What are they saying about you? rules governing the open source code “I expected nine out of 10 cus- projects with or without the company’s leader with all the wrong values. He is humbled through the n with which Optaros works are radically tomers would push back and not permit involvement and to express their own death of his best friend and, brought face-to-face with his own i “Rocket Not Included” different from the rules that govern the us to reuse software or contribute it to opinions in blogs. “Employees are typi- mortality, begins a quest that turns him into a much better The rise in consumer class actions proprietary software world. While an open source project,” adds Gett. cally tied down by agreements that say leader who leaves a positive legacy to all of history. Don Optaros wanted to be able to recycle “But we have had almost zero resis- the company owns anything an employ- Quixote—is he a man of great vision with the imaginative bent solutions and software code in order to tance from our customers. This has ee develops,” notes Gett. “In the open necessary for true greatness, or is he just crazy? How do we 19 What’s Next? Two experts. Three key developments solve client problems more quickly, its been very important to our success, source world, people don’t like that. tell the difference in real life between visionaries and lunatics? customers didn’t want to give away any giving us more leverage in our business We came up with a solution that every- The Harry Potter stories—unexpected lessons on leadership of their “secret sauce.” What Optaros, and allowing us to be good citizens in body likes.” and life abound in these magnificently told stories.”

16 big ideas big ideas 17 tech4tech Don’t Promise On My Radar Screen

the Moon THE PREDICTIONS monitor you 24 hours a machines. Clerks in Old Navy work Personalization: day, diagnose you, perform with wireless headsets so they can UNCLOGGING THE BLOG Consumer class action lawsuits “The focus on individualization and per- surgery and help you recuperate, all access product information, are on the rise, especially in states sonalization in healthcare will spread while using sensors to get more accu- answer the phone and talk to like Massachusetts, New York and into other fields as well: your clothes rate information than what you would each other without ever “Technorati and PubSub are more use- and how they are hoping your compa- California with strong consumer will all be tailor-made at the tell a human doctor.” —Brown breaking eye contact with the ful to me than Google. It’s easier for me ny’s offerings will evolve. protection statutes. While class cost of production, your customer. Waiters are increas- to connect in a blog-based world. For technology companies, blogs action suits generally cannot seek automobile will be Hybrids: ingly using handhelds. The per- People in Morocco and Australia have offer an opportunity to create sticki- damages for personal injuries, designed by you and “Where for 30 years ATMs performed son in the foreground is supported by input into how we grow. I graze Sun’s ness with a sophisticated customer they can seek recovery for econom- forged on the assem- one or two mechanical functions with technology.” —Rayport blogs and read the comments. If a base. However, they don’t just make ic harm by claiming that a prod- bly line.” —Brown no personality, no charm, no attempt to developer has a perception on J2EE, sense from a CRM perspective; they uct did not work or deliver the represent the brand, we now see THE EXPERTS it’s valuable that I know about it fast.” can actually change the marketplace. benefits that it advertised, thus Othersourcing: machines throughout the retail and ser- Arnold Brown: author and chairman of O Z Z — Jonathan Schwartz, president and Goodwin Procter partner Steve causing consumers to overpay. “It’s not just that jobs can go abroad vice world [such as kiosks] convey trend analysis and change management I P

T R

COO of Sun Microsystems, as quoted in Charkoudian suggests that blogs can What does your company need to where they can be performed more brand personality and deal with com- consulting firm Weiner Edrich Brown E B O R know to protect itself? the Naked Conversations blog at red- play a role not unlike that of Intel’s cheaply, it’s that robots, software and plex transactions. Instead of pure sub- Jeffrey F. Rayport: author, professor, Y B

S N

couch.typepad.com. strategy of investing in complementary other kinds of machines will be able to stitutes, build a hybrid interface that and chairman of Marketspace, an affili- O I T A

Be careful when describing R Despite the hype that surrounds technologies in order to spur innovation do just about everything we consider to combines the best attributes of humans ate of Monitor Group, a strategy and T e S U L

product benefits in advertising, on L them, these are still relatively early in its own products. Toward that end, be ‘smart work.’ A robot doctor could with the most appropriate attributes of merchant banking company I Charkoudian believes companies packaging and via all other mes- BLOGS 22,000 can use corporate blogs to start saging media. Goodwin Procter partner U. Gwyn Williams advis- 20,000 a dialog about innovation using EMERGING LEGAL ISSUES 18,000 the company’s own technology es against making statements that 22,000 as a central enabling catalyst. while generally true, are not true 16,000 Meanwhile, while you’re think- in every circumstance. In the Doubling in size approximately 14,000 ing of launching your own blog, automotive world, a car manufac- “Don’t try to put one over on your consumers.” every 5 months 12,000 don’t forget to keep track of con- turer might get in trouble for 10,000 versations on other blogs that promising 30 mpg fuel efficiency 8,000 may be enhancing or eroding if it did not include the caveat, Background: Content producers in the only rippable a certain number of 6,000 your brand image. New web “depending how you drive, your music and film business face challenges times,” says Goodwin Procter partner 4,000 tools (as Schwartz also noted) mileage may vary.” stemming from the spread of peer-to- Steve Charkoudian. Two problems: MA 2,000 Y SE J ‘03 P ‘0 AN M 3 ‘0 AY SE are coming into play to help you peer file-sharing over the Internet. The People who played these CDs in their 4 ‘0 P JA M 4 ‘04 N A S ‘05 Y ‘0 EP JA 5 ‘0 N The same principle holds true 5 ‘06 manage the flow of information e threat of legal action from the computers didn’t know Sony was from a blogosphere that now for software and hardware manu- Recording Industry Association of installing cloaked software on their SOURCE: TECHNORATI numbers 20 million plus blogs facturers. Just extrapolate from the America (RIAA) and others has made a machines, and the software inadver- days for blogs, and as in the early days and growing. auto industry and don’t claim that dent in the unauthorized sharing of tently made users’ machines more vul- of websites, people are often more con- PubSub’s matching engine, for your product performs its function content and forced pioneers like nerable to hack attacks and viruses. cerned with activity than utility. So just example, lets users know within sec- under a certain amount of time, Napster to go legit, but copyright hold- Sony is facing at least three lawsuits, as companies rushed to get a website onds if their company’s name has been faster or more efficiently than ers continue to search for technological primarily for not disclosing its spy- Solution: Sony is trying to make posted and then tried to figure out what mentioned anywhere in the blogo- something else unless you have protections against large-scale, unau- ware-like software to users. things right with apologies and free to do with the sites, many companies sphere or within some subsection of taken into account and listed the thorized content distribution. programs to uninstall the software, but and individuals are dashing to develop top-ranked and most widely read blogs. necessary caveats. For example, Lesson: You can fool some of the peo- it’s hard to recapture trust. Unlucky blogs before they have really figured As company CEO and co-founder Salim your software might only deliver Case in Point: Sony attempted to ple some of the time, but not if they are Sony artists with CDs already in stores out what they want to say. Ismail sees it, PubSub is moving its world-class performance on a employ a proprietary software called tech geeks. Or as Charkoudian puts it: saw sales plummet. Ironically, But the blog can be more than a searching from a task that is primarily machine with certain hardware Extended Copy Protection (XCP) to “Don’t try to put one over on your con- Charkoudian says, Sony might have soapbox. As Jonathan Schwartz noted retrospective to one that is prospective. capabilities. It can be tempting to limit the number of times music on a sumers. With all the sophisticated tech- done better had it simply disclosed the

N get carried away when trumpeting

O in Naked Conversations, a blog can be “Right now, most information [on the CD could be copied in a computer. nologies connected over the Internet, software in the first place and perhaps D R

A your product in marketing materi- E the conduit to your most devoted cus- Internet] is passive,” says Ismail. “The “Basically, Sony was trying to modify you have a huge brain trust out there, sold the XCP CD at a lower price as a R

X

E als, but be sure not to promise the L tomers—or critics—providing you with next step is for information to become the user’s computer so that the CD was and they will figure it out.” discount for the copy limitations. A

Y B

moon unless you’ve got a caveat

T insights about what they like about active and tell you when something R A

H that says “Rocket not included.”

C your product or service, what they miss happens.”

18 big ideas big ideas 19 aa look look back back

The 30-Ton Big Idea

On Valentine’s Day 60 years ago, the team behind the pioneer- ing ENIAC assembled for the public announcement of the world’s first general-purpose electronic computer, developed at the University of Pennsylvania with backing from the U.S. military. The effort’s two driving forces were the university’s John Mauchly and J. Presper Eckert. Within weeks of the THE TEAM THAT BUILT THE ENIAC: From left: J. Presper Eckert, announcement, the two left the university due to patent-policy chief engineer; Prof. J. G. Brainerd, project supervisor; Sam Feltman, chief disagreements and launched their own startup, which created engineer for ballistics, Ordnance Dept.; Captain H. H. Goldstine, liaison officer; the UNIVAC and was sold to Remington Rand in 1950. Dr. J. W. Mauchly, consulting engineer; Harold Pender, dean, Moore School of In 1996 another team—this time, a group of Penn students Electrical Engineering; General G. M. Barnes, chief, Ordnance R&D Service; and faculty—developed an “ENIAC on a chip,” recreating the Colonel Paul N. Gillon, chief, Research Branch, Ordnance R&D Service. original 30-ton machine’s architecture, circuits, 18,000 vacuum tubes and 170,000 resistors on a fingernail-size piece of silicon.

S S E

N V F I O O I H

T Y C C T R I E A S L

L R A I E O V N C I

A N E V U L H

Y T E 20 big ideas S H N M T

N O F E R O P F