Transition to Business

The shift to business software also brought changes in management. Up until 1983, Berez had served as President and performed all the duties normally associated with a Chief Executive Officer. When work on Cornerstone began, it was obvious that the company needed more capital. Both Berez and Vezza met with various venture capital firms in search of additional funding. Vezza believed that the company needed an official CEO who had experience and clout to attract investors. Some firms were wary of giving money to young entrepreneurs who had little business experience. But they would be more comfortable dealing with Vezza, an older, seasoned leader.

Soon after, Vezza began more discussions with investors to raise money for Cornerstone. Ray Stata, founder of Analog Devices, Inc. and a friend of Vezza, took an interest in the company. Stata offered to secure a $2,000,000 three-year subordinated loan from the Bank of Boston in exchange for options to buy $2,000,000 in stock and a position on the Board . On December 15, 1983, the Board approved the loan, increased the number of Directors from five to six, and elected Stata to the Board. Stata's endorsement of the company seemed to have helped the company's image. In the Board meeting of January 25th, 1984, "Mr. Vezza noted that even more potential investors have shown interest in us, following Mr. Stata's investment."

Although Stata's investment helped, Infocom found it difficult it to raise money. Venture capitalists were reluctant to invest large amounts of money on a company that had leaders who had no prior business experience. Vezza also believed that the relaxed, fun-loving engineering culture also worked against the company. He believed that East Coast venture capitalists wanted to invest in serious, professional-looking companies. Investors would initially be impressed with Infocom's bottom-line and potential for growth, but they would be displeased by the lack of a serious atmosphere once they visited Infocom. One firm reportedly told Vezza, "You have a bunch of talented, undisciplined bunch of people, and you're not going to be able to control them." That Infocom managed to become a $10 million company just made them arrogant, Vezza said.

There was also a strong desire among Infocom's leaders to retain control of the company. In 1983, Gulf and Western was interested in buying the company for $11 million. The deal was rejected not only because the Board felt the company was worth more, but also because Gulf and Western wanted to impose their own entire organizational structure on Infocom.

Infocom, however, managed to get some additional funding. On October 24th, 1984, the Board approved the borrowing of $500,000 dollars from Massachusetts Capital Resource Company (MCRC), a state-run venture capital firm dedicated to helping Massachusetts-based companies. But the MCRC investment was the only venture capital Infocom received.

Everything looks ok, so what happened next?