Ex-CEOs Play Angel by Helping High-Tech Start-Ups Get Their Wings

It’s called the CEO Emeritus Club, and as clubs go, they don’t get much more exclusive.

The six members are among the biggest names in the Orange County business world. They are executives who built empires, lost them, won admirers and stirred controversy.

Now independently wealthy, they remain driven by the prospect of more profits, but with an altruistic spin: They want to help lead Southern California into the high-tech future.

Founded three months ago, the group is composed of Roger W. Johnson, the retired chief executive of Western Digital Corp. and a former Clinton appointee; AST Research Inc. co-founders Safi Qureshey and Albert Wong; and Carmelo J. Santoro, Gary Liebl and Isaac “Zak” Kong, all fixtures in Orange County’s high-tech community.

The members want to put their experience--and their money--to work in infant business ventures. They believe that with their help, cutting-edge companies and life-changing technologies can grow and thrive.

“People like us have a responsibility,” Johnson said. “We need to find the next generation of new leaders.”

*

On a recent afternoon, these retired commanders of industry gathered in the elegantly appointed home office of Qureshey’s hilltop mansion in Lemon Heights near North Tustin, where they sipped sodas and coffee and eyed custard tartlets.

The conversation ranged from the bloodiest moments of their own careers to new technologies and visions of Southern California’s future. Mingled with a been-there, done-that sensibility was the kind of enthusiasm typically found in young entrepreneurs.

No longer interested in running their own corporations, these former CEOs--ranging in age from their late 40s to mid-60s--aren’t ready to fade into the sunset, either. They joked about their wives pushing them out of the house but admitted they still hanker for a piece of the action.

Without an active role in business, “I wouldn’t know what else to do,” Johnson said. They might not be back in the starting lineup--but the role of coach seems to suit them just fine.

Said Qureshey: “We don’t want to be seen as just a source of capital, but much more as a source of advice and experience.”

The emergence of this group is significant largely because there has been a lack of organized efforts to fund and nurture early-stage firms in Los Angeles and Orange counties.

Notably absent has been a well-developed network of “angels”--wealthy investors who provide entrepreneurs with money, advice and contacts. In the San Francisco Bay Area, the Band of Angels is a high-profile group of current and former executives who have played an important role in backing new businesses.

*

It’s one of the key reasons why Silicon Valley has become the economic envy of the world. Huge, market-leading concerns, including Intel Corp., Hewlett-Packard Co. and Cisco Systems Inc., and scores of other hot, fast-growing companies, are packed into the area. With each success, new generations of savvy entrepreneurs and take-it-to-the-bank ideas are quickly launched, keeping the region at the forefront of business growth.

Yet in Southern California, “the road is littered with the bodies of great potential companies,” said Liebl, a former top executive at McDonnell Douglas Corp. and Microdata Corp., an Irvine minicomputer company.

Although Southern California does have its angels--each of the six CEO Emeritus members is involved with a few developing companies--to date they’ve been unorganized and elusive.

“There just aren’t that many successful technology role models down here for emerging companies,” said Bob Hoff, general partner of the Irvine-based venture capital firm Crosspoint Venture Partners. “Here’s a group coming together that’s going to be very visible and highly contactable.”

In an indication of the demand for angel investment groups, Liebl said that in the last six weeks he has been contacted by 42 firms asking for financial and managerial help.

The CEO Emeritus Club says its most valuable asset is its years spent in the trenches. As Qureshey put it, “There’s really no shortage of mistakes we haven’t made.”

It has been two years since he stepped down as CEO of Irvine-based AST, the company he founded in a garage with Wong and Tom Yuen. Once one of the top five personal computer makers, AST’s finances hit the rocks in the mid-90s. Qureshey was pushed out after Samsung Electronics Corp. gained control.

He has the title of chairman emeritus of AST but has no active role in management. He’s also a director of Object Automation in Santa Ana, a newly formed industrial automation software developer that has been creating a lot of buzz with its hopes of revolutionizing factory floors. To this day, Qureshey said, his deepest regret, and his biggest lesson, came when he laid off 440 workers as AST headed into a financial tailspin in 1994.

When that happened, he said, “you’ve got no one else to blame but yourself.”

Wong had left AST years before and started another computer company, Amkly Systems Inc. in Irvine. There, he said, he grew too confident, expanded too fast and overextended himself. Amkly closed in 1992.

Having been burned by his own lack of financial diligence, Wong said he’s now extremely conservative. As a director on the boards of such firms as Printrak International Inc., an Anaheim supplier of fingerprint identification systems, he has become a fierce advocate of cautious spending.

*

Kong recalled his own naivete when he started Irvine-based NetSoft, which was acquired in July by a Silicon Valley company for $26 million. He didn’t know how to write a business plan and searched frantically for books to explain basic accounting terms. At his first presentation to financial analysts, he froze and almost couldn’t speak.

Santoro resigned as chairman and CEO of Platinum Software Corp. in Irvine last year to spend more time with his ill wife. He had taken the reins in 1994 and rebuilt the company after a bookkeeping scandal threatened to destroy it.

Even Johnson, revered for building Irvine-based Western Digital from a small player into a Fortune 500 computer products concern, is no stranger to trouble.

The company barely survived a financial near-disaster in the early ‘90s. Johnson engineered a turnaround, then left in 1993 to become head of the General Services Administration, the federal agency that manages government purchases and properties.

It was that job, Johnson said, that may have provided his most valuable lessons. The first sign of the nearly insurmountable resistance to change in Washington came at a cocktail party shortly after Johnson arrived. An underling informed him that his staff was known as the “B Team.” That meant, “We be here when you came, and we be here when you go.”

During his three-year tenure, Johnson battled bureaucratic dogma and was castigated by fellow Republicans for breaking ranks to serve under President Clinton. In May, the newly converted Democrat was cleared of allegations that he had used his office for personal gain.

With these trials behind them, the CEO Emeritus Club members say they can help young executives avoid potentially fatal errors.

The club was formed by Qureshey and Liebl, who had been meeting informally. The group plans to grow to about 10 members, with each investing about $50,000 in selected firms--though none is bound to invest in any deal. They might also form a fund to which they will all contribute and from which investments will be made.

“The folks we’re talking about--that’s a wealth of experience to bring to the table,” said Rita Pirkl, Southern California group manager at Silicon Valley Bank. “That’s so much more valuable than just putting money in a company.”

Chuck Martin, general partner at the Newport Beach venture capital firm Enterprise Partners, said that many firms he sees are “too raw, too underdeveloped.” Venture funds typically invest in young companies but require complete management teams, business plans and marketing strategies.

But a venture capitalist would certainly take notice of the involvement of someone like Qureshey, who is also a partner in Enterprise, Martin said.

*

Make no mistake, these guys are out to make money. Though risky, funding start-ups can also be extremely lucrative.

But, as rich as they already are, club members could easily sit back, invest passively and watch their portfolios appreciate quite nicely. So why bother with the headaches that come with starting new businesses?

They all express a deep-seated desire to give back to a system that has rewarded them well. Qureshey, Wong and Kong speak of their success as immigrants, Johnson of his working-class roots.

Yet there’s another reason, one that Hoff attributes to “a genetic defect” in the makeup of hard-driving executives.

“No matter how much money they’ve made, they’ve got to be in the game,” he said. “You can only play so much golf.”

Indeed, club members talk excitedly of new industries and technologies they could encourage. They speak of multimedia converging with entertainment, harnessing aerospace talent, and technology in education and medicine.

“Each of us, we’re all sucked into Northern California,” Qureshey said. “Whether I like it or not, I’m flying there every other week because there is so much happening there.

“The idea of this group was that there have got to be good companies right here. We don’t have to copy Silicon Valley. They have their strengths. We will find other areas.”