Bob Metcalfe’s pitch for 3Com

At the Demo Day for One Semester Startup, one of the best pitches came from Ethernet co-inventor Bob Metcalfe.
Metcalfe, who moved to Austin in January, serves as professor of electrical engineering and director of innovation at the University of Texas at Austin.
This fall, Metcalfe, who also serves as general partner of Polaris Venture Partners, created a new class, One Semester Startup, along with Joshua Baer, entrepreneur and computer science specialist and John Butler, director of H.K. Entrepreneurship. On Thursday, 75 students pitched 20 startups.
But one of the most interesting ones came from Metcalfe, who halfway through the event, shared his 1980 pitch for 3Com, which sold Ethernet products. Just a few days earlier, Metcalfe had been in Japan receiving an award for his groundbreaking work at 3Com, according to this story in The Daily Texan, the UT newspaper.
Metcalfe said he didn’t have any Powerpoint slides, because his company was founded eight years before Powerpoint. In fact, Metcalfe served on the board of directors of Forethought Inc. that invented Powerpoint, which Microsoft bought in 1987 for $14 million.
“3Com’s business plan is in my hand,” Metcalfe said. “It’s about 25 pages of text that was typed on an IBM Selectric typewriter.”
3Com stood for computers, communications and compatibility.
“Three standards and compatibility was our goal” Metcalfe said. “These three standards I’m about to mention were not standards at the time For example, UNIX (operating system), TCP-IP (networking technology) that was quite new. It would take 10 more years for it to be installed on the Internet.”
The last new standard they sought to establish was Ethernet, local area networking technology that allowed computer systems to share information.
“We were going to implement those three standards and sell them to other companies,” Metcalfe said.
But 3Com’s first product was a book. Metcalfe wrote a book outlining his vision for networked computers. Then he got a directory of venture capitalists in the Silicon Valley area and called them one by one and invited them to 3Com’s offices to listen to his pitch about the company. He talked to more than 100 venture capitalists during a two-year period, he said.
“They hated the pitch you are now hearing,” Metcalfe said. “But before I let them out, we got them to buy a copy of the book at $250 a copy. I would sell a book every single time.”
3Com’s second product was the implementation of TCP-IP networking technology on a 10 megabit per second modem. The company made Ethernet adapters for mini-computers and the Fax machines.
“Ethernet had been developed for PCs of which there weren’t any,” Metcalfe said.
The first Ethernet adapter cost $5,000, Metcalfe said.
“We anticipated there would be some price erosion,” Metcalfe said. “Ethernet adapters are now virtually free.”
Sun Microsystem was just getting started and bought 3Com’s multi-bus Ethernet.
“Very soon we were selling hundreds every month – hundreds of them,” Metcalfe said.
Then 3Com created an Ethernet product designed for a new computer called the IBM personal computer.
“Very soon we were shipping millions per month,” Metcalfe said. “This is what they call being in the vortex of the tornado and I recommend it highly.”
3Com decided to sell its product directly to consumers. But that was a really bad idea because the company didn’t have a way to reach those consumers.
“The next day we lucked out and they invented computer stores,” Metcalfe said. “We put our product in computer stores and the business took off.”
3Com had $5.7 billion in revenue in 1999.
“But everyone had $5.7 billion in revenue in 1999,” Metcalfe said.
Last year, 3Com became part of Hewlett Packard.
An audience member asked Metcalfe what would he do differently if he could change anything.
“Not one single thing” Metcalfe said. “It’s very dangerous to mess with the past. I would not change one thing about that outcome. It has all worked out perfectly and let’s not mess with it.”