280 Case Studies
in business while the seven developers continued working on the product. In March 1985, Reflex shipped and attained a level of two hundred units per month, which was far short of the plan. However, Analytica was clearly running out of money, and the venture capitalists were fatigued. Adam approached Borland, and the firm was sold in exchange for a few million dollars worth of Borland stock. The common stockholders and first-round investors received nothing. In October, the engineering team moved to Borland and were given Borland stock options.
Adam left the company in 1939 for Microsoft and Brad did likewise in 1990, while some of the team still remained at Borland. When Analytica closed, Eric became an independent software developer, operating with independent but highly experienced software developers in a "distributed garage-shop fashion" to develop Silverado, an add-in database for Lotus 1-2-3 that was sold to Computer Associates, and Budget Express, which was sold to Symantec. In 1990, he built and tested a work-group product to sell to a software publisher.
Figure 11-3 shows the obvious shortcomings of Analytica’s position at the end of the product development stage. When the product was first introduced, the engineering group had a schedule fantasy factor (SFF) of over 2. The product wasn't what was promised, but it was still interesting and clearly salable. The business plan was at risk because there had been no market calibration for an enormous PR machine, nor did the company have the financing to proceed with a high-visibility, Lotus like marketing plan. Sales expenses were always running ahead of plan. By now, there was clearly enough blame to go around: two CEOs had failed in every respect, and the board had allowed the organization to operate for almost two years in an out-of-control fashion. Although Analytica had cash when Reflex was introduced, it was clear that the venture capitalists were tapped out and would close the firm down if the product failed to take off.
POSTMORTEM
Once Reflex was in Borland's hands, the picture changed dramatically. Borland immediately dropped Reflex's price to $100 at a gross margin of 40 percent, and during the first year, about 200,000 units were sold.
Adam and Eric believe that, in hindsight, the $1.3 million first-round funding was more than adequate to develop and introduce Reflex. They both give similar advice to programmers who want to produce a product that can be developed by a small team:
Don't use venture capital. Start small, build from your own equity, ship ASAP, and evolve the product. Don't believe your own b.s. Don't fight for elegance because you are paying for it yourself.