We continue to explore the foundations of HP’s involvement in ERI. The company came close to going out of business many times in the last 13 years. Somehow, however, the guys who were writing the checks – including HP himself, kept writing those checks!
SM: So in 1993-94, when you were funding this company from New York, you were at an investment bank at the time? HP: At the time I was. That is where I met my colleague. I was the CEO of a Scandinavian investment bank at the time. My interests for these types of things were ignited a long time ago. So this was sort of a pet project I did on the side in those days.
SM: You were basically funding the R&D through all of the experiments? Through metal versus ceramics and all of that? HP: We funded all of that and we kept on funding well beyond what any reasonable venture investor would deem appropriate. We funded well beyong where a person would say enough is enough.
SM: Sounds like something venture capitalists would never do. HP: No, and I think there are lessons to be learned here. A venture capitalist, or persons running venture capital firms, are coming from the money management side, and of course, they have the obligation to cut their losses. It was our money. VCs manage other people’s money. The dynamics are different. I think if a traditional venture capital firm had been behind ERI, they would have pulled the plug long before we did. We went all the way.
SM: And you went all the way based on a conviction? Did you already fathom the significance of what you had in your hands potentially? HP: No. In hindsight I think it is important not to know too much. If you know too much you become too cynical and you may argue that it doesn’t make any sense to go on.
Here you are sort of into that classic paradox between what you may define as an industrial builder versus a money manager. We realized that we were on to something, but how large was not known to any of us … yet, we had visions. We understood pretty well the direction of it; but, it was impossible to have a full idea. I sort of remember the old business plans. We should do 20 million dollars in the year 2000 and all of that. Now we are in 2007 and we did 20 million dollars last year.
SM: So it has taken much longer. How much money did you guys put in? HP: I would divide that into two groups. One would be the retained earnings what we have been able to generate over the years through commercial sales. And the other is in pure cash coming into the company. In pure cash we have invested about 12 million dollars and in terms of retained earnings we have invested about 12 more. So at this stage somewhere between 20 and 24 million dollars is relevant.
SM: And looks like you’ve built a great company!