Meanwhile, Metcalfe and another engineer incorporated 3Com Corp. -- for computer, communication, compatibility. 3Com started out as a consulting firm, because a market for Ethernet products didn't yet exist. Howard Charney, an engineer-turned-patent-attorney and a fraternity brother of Metcalfe's, joined as employee number three.
In May 1980 the DEC-Intel-Xerox collaboration was announced to the world. The collaborators would release the Ethernet standard they were devising, they said, on September 30. Also by May, Metcalfe and Charney had realized that it was time to start developing Ethernet products -- hardware and software the company could sell. To be a manufacturer, however, 3Com would need capital, which meant it needed a business plan. And it was about that time, the summer of 1980, that Metcalfe's instincts suggested that he and his engineer-colleagues would, as he puts it, "need a little adult supervision" to help them bring all of this off.
End of background.
Metcalfe will tell you, honestly and sincerely, that as a scientist, engineer, and former salaried corporate employee, his principal interests in founding 3Com were to develop and sell products and to produce wealth for himself and others. "You often hear about people whose dream it is to save the world with organic sodas because they're good for people. I just want to come clean," he says. "The company was more an end in itself than the means to something more glorious." In any case, Metcalfe insists, he did not start 3Com to run a company. Like the rest of us, however, the Ethernet inventor lives with an ego. He's no self-effacing saint.
The day Krause reported for work, Metcalfe made a great display of giving the new president his corner office. For himself, he took a conference room with no windows. Giving up the office, of course, was a cheap gesture. Giving up other founder perquisites was a good deal more wrenching.
Metcalfe met Krause in January 1981 at a lunch arranged by a common acquaintance. Metcalfe didn't know what sort of person he wanted to hire or what job he wanted to give the individual. His partners believed Metcalfe capable of doing the job himself. They weren't enthusiastic about recruiting an outsider. And if they did bring in a management pro, all three agreed, the job they offered would depend upon the qualifications and experience of the person to whom they were offering it. They considered, for instance, Metcalfe's former boss at Xerox. He would make a good president, they thought. A woman they considered from Hewlett-Packard, on the other hand, had only executive vice-presidential stuff.
The three venture capitalists whom Metcalfe had been courting since the fall of 1980 had not insisted, as they might have, that he recruit professional management as a prerequisite to closing the deal. The $1.1 million they were about to drop into 3Com wasn't a huge sum of money, even then, and technology seemed more important to the company's short-term future than management. "The company had come together," says Wally Davis, now a general partner with Alpha Partners, "largely because of Bob's renown and his technical ability." Nobody, Davis says, believed his optimistic business plan.
Another investor, Dick Kramlich, general partner at New Enterprise Associates, recalls that no one knew exactly what kind of market 3Com was going to be in back then, "So we didn't know what kind of business guy we would need."
At lunch Metcalfe immediately liked Krause. He pointed out to his partners that Krause had 14 years of management experience. "I argued that he knows how to run an organization of 500 people. We want to be an organization of 500 people, so let's bring him on." Implicit in this argument was Metcalfe's recognition that he was not the man to be running an organization of 500.
That's important. Metcalfe may not have understood then what handing over control really meant, but he at least had the inkling that it had to be done.
Charney still doubted that the company needed anyone badly enough to warrant the salary expense and the stock they'd have to give up. He recalls a cartoon someone gave to Metcalfe. A king and a queen look over their domain. King, appearing doubtful: "I'm not sure I can do this." Queen, looking stern: "Shut up and rule." Charney frequently gave Metcalfe the same advice.
Charney was wrong, as it turned out, and the stock the cofounders gave Krause on his arrival probably accounts for his still being there today. Perhaps, without stretching the argument too thin, it even accounts for the company's survival. In either case, it was a bargain.
If Metcalfe is serendipitous about life, Krause is not. In fact, he has a three-phase plan, which he divides into his "learning," "building," and "serving" phases. During the first, he had decided, he would learn how a business was run. In the second he'd build his own business. And in the third he would perform some sort of public service. Each phase would last about 15 years, taking him to retirement. With 14 years of on-the-job management training at HP behind him in 1981, Krause was ready to move to phase two.
At their first and subsequent meetings, Krause was delighted to find that although he and Metcalfe had different voices, they sang from the same hymnal. They shared the same view of how the computer industry would evolve and of the key role a networking company -- 3Com -- could play. "Here," says Krause, "was my opportunity to gain expertise in a technology that was going to change the computer industry and the way people work." More to the point, though, here was an opportunity for him to build a company almost from scratch.
Quickly, in little more than a week, they negotiated a deal. It was not what either one of them wanted. Metcalfe would be chairman and CEO; Krause, president. Metcalfe had offered the executive vice-presidency, and Krause had wanted the chief executive's title. The compromise was a mistake, but who knew then? Metcalfe took the view, naïvely, he says now, that CEO was an honorific title. "Bill was president. His job was to run the company. The chairman-CEO thing didn't appear in my mind as a conflict."
