Making Pizza Dough

Venture capitalists routinely come across way-out investment proposals. But few have sounded wackier, yet paid off more handsomely, than Pizza Time Theater Inc. of Sunnyvale, Calif. The company operates a rapidly growing, 50-restaurant chain of fast-food pizza parlors in which food is almost the least of the attractions.

The real action is in the roomfuls of coin-operated electronic games designed to divert, amuse and swallow the quarters of customers waiting for their pizzas to cook. Even more entertainment is provided, free of charge, by troupes of singing, talking, joke-telling robots dressed up to resemble Muppet-like characters.

Pizza Time Theater Inc. is the creation of Nolan Bushnell, 38, a microelectronics expert. In 1972 Bushnell founded the successful Atari electronic games company with a $500 initial investment. Four years later, he sold out to Warner Communications, ending up with $15 million in cash and debentures, and took the post of chairman of his company, which became a new Warner subsidiary. Since then, Atari has broadened from electronic games to personal computers. Bushnell had been working on the Pizza Time concept at Atari; but before the first of the computerized robots, a wisecracking rat named Chuck E. Cheese, emerged from the lab, the company had been bought by Warner Communications.

Though Warner's management permitted Bushnell to open an initial Pizza Time Theater restaurant in San Jose in 1977, the parent company never saw much future in the idea. In 1978 Bushnell resigned his chairmanship, put up $500,000 to buy back the Pizza Time concept from his old employer, and went into business for himself.

By the fall of 1979, Bushnell had plowed $1.8 million more of his personal wealth into Pizza Time Theater Inc. and had opened four more outlets on the West Coast. But to expand further he needed more money. Bushnell therefore turned to venture capitalists for backing. Says Wallace Davis, 63, whose venture capital firm, Mayfield Fund, invested $750,000 in the company: "I'm not a game player or a, big pizza eater. But I was impressed observing the customers at Pizza Time restaurants. People really seemed to enjoy themselves there." Another attraction for investors was Bushnell's good business record at Atari.

In January 1980 several venture capitalists put up $2.5 million in return for 669,333 shares of Pizza Time stock at $3.75 per share. Ten months later, investors bought an additional 572,941 shares at $5.25. In April of this year, a syndicate of securities underwriters sold 1.17 million shares to the general public at $15 per share, or nearly triple what the venture capitalists had paid less than six months earlier. And the stock has climbed higher still. Last week Pizza Time Theater was selling for $23.25 per share, or more than six times what the stock was worth 18 months earlier, when the first venturesome capitalists bought a slice of the Pizza Time action.

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