Sun Microsystem's somewhat crooked startup

by Lester Earnest

2017.06.20

Andy Bechtolsheim designed the original SUN (Stanford University Network) workstations using the SAIL (Stsnford Artificial Intelligence Laboratory) computer running SUDS (Stanford University Drawing System), which was an interactive graphical design system that had been developed earlier by the Super-Foonly Project, headed by graduate students David Poole and Phil Petit. A number of these workstations were built for use at Stanford and the SUN computer was also used by others at Stanford to create packet routing devices using software developed by Bill Yeager. Andy then began licensing the computer board used in the workstation to others and I arranged to use them in my start-up Imagen Corp, which made the earliest desktop laser printer systems.

Andy subsequently linked up with recent Stanford Business School graduates Vinod Khosla and Scott McNealy to start a new company called Sun Microsystems and Khosla became the President. They then recruited Bill Joy of U.C. Berkeley, a primary developer of the Berkeley Software Distribution (BSD) and began making and selling interactive display workstations.

In negotiations with the newly formed Stanford Technology Licensing group, Andy asked if he could use the SUN workstation technology in the startup without getting a license from Stanford and was asked whether there was anything patentable there. He said there was not, put that in writing, and was allowed to take the technology for free. One of the first things that Sun then did under Khosla’s leadership, was to file for a patent on the Stanford design and they obtained it without mentioning it to Stanford. After making millions from this startup, Khosla resigned and became a vulture capitalist while Scott McNealy took over and eventually ran the company into the ground, causing it to be sold to Oracle.

Concurrently, Imagen Corp., where I served as founding President, became successful as a bootstrap startup in spite of the fact that the venture capitalists (VCs) refused to give us any startup funding. We then risked doing a bootstrap startup after borrowing just $100,000 from friends and family and made it work. Seeing our success in making a profit each year without capitalization while sales rose to over $11 million in three years, the VCs agreed to fund expansion provided that we hire a “real manager” and we ended up hiring one from Hewlett-Packard that they suggested, who promptly fired me then signed a secret contract with his former employers that essentially destroyed the company for the benefit of H-P. He did not even show that contract to the Imagen corporate attorney, who would have perceived that it was part of a bribery deal. The net result was that Imagen was destroyed and its remains were sold to a competitor.

After leaving Imagen, I returned to Stanford at the request of John McCarthy, who had earlier fired me, and then was appointed half-time Associate Chair of the Computer Science Department. In that capacity, I supervised the department’s computer facilities and soon discovered that Len Bosack, who was managing the old SAIL computer facility, had started a company called Cisco and was stealing and selling technologies that had been developed at SAIL, so after discussions with Stanford attorneys, I fired him, then got to see him continue that crooked startup aided by Stanford faculty and a Dean, but that is another story.

I also discovered that Andy Bechtolsheim was still using SUDS on the SAIL computer to design new Sun Workstations even though it had been years since Sun started up. I then told him to get off and develop a design system using Sun’s own workstations, which he did.

Much later, when some Stanford students were trying to start a search engine company called Google but could find no venture capital, Andy Bechtolsheim and his colleague David Cheriton, who had accumulated a bundle, each gave the Googlers $100,000, which enabled them to get started and then soar to remarkable heights.

Later still, Vinod Khosla used some of his accumulated wealth to buy property at Martin’s Beach, just south of Half Moon Bay, California, then attempted to block access to that public beach by people who had been using it for decades. It has cost activists a lot of money in legal fees to undo Khosla’s arrogant blockage but it appears that they have succeeded.