My Biggest Mistake: Regis McKenna
Sunday 11 October 1992
MY BIGGEST mistake was turning down a 20 per cent stake in Apple Computers. In 1976, Steve Jobs and Steve Wozniak, who had started the company in a spare bedroom, approached me and asked for help in launching what was to be the world's first personal computer.
I had worked with many technical companies in Silicon Valley, and I liked Apple's vision.
In addition to marketing consultancy, I also owned an advertising agency and a public relations company. So not only did we write their first business plan, we also designed the Apple logo and put together their advertising campaigns.
At this point, one of my senior managers wrote me a memo. He'd been talking to Apple, and suggested that instead of taking the money, we should exchange our services for a 20 per cent stake.
My company was only about six years old at the time. We were growing fast and had a turnover of several million dollars, but it was still a relatively small business.
When I was in high school I dated a young lady whose mother owned a candy store. Whenever the supplier came in she would open the till, and if there was any cash she would buy some new candy. If not, she didn't.
I always use that as an example: you have to run a business like a candy store.
So when I looked at the idea of swapping services for equity, instead of seeing a potentially multi-billion-dollar company, I was looking at my cash flow. And that's one of the reasons why I turned down Apple's offer.
The other is that what you think the value of your business is and what the buyer thinks the value of your business is are often far apart. I learned that from experience.
Many years ago, I was chatting to the owner of a restaurant in California, and when he found out what business I was in, he said he could use some help.
He suggested that we exchange services . . . food for thought, in other words.
So we did: we carried out market research, designed his graphics and did all sorts of things while building up this chit of what we thought was our value.
One night after work, about six or seven of us decided to go to his restaurant. We all ordered big steaks, and drank several bottles of his best wine.
The next day I got a call from him, and he was absolutely furious.
He felt that we had far exceeded the value of our work, and fired us on the spot.
It was no terrific loss, but it did teach us a lesson. When you exchange these intangibles, it is very hard to put a value on them, and that is why I will only provide services in return for cash.
If I had agreed to take 20 per cent of Apple, I would have made up to a billion dollars within seven years. But were I to dwell on past mistakes, I don't believe I'd get up in the morning.
I've had many opportunities to take equity in these hi-tech companies when they were just starting up, but if I want shares I prefer to pay cash. That's what I did with Apple - bought shares from Steve Jobs - and Apple is still a client 14 years on.
Meanwhile, our business is still doing well and we have maintained our integrity. That, actually, is worth more than dollars.
I don't think food for thought is ever a good concept. But I am always reminded of what I turned down, because my letter is on display at Apple's headquarters.
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