1988 was the year of Venture Capital. By now our company was doing very well. Our sales for the fiscal year 1988 (March yearend) were on track to exceed $2.5 million, with 40% profit margins. We had gone from just under $1 million in product sales the first year (1986FY) to over $2.5 million in just two years (1988FY). We were on track to double to $5 million for 1989FY.
However we needed more capital to develop the new host adapter designs. We had two major adapter chip development projects in the pipeline, and shortly after IBM introduced MCA the PC compatible manufactures introduced the 32 bit EISA bus. Developing these chips would take more than the profits we were generating, we needed more capital. In addition, several of our customers were concerned that we were undercapitalized. Large companies need to feel their suppliers can weather a storm, should one happen. I had just spent a grueling six months working with Tandy to qualify the TMC-830 as the SCSI adapter for their new UNIX based PC Server, only to be displaced by Adaptec’s new AHA-1540 16 bit Bus Master host adapter. Adaptec and Western Digital began winning all the high end designs with their DMA Bus Master host adapters which were still small numbers compared to us, but they were growing and we did not have that type of product. I was not that concerned about Bus Master as we had consciously decided not to address that market. I was more concerned about our ability to deliver the 950 and 1800 chips in a timely manner. Al was way behind on both projects.
So in 1988 I decided to raise venture capital as suggested by my board of directors. It was an ideal time, we were growing fast, our company had been very profitable for two years, and the third looked spectacular, we were projecting doubling sales again to $5 million for 1989FY (March). We could develop the chips without outside funds, but having the funding would accelerate the schedule and provide a buffer if things did not go as planned.
I contacted my friend Greg Presson in March of 1988, who I had met at Cruttenden and Company, a long time Orange County Investment banking firm that specialized in technology. They helped fund many companies including AST Research, ALR, Western Digital, MTI, and others. I met Greg when I was at Hilevel. When Hilevel growth took off I felt we needed to have resources ready if we needed capital. I had heard of Cruttenden from friends in the industry, they had the best reputation.
I kept in touch with Greg, asking advice at times. Finally I was ready; I told him it was the right time to raise capital. The board agreed to sign him on and we worked on a package to present to venture capital firms. Greg was invaluable in getting the package together. He had a lot of experience so Patty and I listened to what he said.