Nolan Bushnell in his home workshop with Androbot’s Topo robot, circa 1983. [Photo: Roger Ressmeyer/Corbis/VCG]
In the annals of Silicon Valley history, Nolan Bushnell’s name conjures up both brilliant success and spectacular failure. His two landmark achievements were founding Atari in 1972—laying the groundwork for the entire video game industry—and starting Chuck E. Cheese’s Pizza Time Theatre in 1977. But there’s another highlight of Bushnell’s bio that has long gone undocumented: pioneer of the high-tech incubator.
In 1981, Bushnell created Catalyst Technologies, a venture-capital partnership designed to bring the future to life by turning his ideas into companies. In the era of the TRS-80, Betamax, and CB radio, startups funded by Catalyst pursued an array of visionary concepts—from interactive TV to online shopping to door-to-door navigation—that created entire industries decades later. “I read science fiction, and I wanted to live there,” Bushnell explains.
His incubator only existed for half a decade, and most of the tech startups that emerged from it are long forgotten. “You might say he flew too high and his wings burned off,” says Alan Alcorn, a longtime collaborator of Bushnell and the developer of Atari’s Pong.
Catalyst’s mostly forgotten story serves both as a reminder of the daring nature of entrepreneurship and as a cautionary tale for those who might try to do too much, too quickly. And for Bushnell, the memories remain satisfying. “It was actually a fun project for me,” he says. “I enjoyed it a lot.”
BUSHNELL IN A NUTSHELL
As a kid growing up in Clearfield, Utah, Nolan Bushnell would visit a local boneyard where he scoured the hulking bellies of rusty aircraft looking for spare parts. “They were melting down airplane fuselages from World War II for the aluminum,” he recalls. “Inside the airplanes, they still had the radios, wiring, and lights in them, and we’d sneak down at night and strip them out.” It was a hazardous place for a kid, but it was also a wonderland.
Around the same time, he built a small cinder block building in his backyard so he could blow stuff up safely. He was not afraid of taking risks to learn new things, and as he grew older, he also found that he was not afraid of using his personal charm and charisma to get what he wanted.
During a summer job while in college, Bushnell occupied his restless mind’s spare hours by working at a local theme park. His superiors quickly promoted him to manage the entire midway, which included an arcade and a typical array of carnival games. He learned about what it took to attract customers and keep them coming back for more—two lessons that would define the course of his life.
In 1969, Bushnell relocated to Silicon Valley to work at recorded-media pioneer Ampex. In 1970, with the help of a fellow engineer named Ted Dabney, he hatched the blueprint for the commercial video game industry by designing Computer Space—the first commercial video game ever launched. It was not a knockout success. But the following year, Bushnell and Dabney cofounded Atari.
When their new startup launched an arcade game called Pong in the fall of 1972, it set the arcade industry on fire. Several other hit arcade games followed, then Home Pong in 1975. Soon, Atari was at work on a next-generation game console with removable cartridges, designed to leapfrog the oversaturated dedicated home console market.
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Atari’s Ted Dabney, Nolan Bushnell, Larry Emmons, and Alan Alcorn pose with Pong.
Atari had been largely self-funded at that point. Despite the popularity of its games, it had skirted with bankruptcy. But now it needed capital to develop its new console, so Bushnell sought a buyer. In 1976, the Warner Communications media empire—the predecessor of today’s Time Warner—acquired Atari.
After the Warner acquisition, Atari’s ambitious CEO had trouble focusing on the intricacies of the video game business. His newfound wealth—about $15 million of the proceeds of the merger—served as a compelling distraction. Recently divorced, he sailed yachts, traveled the world, and even bought a 14,000-square-foot mansion in Woodside, California.
But he was still hungry to create new things. At the time, there were no personal robots, no high-definition TV sets, no video phones. If he wanted to see them come to pass, he realized he would have to make them happen himself.
Bushnell’s overlords at Warner didn’t want to be in the pizza business.
At first, Bushnell dabbled in the future at Atari. Pizza Time Theatre, the kernel that would become the Chuck E. Cheese chain of family arcade restaurants, began as an Atari division in 1977, and it became Bushnell’s pet project. Its animatronic signing robots were cutting-edge for the time. Bushnell also encouraged Atari’s engineers to experiment with futuristic technologies outside the realm of video games, such as video phones (a project called “Phoney”), computerized cameras, and telecommunications devices for the deaf.
But Bushnell’s overlords at Warner weren’t amused—especially by the singing robots. They didn’t want to be in the pizza business. To keep his dream alive, Bushnell acquired Pizza Time from Atari in 1978 while still working there. After a showdown with Warner management over the future of the then poor-selling Atari VCS console—which Bushnell wanted to ditch and replace with a more advanced system—Warner forced Bushnell out of the firm in November 1978. He was 35 years old.
CATALYST IS BORN
Around the time of his Atari departure, an important future collaborator entered Bushnell’s life. “I got a call from Nolan, and he was in the throes of getting terminated by Warner Bros,” says Larry Calof, a lawyer based in Los Angeles at the time. “I ended up negotiating Nolan’s termination package from Atari. That’s how he and I got to know each other.”
In many ways, Bushnell says, leaving Atari was liberating. Once free of the company, he could pursue any path he wanted. And with an epoch-shifting success like Atari under his belt, he was wildly optimistic. “I was a young man and I had worlds to conquer,” he says today. “I think I was kind of arrogant. I really felt that I had the Midas touch.”
In 1979, Bushnell ran into trouble with the Pizza Time chain and called in a new management team to help. As those executives steered the company, Bushnell began to step away from duties there and turned his attention toward new opportunities. He had so many ideas—and so many talented friends and colleagues that could implement them. But he saw a daunting task ahead of him if he wanted to do something about it: Starting a company from scratch for each and every idea would take a lot of work.
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Bushnell poses with the King, one of Chuck E. Cheese’s Pizza Time Theatre pals.[Photo: Terry Ashe/The LIFE Images Collection/Getty Images]
One of the biggest problems with startups, Bushnell realized, is the sheer amount of “bullshit housekeeping stuff” involved. One needs to acquire funding, find a building, buy furniture, sign contracts, get lawyers, hire management, and handle payroll, among other administrative tasks.
To Bushnell, all that got in the way of the core reason for the business: the technology. He devised a plan to start creating small businesses as fast as possible. Each one would be an investment vehicle for Bushnell’s fortune while simultaneously accelerating the future’s arrival.
Within the first year, Catalyst was funding 10 separate technology firms.
Central to this idea would be a shared office space—a command center where Bushnell and his lieutenants would be able to guide the proceedings. “My idea was that I would fund [the businesses] with a key,” says Bushnell. “And the key would fit a lock in a building. In the building would be a desk and chair, and down the hall would be a Xerox machine. They would sign their name 35 times and the company would be incorporated.” All the details would be handled: “They’d have a health care plan, their payroll system would be in place, and the books would be set up. So in 15 minutes, they would be in business working on the project.”
And once these microfirms were up and running, the fledglings could leave the nest and set out on their own—by getting acquired or by becoming thriving standalone businesses.
What Bushnell had just devised was an incubator. It wasn’t the world’s first such company, but it was very likely the first in Silicon Valley, and it was the first to focus on the high-tech world that spawned from the 1970s revolution in semiconductor technology.
Bushnell invited Calof, his longtime lawyer, to help develop the idea. Then he brought in John Anderson, the former CFO of Atari, to handle the financial side. In 1981, the three of them decided to call their new investment partnership Catalyst Technologies—with their money being the “catalyst,” so to speak, of tech innovations.
They raised a venture fund, soliciting investment from others in the area, and planned to match the venture fund’s interest in each company personally, although Bushnell ended up shouldering most of the financial burden.
The group leased a building on Lawrence Station Road in Sunnyvale, California—the former headquarters of Dysan, a manufacturer of floppy disks. “It was a wonderful old thing that everybody called the ‘Rust Bucket’ because it was made out of steel that rusts and protects itself,” recalls Bushnell. The building was ideal because it had several bays that could be used for different companies. And at over 48,000 square feet, it provided lots of room—at one point, over 14 companies shared its interior, although the larger, more successful firms soon moved out and into their own spaces.
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One of Catalyst’s companies created a TV show about video games, playing up Bushnell’s involvement.
In 1982, the Catalyst founders rounded out the team with Perry Odak, the former VP of consumer products at Atari. Between the four of them, Calof says, Bushnell had a lawyer, an accountant, a business guy, and an idea man. And Catalyst was always intended to be a skeleton crew: At its peak, its core staff numbered only seven or eight people. Calof was named president and Bushnell was named CEO.
When it came time to decide which projects to pursue, the team shunned unsolicited pitches. Instead, the ideas mostly came from Bushnell or his associates. With the constellation of talent Bushnell knew around the valley, the project took off quickly. Within the first year, Catalyst was funding 10 separate technology firms. Soon that roster grew to 14, then between 17 and 20 at its peak. (It’s hard to pin down the exact number because some of the “companies” existed only briefly as research projects, and some of Bushnell’s other investments were often counted as Catalyst firms by association.)
Many of these microcompanies featured Bushnell as chief investor and chairman of the board, and several were staffed with Atari alumni such as Alan Alcorn, who spearheaded the technology behind a video game distribution company called Cumma. Joe Keenan and Gene Lipkin, both Atari veterans, also joined the effort. Such choices, which rewarded loyalty as much as skill, weren’t always perfect fits. But Bushnell’s charismatic nature had a way of roping in those around him to help him achieve his goals. Alcorn in particular served as a trusted sounding board for many of Bushnell’s ideas.
THE FUTURE, TOO SOON
Aside from a familiar crew of Bushnell cronies, most of the Catalyst companies had another thing in common: They were almost unnaturally ahead of their time.
For example, a firm named Cinemavision pursued high-definition television and digital theater projection in the early 1980s. ACTV invented an interactive cable TV system for choosing camera angles for live broadcasts or playing quiz shows. ByVideo dealt with an early form of semi-online shopping: Users browsed items on a screen at a kiosk, served up by LaserDisc, and the machine reported purchases back to a central shipping warehouse via modem. Alcorn’s Cumma allowed electronic distribution of video games through rewritable cartridges programmed by special vending machines.
Each of these firms represented kernels of ideas that would become successful decades later, in the hands of firms like Sony, Texas Instruments, Time Warner, Amazon, and Valve. But one huge thing was missing: the technology infrastructure to make them practical in the early 1980s.
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Etak’s pre-GPS navigation system made the cover of Popular Science in 1985.
“A lot of these things were so far ahead of their time that either there wasn’t the market, or the technology wasn’t there to take it to the step where it could be commercialized,” says Calof. “For example, we were doing HDTV before HDTV really could be HDTV. We had an essence of a video phone working before you could do that with the technology that was available 15 years later.”
That’s not to say that Catalyst focused primarily on selling the promise of science fiction. The firms had engineers making real breakthroughs in the fields of optics, telecommunications, and navigation. In fact, one of the brightest stars of the Catalyst family gave birth to the entire electronic navigation industry. That firm was Etak, a company led by engineer and championship yacht navigator Stan Honey. In 1985, Etak released the world’s first in-car computer navigation system, the Etak Navigator.
At the time, the U.S. government was years away from fully deploying its network of GPS satellites and making them available for consumer devices. So Etak’s gadget used a combination of dead reckoning and map matching, with maps streamed digitally from cassette tape to pinpoint your location (and even provide directions) on a small screen. Bushnell envisioned the technology eventually pointing people to the nearest sushi restaurant—in 1985—which some in the press ridiculed at the time.
Even more impressive were Etak’s bleeding-edge digital mapmaking, storing, and processing techniques that spawned a suite of fundamental patents, and its portfolio of digitized maps themselves, all of which ultimately proved more valuable than a navigational device for consumers.
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Source: FastCompany