Four Financial Genies

By Charles P. Alexander

Long before an entrepreneur can go public, he needs the private help of venture capitalists, underwriters and assorted ground-floor investors. They are the dreammakers whose cash and advice can mean the difference between survival and collapse for a fledgling company. They often risk big money, but with luck and savvy they can earn huge rewards. Four successful financiers who have helped launch small companies:

Thomas Unterberg: Staying on the Run. On a typical weekday Unterberg rises at 6 a.m. and dons a sweatsuit. From his Park Avenue apartment, he runs 28 blocks to a health club for a 45-minute workout and then runs back.

Once he reaches his Wall Street office by cab at 8:30 a.m., Unterberg, 53, keeps on hustling. As chairman of the investment-banking firm of L.F. Rothschild, Unterberg, Towbin, he has a talent for finding young companies ready to go public and selling their stock. He spends nearly half his time on the road, particularly in California, scouting for prospects. In 1983 Rothschild underwrote new issues worth $1.4 billion. The biggest: a $123 million stock offering in Diasonics, a Milpitas, Calif., firm that makes advanced medical diagnostic devices. On that deal, Rothschild earned a fee of $1.7 million.

Unterberg likes to sign up a company well before it goes public in the hope that he can continue to underwrite subsequent stock offerings as it gets bigger. When Cray Research, a Minneapolis-based maker of scientific computers, went public in 1976, Rothschild earned a fee of $150,000 on the $9.9 million issue. Cray has since sold an additional $63 million worth of stock through Rothschild-led syndicates and generated $500,000 in additional fees for Unterberg's firm.

Educated at Deerfield Academy, a Massachusetts prep school, and Princeton University, Unterberg was bred to be an investment banker. In 1931 his father co-founded C.E. Unterberg, Towbin, which merged with L.F. Rothschild in 1977. In an office with a view of the Brooklyn Bridge, Unterberg sits at the same solid-oak desk his father used. Though he is worth more than $10 million, Unterberg and his wife choose to live in the same two-bedroom apartment they bought for $70,000 when they were married 22 years ago. Unterberg marvels at the thought that he helps make multimillionaires of entrepreneurs little more than half his age. "It's like the atmosphere generated by Hollywood in the 1930s," he says. "The founders of these new companies are the stars of the 1980s."

Robert Noyce: Scientist Turned Investor. Noyce is the co-inventor of the integrated circuits that form the core of all modern computers, winner of the 1979 National Medal of Science and a co-founder of two pioneering and profitable California electronics companies, Fairchild Semiconductor and Intel. Noyce, 55, also plays a less publicized role as a venture capitalist. With his success has come enormous wealth. His 1.5 million shares in Intel, where he now serves as vice chairman, are worth $60 million. Along with Arthur Rock, his friend of 30 years, Noyce in 1977 helped bankroll Diasonics, the medical-instrument manufacturer. Noyce's 8% stake in Diasonics is worth $30 million. He helped finance Monoclonal Antibodies, which sells pregnancy-testing kits and hopes to market a product that will predict the timing of ovulation. Noyce has also suffered a few setbacks. Through a venture-capital fund, he invested in Osborne Computer, the maker of portable models, which filed for bankruptcy four months ago.

The son of a Congregational minister, Noyce grew up in Iowa. After earning a Ph.D. in physics from M.I.T., he got his start working for William Shockley, the Nobel-prizewinning co-developer of transistors. Noyce is married to Ann Bowers, a vice president of Apple Computer. He enjoys piloting a twin-engine Cessna Citation jet and is an avid downhill skier. Friends consider Noyce something of a daredevil, both in the way he lives and in the way he invests.

Thomas Perkins: Master Mechanic. For fun, Perkins tinkers with very old automobiles. Using well-worn wrenches and lots of elbow grease, he and a team of mechanics have restored a collection of nearly two dozen 1930s sports cars. Among them: a Mercedes-Benz Special Roadster, a deep sea-blue Bugatti and a Duesenberg once owned by a maharajah. "They have to run right," he says, "or they're not worth having."

In his professional life Perkins, 52, displays the same perfectionism toward a collection of-very new companies. As a founding partner of San Francisco's Kleiner, Perkins, Caufield & Byers, he has since 1972 managed four venture-capital funds that have invested $80 million in 65 companies, including Genentech, a leader in genetic engineering, and Tandem Computers, a rising manufacturer of large mainframe machines. The original $200,000 that Perkins' firm put into Genentech is worth $60 million today, while its $1.5 million stake in Tandem has grown to $250 million. Like many venture capitalists, Perkins often helps run the companies he invests in. He is chairman of the board of Genentech and Tandem.

An M.I.T.-trained electrical engineer with a Master's in business from Harvard, the Illinois-born Perkins went west 27 years ago to work at Hewlett-Packard, the Palo Alto, Calif., electronics firm. In 1966 he took $15,000 that he and his wife had been saving to buy a house and invested it in University Laboratories, a Berkeley, Calif., laser company. That stake returned $2 million and launched Perkins' career as a venture capitalist.

Perkins lives with his wife and two children in a spacious 1920s-vintage house overlooking San Francisco Bay. Most weekends he putters in his garage or enters one of his roadsters in a classic-car show. He may risk his capital on the newest computer technology, but he invests his passion in mechanical relics of an earlier age. "I don't turn on to the latest electronic gadget," he says. "I turn on to older, nonelectrical things."

William Hambrecht: Green Thumb. Hambrecht feels a great sense of accomplishment when he picks a bunch of ripe, juicy Zinfandel grapes from his 140-acre vineyard in Sonoma County, Calif., or clips a dazzling orchid in his San Francisco greenhouse. "I like to grow things," he says.

Among the things Hambrecht, 48, grows best are seedling companies. As a general partner in San Francisco-based Hambrecht & Quist, he has nourished several electronics firms in the fertile fields of Silicon Valley, including Convergent Technologies and VLSI. Unlike most other investment companies, Hambrecht & Quist will do it all for clients: provide venture capital, underwrite stock issues and lend management help.

Hambrecht & Quist oversees seven venture-capital funds with total assets of more than $350 million. Clients range from institutional investors such as Yale University and American Express Co., which must chip in at least $1 million, to wealthy individuals, who put up $150,000 or more. The first fund, started in 1970 with $3.5 million, is worth more than $100 million.

In the first half of 1983, Hambrecht & Quist had a hand in underwriting 26 stock issues worth $1.3 billion. Hambrecht is a director of eleven companies, including People Express, the discount airline, and NBI, which makes word processors.

In 1968 Hambrecht, a Princeton graduate who grew up on Long Island, N.Y., was a discontented broker working in the San Francisco office of Francis I. du Pont & Co., a now defunct New York City investment firm. One evening he stopped for a drink at the Kona Kai Club in San Diego with George Quist, a friend who was a venture-capital specialist for Bank of America. After commiserating a while over the excessive caution of big companies and consuming two bottles of wine, Hambrecht and Quist decided to launch their own venture-capital fund.

Today Hambrecht & Quist has a staff of 350 in five U.S. offices and one in London. That is big enough, insists Hambrecht: "I have no desire to be a Merrill Lynch or E.F. Hutton." Since Quist's death in 1982 at age 58, from a heart attack, Hambrecht has had to shoulder a greater burden at the top.

A millionaire many times over, Hambrecht has personal stakes in numerous firms. But no sooner does he make money on a stock than he risks it again. "I'm a hopeless addict to investing in early-stage companies," he says. "I once had a stock that paid a dividend, and I hated it."

Married, with five children, Hambrecht lives in an Edwardian-style home in San Francisco's opulent Pacific Heights district. In recent years he has begun diverting some of his attention, and money, to Democratic politics. A major backer of Presidential Candidate Alan Cranston of California, Hambrecht explains that in politics, as in business, he has "a natural affinity for the underdog."

--By Charles P. Alexander. Reported by Michael Moritz/San Francisco and Adam Zagorin/New York

With reporting by Michael Moritz/San Francisco, Adam Zagorin/New York