The Pied Piper Of Sunnyvale

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By centralizing, Catalyst condenses the rote part of setting up shop -- the first several months that are bogged down in a search for space, buying furniture, evaluating telephone systems, and figuring out employee benefits. To launch its companies efficiently, Catalyst's turnkey operation supplies not only the requisite cash, but also a set of desks, a notebook with all essential organizational documents, and a core of seasoned administrators and advisers. A company that taps this pool is charged accordingly but doesn't have to carry more G&A than it needs. "Here you can have one-third of a person working for you," explains Bushnell. "On the outside, people don't come in thirds."

And the number of petty details that tend to irritate infant businesses are kept to a minimum. Bushnell is convinced, for example, that every greenhorn entrepreneur who goes to a bank will come back with the wrong kind of checkbook. Additional homespun schooling is dispensed (often via in-house video) on such quint-essential seed matters as taxes, stock options, patent law, and accounting. "I've never gotten fair value from an accounting department," Bushnell sympathizes. "It's a monkey on your back. It doesn't contribute to marketing. I'll guarantee that no Catalyst company will ever get as cheap accounting as it's getting now."

Another synergistic advantage of having everybody in one spot comes through Catalyst's frequent courtyard klatches. Among the chickens (a gift for Bushnell's 39th birthday) that roam as freely as in a Grapes of Wrath kitchen, ideas and problems are batted around by building denizens (some residents aren't Catalyst companies, but simply tenants whose rent helps cash flow). Theoretically, such elbow-rubbing enhances the pace of progress more than if each company were out on its own Management may find, for instance, that some collective purchasing items may cut costs. And typical entrepreneurial errors are kept to a minimum.

If all this doesn't do the trick, the Grand Council of the Empire, as Catalystians call it, meets every month. These executives and senior members, including Bushnell; Calof, Anderson; E. Beirne Shuffle, treasurer, and Robert Allen Jr., financial analyst, keep an eye on the nestlings and set them right when they stray. Although a founding precept is to have all operations close by initially one Bushnell ambition says Calof, is to populate Silicon Valley with Catalyst offspring.

Although a Catalyst company has all the earmarks of entrepreneurship, the difference is that nobody within it is an owner; at the start, Catalyst -- or more specifically, Bushnell -- is. If a company needs second-phase financing, outside investors may be let in later. A few months after Catalyst's 1981 seeding of Androbot Inc. with about $1 million, a sum quickly used up by the home-robot company on capital equipment and research, Androbot sold 400,000 shares of convertible preferred stock for another $1 million to an individual and was putting together a $1.5 million research and development syndication partnership to develop a robot "brain" (see box, page 64). About to be weaned from Catalyst's services and sent off on its own, Androbot is seeking another $2 million from outside investors. Catalyst expects to shorten the R&D cycle to six months to a year, and to use up $500,000 to $1 million during that phase

Even though they aren't owners, Catalyst company employees are made to feel they are. "We instill fire in their eyes," Bushnell proclaims. "The entrepreneurial flame burns as brightly as if the business were their own." And, indeed, some of it is. In addition to the autonomy granted by Catalyst (each company's management is expected to make virtually all its operating decisions, guided only by the inescapable sense that Bushnell is looking on), one poker that stokes the embers is lavish income potential. For example, both Androbot's president and chief operating officer are already major shareholders of the corporation and have bcen granted stock options that will be amply rewarding should the company take off. Says Androbot president Thomas Frisina, "Nolan conveys the impression to all the presidents that it's their baby. If we hit, we get a lot out of it; if we screw up, we'll be out of a job."

For a while, Catalyst Technologies was probably the only institution in Silicon Valley without an over-designed logo out front. Although it had existed since December 1981, it wasn't until 10 months later that anyone got around to putting up a sign. But it really didn't matter, since the shortcuts and expertise within can't be characterized anyway. Bushnell is the real catalyst. Says Axlon's Vurich: "Nolan makes new things happen. To do it efficiently, to make his ideas become reality, he put everything under one roof. If you have lots of ideas, it's the logical way."

"Nolan is the vision," Calof extols. "He's the spirit of this operation. Anybody can sit around and come up with ideas all day, but we're doing things here -- lots of different things. This place has to be flexible, or it isn't going to work."

The first all-Catalyst company to leave the premises and operate on its own will be Androbot, due to depart this spring, a scant 18 months after it was started. "Two weeks after we're gone," Frisina notes, "one of Nolan's other ideas is going to be in this space, incubating like we did."

There is no doubt that innovative products will be waiting in line. Bushnell seems not only willing but anxious to bankroll leading-edge projects. Big companies like Warner Communications "don't have the guts" to innovate any longer, he feels. The conservative cycle that businesses are following these days is that they wait for their products to peak before daring to undertake a new venture. Bushnell is less patient. For one thing, he promises that on October 1, 1983 -- the moment his agreement not to compete with Atari expires -- "I'm going to be back in the game business " The corporate beneficiary of this reentry into video games (with three-dimensional playing fields, he hints) will probably be Pizza Time Theatre, a 1978 start-up in whose operation Bushnell is still closely involved.

"If I were still at Atari," Bushnell declares, "I'd have all these things going on at once. But now they're afraid of failure. Yet every new product runs that risk."

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