Microsoft alumni: A class of their own

By Rachel Konrad
Staff Writer, CNET News.com
February 11, 2002, 4:00 a.m. PT

Three years ago, Eric Engstrom was running Microsoft's Internet service provider business and growing rich from stock options in suburban Seattle. Now he's supervising the construction of New Oroville, a self-contained, utopian community for software engineers in India.

"I like to change the way people think about things," said Engstrom, founder of Catalytic Software. "We went there and we looked around and said, 'Wow, we could change the world here.'"

Although he may be more altruistic than most, Engstrom represents a unique class of Microsoft graduates who left the company in the late 1990s and 2000.

More than any other Fortune 500 company in recent memory, the world's largest software maker has seen dozens of top executives leave to chase their dreams of becoming CEOs, venture capitalists or, in Engstrom's case, an instrument of socioeconomic revolution. Along the way, these executives-turned-entrepreneurs have become emblematic of a new American dream that has given working stiffs--no matter how young or inexperienced--the hope of transforming a germ of a plan into a multimillion-dollar business.

The stock market crash of April 2000, of course, radically reshaped the plans of the most recent crop of alumni from Redmond, Wash. But regardless of their fate post-Microsoft, this group will have had the distinction of leading an unprecedented exodus driven by the Internet gold rush, a pioneering streak of independence, and the kind of liberating confidence that only millions of dollars in vested stock options can inspire.

In interviews with more than a dozen high-profile Microsoft alums, a common theme emerged: a deep-seated desire to be in charge, whether it be in their professional or personal lives.

"I really wanted to run something, and I wasn't likely to run Microsoft," said Greg Maffei, who quit as chief financial officer in 1999 and is now chief executive of fiber-optic network company 360networks.

None has created the next Microsoft so far, but many have found success where neither business nor technology play a part, even if that wasn't their original intent--such as spending time with their families and enjoying their considerable wealth.

Some, such as Ben Slivka, the lead developer of the Internet Explorer browser, opted for semi-retirement or stay-at-home parenthood. Nathan Myhrvold, founder of Microsoft Research and former chief technical officer, is practicing French cooking skills, digging for dinosaur fossils, and investing in start-ups with a personal fortune valued around $650 million in 1999.

Many veterans say they left because, as Microsoft matured, they felt less like entrepreneurs and more like bureaucrats. The company employed 5,635 in fiscal 1990 in the United States; in fiscal 2000, it employed 32,931, not to mention legions of contractors and temporary workers. It wasn't unusual for individuals to preside over more than 1,000 workers.

Pete Higgins, the 45-year-old former group vice president of Microsoft's interactive media division, saw the company evolve from a lean, entrepreneurial organization into a much larger institution in his 16 years there. He took a sabbatical in 1998 to improve his golf game and spend more time with family. He never really came back.

In February 2000, Higgins co-founded Second Avenue Partners, a Seattle-based provider of management, strategy and capital for young companies. He says comparing his venture capital responsibilities to those at Microsoft is "like apples and oranges."

"At Microsoft, like at any large company, the care and feeding of the organization takes up a lot of your time. It's nondiscretionary stuff that grinds you forward--the meetings, the reports, the paperwork," Higgins said. "Whereas at a smaller organization, in my current situation, every day is different and I'm more in control of my days."

Veering off the beaten path
The number of executives like Higgins may have been higher at Microsoft than at other companies, but their actions are not surprising. Industrial psychologists believe that any company's work force includes a small percentage of hard-core entrepreneurs--people willing to ignore conventional wisdom and market fluctuations to strike out on their own.

"Some people simply want more freedom to make decisions," said consulting psychologist Art Resnikoff, executive vice president of Foster City, Calif.-based Hagberg Consulting Group. "They want to be free of the layers of the corporation and have a hand in various stages of development, from the beginning to the end. It's especially true in a company like Microsoft, where a lot of people worked hard and made their money, so they have a financial cushion and can afford risks."

Others discover they want something different when confronted with the limitations of their career paths. Psychologists say many people are happy to climb the corporate ladder at any large company for years--sometimes taking more than a decade to become senior vice president--until they realize they will never be the chairman or CEO.

"Entrepreneurs will stay with a large company as long as they think there are opportunities for them to progress and be in charge," said psychologist Robert Hogan, founder of Tulsa, Okla.-based management consulting firm Hogan Assessment Systems. "They are uncomfortable with bureaucracy, rules and procedures. They want to be in charge, want to be successful, (and are) fairly ruthless and quite mercenary. They are not very nice people, but they can be charming, and they are also the engines of the economy. So everything about them makes them want to run their own show."

Microsoft alums may quibble with the mercenary label, but few refute their drive to run their own company. In fact, many senior-level Microsoft veterans described their resignations as inevitable; they viewed their tenure at Microsoft as a way to make contacts and work under Bill Gates before venturing off on their own.

Cutting the umbilical cord
Microsoft's youthful, cliquish campus--where caffeine-fueled 20-somethings dress in jeans and sneakers and often hang out with buddies from college fraternities--pushes many mature workers to consider "graduation," said Naveen Jain, who left in 1996.

"A lot of people go to Microsoft and feel the need to cut the umbilical cord at some point," said Jain, a New Delhi native who founded Bellevue, Wash.-based Internet information provider InfoSpace largely with his Microsoft stock options. "There's a sense among a lot of people there that you have to grow up and move out of your parents' house. You could live there forever, I guess, but how cool is that?"

Still, many of those who left Microsoft concede that they would not necessarily have jumped ship if the tech sector had already collapsed. Some, including former CFO Maffei, are struggling through their companies' bankruptcy reorganizations and wistfully recall their days at Microsoft as relatively carefree.

"It would be impossible for anyone to say that the economy didn't play a role in our decisions," said Rob Bennett, a former director of marketing for MSN who left in November 1999 after eight years. Bennett took a job with digital media start-up Encoding.com, which became Loudeye Technologies. In June 2000 he and Larry Cohen, former general manager of Microsoft's Silicon Valley business relations group, formed marketing consulting firm Bennett Cohen.

"There were all these opportunities on the table, and a lot of great ideas were getting funded," Bennett said of the first half of 2000. "It turned out there were a lot of not-so-great ideas as well. I'm not sure whether I would have quit (if the economy had tanked sooner), but I would have definitely thought twice about it."

Some employees who left in the late 1990s and 2000 have even come back to the mother ship. In fiscal 2001, 270 former Microsoft employees rejoined the fold. So far in fiscal 2002, Microsoft has rehired 90 workers.

"When the weather's nice out, people like pleasure boats. But when the weather gets rough, an aircraft carrier like Microsoft starts to look pretty good," said Robert Horowitz, editorial director and founder of industry research group Directions on Microsoft. "Executive departures have slowed down as other opportunities don't seem so bright...People realize there's a lot to be said for a relatively stable, well-managed company." 

News.com's John Borland contributed to this report.