Startups are a triumph of hope against reality. One hears mostly of the Netscapes and the Yahoos, the dozens of overnight millionaires. Very rarely does one learn of the drudgery and toil, the hundreds of nights spent staring drearily at a computer screen, the fear of whether you’re going to make your rent check this month. For two years, Patil Systems stumbled along, supported on the loans made by family members and college friends. At one point, Patil was forced to take aside Dr. Ravindra, one of the other faculty members who had left with him, for a heart-to-heart talk. Funds were running terribly low, he told him, and he wasn’t sure it was the right company any more for a person with a young wife, expecting their first child. Not to worry, was the reply, he was going to gut it out no matter what the pain. Fifteen years later, Patil still chokes up when he remembers that conversation.
One fact was slowly becoming clear. Most of their customers came from a 40 square mile area In Silicon Valley. The mountain had to move to Muhammad. In late 1983, four of them moved from Utah to Northern California. They incorporated there on February 3, 1984.
Regis McKenna, their consultant, advised them to pick a corporate name that had positive connotations. They spent a day writing up all plausible choices on a board. The winner was the name of an airy cloud that signified clear skies and sunny weather. Cirrus logic.
They worked furiously on the design of an Integrated chip for Jerrold Systems that would drastically bring down the cost of set-top boxes for the selection of cable channels. They came up with a design that worked perfectly but found that they had no money to actually get the chip fabricated. Swallowing hard, Patil gave the design to the customer for nothing more than the $100,000 engineering fee.
It was a tough financial decision, but it was the right one because it gave his company cachet and credibility. Other customers came calling. News of their success spread, and they were courted by a host of venture capitalists. In nine months they were finally well funded, with names like Nazall, Brentwood, lVl, and Robertson Stephens all on board. With this war chest backing his cutting-edge technology, Suhas Patil was able to mount an all-out campaign to bring on one of the most highly regarded managers in electronic design as CEO. Mike Hackworth was a marketing and sales wizard who was in charge of 2,300 people at Signetics. He signed on with Cirrus, which at that time had a total of 12 employees.
Patil and Hackworth complemented each other so well that they became known as one of the best management teams in Silicon Valley. Patil would emerge from the labs after much thought and careful design with a product that was aimed dead square at a consumer need. His partner would then set the company strategy to market and sell that product for all it was worth.
Cirrus’s next innovation was to bundle the controllers for disk drives with the actual drives themselves rather than treat them as separate bulky entitles. This made the drives much more portable and spawned an entire industry in Integrated Drive Electronics. In 1989, they introduced a controller chip for the IBM VGA graphics standard that allowed identical programs to run on laptops and desktop computers for the very first time. They went public that year.
Each year seemed to bring a new hit.
One year. It was a way to connect CD-ROM drives directly to PCs without needing costly adapters. The next, it was helping define credit-cardsized PCMCIA cards that are used in almost all the portable computers sold today. Fax modem chips came shortly thereafter, followed by chips for the wireless communication market. From 1992 to 1996, the company’s annual revenue grew sixfold, from $1 71 million to $1,147 million. Along the way, the company pioneered a way of working called fabless design. The engineers designed all the circuitry, and sent the blueprints to be fabricated at other company’s foundries. That way, there was no necessity to invest hundreds of millions of dollars in capital equipment. It also resulted in more time and freedom to attack new markets quickly and to be nimble in delivery.
Investors took notice of Cirrus’s success.
During three giddy quarters in 1995, the stock rose from $12 to $62. A billion-dollar company with that kind of visibility attracts a lot of competitors, especially in the jungle of high technology. And come out of the bushes they did, Oak Technologies in CD-ROMs, Sierra In modem chips, S3 in graphics. Adroitness and instant response to market changes became the company watchword. For every PC sold, Cirrus sold about a dozen support chips worth around $200, generating revenue per PC second only to Intel’s $300 per microprocessor. For better or worse, the company became known as a bellwether for the health of the PC industry. A good quarter for Cirrus meant that PCs were selling well.
In early 1995, with the order queues being full, the company made a decision to cut back its customer list to only a dozen or so of its biggest customers. In order to ensure supply, some of the largest customers like PackardBell placed their orders way in advance. But they forecast wrongly since customers bypassed the older computers in favor of faster ones Introduced in late 1995. Frantically, Packard-Bell and others cut back on their earlier orders. Cirrus’s sales in the last quarter of 1995 were disappointing. The stock got slaughtered, and retraced Its way back from $60 to the $20s. Momentum Investors tend to be a nervous lot.
Talk to Suhas Patil now about those days, though, and you are met with total equanimity. He is unperturbed by the cavalier way that Investors treated the company. He has reason to be sanguine. The company has had a recent $300 million convertible offering. Inventory levels are substantially lower than a year ago. The PC business continues to boom they have introduced new high-performance audio cards, graphics processors, and mass storage controllers. There are plans for personal digital assistants, digital video disks, and network computers.
There is still the air of the inquisitive child about him, the person who cares deeply about how something works. He is the rare personality who blends both the analytic ability of an MIT professor and the tinkering itch of a backyard inventor. A recent issue of ‘Byte” magazine hazarded guesses about what the computer of the next millennium would look like. There were wild postulations about holographic imaging, terabyte thumbnail drives, speech-driven commands. Whatever the reality is, it is easy to visualize one image. It is of that computer taken apart, all the little pieces being subject to microscopic scrutiny, on Suhas Patil’s workshop bench.
BUSINESS FOCUS: RAJ JASWA – The Entrepreneur
Carl Gustav Jung once wrote that life is lived forward but can only be understood backward. When faced with a decision, humans often make their choices blindly. They accept the job offer or agree to move cities, or vol-unteer for service in the army. Each choice throws them in new situations and makes them confront yet more decisions. At the very end of life, they reminisce and relate their stories as if they were pushed forward at each step by pure rationality rather than by happenstance and impulse. Once they become the storytellers, they polish and smooth the telling of each stage as the child in their lap looks at them with awe, marveling at how smart grandpa was when he was young.
The mythologist Joseph Campbell called this “The Hero’s Journey.” Each person fashions the myth of their lives, making up the story into which each episode and situation can be neatly fit. The simplest synopsis of this on paper is called a resume. There is the half-hour version, which you relate to a seatmate on the plane, and the years-long version which you share gently and gradually with your spouse or your best friend. The paradox of this myth is that it is remarkably similar among the vast majority of people in the broad brush strokes; and yet it can be remarkably different in the fine lines and subtleties. Most everybody has the same experiences of childhood, school, adolescence, marriage, middle age. And yet there are those that get particularly good at one aspect of living that others merely pay lip service to. These are the people that you read newspaper articles about or the ones who inspire others. These are the people like Raj Jaswa.
Jaswa’s early life reads much like the story of any other student in India who dreams of coming to the United States: the boy who was smartest in his class, the math and science whiz, the determined struggle with the Agrawal Joint Entrance Examination training classes, the admission into lIT Bombay and into graduate school in electrical engineering at Toronto. Hidden in the description of those fledgling years is the will that made him choose not to take the easy path of partnering with his family members in their thriving businesses in real estate, jewelry, textiles, and sugar. Also hidden is his steely efficiency. He graduated on a Monday, got his green card that Tuesday, set up a job interview for Wednesday, and had started work on Friday. He started as a junior design engineer at RF’ Communications at a then-princely salary of $16,500 a year. The city was Rochester, New York, often confused with being a suburb of New York City but in reality 400 miles north- west, not far from the Canadian border. Winter lasted from November to April, a peri. od during which icy winds gusted off the frigid waters of Lake Ontario. Eight months was enough for him. He started interviewing all over the Sun Belt and ended up accepting a job at General Electric in Daytona Beach, Florida. Some day in the future, when scholars study why the South and California became magnets for industry in the late 20th century, weather will show up as the number one reason.
IIT had given Jaswa a broad-based education, with exposure to the liberal arts. He added to his academic credentials by getting an MBA by night at Stetson University. He decided to move to marketing and became a product manager at lntel in Santa Clara, California. He was given responsibility for the compiler software for the 8086 chip. Today, 95% of Intel’s business comes from microprocessors for the PC. In those days, the figure was under 10%. The majority of Intel’s business came from the embedded market, where its chips were used to control the path of machine tools, or in electronic fuel injections for Ford cars, or within the coneheads of Cruise missiles.
As it is now, Intel in 1981 was a very well-run company. Top management came from the engineering ranks, and was intimately familiar with issues that would have been too detailed for executives at other companies. It had a stellar training department, where employees could sign up for a course as often as they wished to. There was a healthy amount of creative tension, with organization charts shuffled around almost annually in order to expose employees to as many different aspects of the business as possible.
Jaswa thrived in the rough and tumble of the new Environment, but he cried halt when his group got moved to Oregon. He had begun to believe that most important advances in technology happened in Silicon Valley because it was one of the very few places in the world that had hit critical mass in engineering talent, venture capital, and manufacturing capability. It would be like leaving Florence during the Renaissance. He decided to stay, and took a job marketing chip sets that were peripheral to the main microprocessors but which were nevertheless needed for everything from graphics to networking.
Even the best-managed companies suffer during an industry downturn. In 1986, just such a slump hit the entire chip industry, Intel, as the bellwether, suffered the most. Products were axed, assembly lines were shut down, and the cornpany underwent nine separate rounds of layoffs. In early ’87, Jaswa switched over to Chips & Technologies, Intel’s principal competitor in the chipset business.
It was the meeting of the man and the moment. The IBM PC AT had come along, and was revolutionizing business. It used the 386 chip from Intel and the BIOS software from Phoenix Technologies to support MS-DOS. The third and final piece of the puzzle was the integrated chipset made by Chips & Technologies to allow the PC to use a modem or hook up to other external devices. Jaswa launched the NEAT chipset, which stood for NExt generation AT. He traveled the globe, to France, to Korea, to Taiwan, to England, proselytizing all the while. In two years, he took the product line from $30 million to $200 million in annual sales. The company recorded profits of over $100 million, with gross margins in the astronomical 70 range.
It should have been the zenith of his professional career. He was called in for a meeting with senior management. Surely, he thought, this must be where they rewarded him for the startling success of his product. But no, they were hauling him in to tell him that they didn’t think he had the right stuff to manage a business unit with revenues as large as $200 million, he who had been largely responsible for its success in the first place!
Here’s where this particular myth diverges from the myth of the majority of people in this situation. Given his title and high pay, most people would have swallowed their pride and rationalized that it was possible that the senior management was right. Instead. Raj laswa quit.
Three of his fellow workers had come to him with an idea so crazy that it was just remotely possible that it would work. They were proposing to design a chipset that would pair the new 486 microprocessor with the connector or bus for the older IBM AT architecture. This would mean pairing a 32-bit processor with a 16-bit bus. It seemed almost retrograde, a path to technology that was behind the times. The only other feature was an integrated cache controller, a component others deemed so complex that it had to be independently designed. On blind faith, and not drawing a salary, the four of them rented a 4.000 square foot office on Augustine Drive. His mother-in-law had joked that he was an incorrigible optimist. So they named the company Opti.
The idea turned out to be a stroke of genius. IBM was pushing the MicroChannel bus, which was proprietary and which they thought would help them wrest back control of the PC from Intel and Compaq and Microsoft; nine other manufacturers were arguing for a new and still largely untested bus called EISA. But people were very comfortable with the AT bus. And Opti was the only game in town.
It is extremely rare for startups to be profitable in their first year. Opti was cash flow positive in six months. In 1990. the company recorded $25 million in revenues. At a headcount of just 20 people, it was bringing in more than a million dollars a person. Chips & Technologies, their old company, fought them in court for 18 months, then settled out of court.
In 1991, Opti’s revenues soared to $65 million and the year after, to $98 million. They were outselling Texas Instruments. Western Digital, and a slew of Japanese competitors, companies with ten times the number of engineers that they had. The company ran like a sports car with two wheels constantly off the road. In order to get ahead in a manufacturer’s allocation queue, they placed orders for wafers before their chip design test results came back. They worked obsessively to make sure that there was never a quality glitch that would delay their getting product to market. They also made it very easy for PC manufacturers to use their products, going so far as to design the entire motherboard for them.
Opti went public in 1993 at a valuation of $180 million. Revenues kept increasing over the next three years. IBM signed on as a customer. So did Olivetti and Hewlett-Packard. In 1995, the company was sitting pretty with an annualized revenue stream of $150 million. It was the darling of Wall Street analysts. The stock began a steady climb to the high $20s.
Raj laswa was identified as one of the 20 best-compensated executives in Silicon Valley. His net worth rose to the tens of millions.
One of the great world myths is that of Icarus flying too high and getting his wings melted by the sun. The fiery body in this case was Intel, which had surged from strength to strength in the mid-nineties. To ensure continuing growth, that company started taking over the design and manufacture of increasingly large pieces of the motherboard. One of the pieces it decided it wanted was chipsets. That put Opti in its crosshairs.
Opti found its customers being siphoned off by Intel. In the space of one week, it lost Packard-Bell, which was responsible for $40 million in annual revenue. In the third quarter of 1995, when the company had a shortfall, the stock began a freefall. Jaswa came back from Christmas vacation in India to find out that the rest of the management team had executed a coup d’etat. He was without a job.
Again the myth diverges from the path that would have been followed by the majority of people. Early forties, net worth in the millions-it is an invitation to step back and enjoy all the wealth. Jaswa did do that for a few months. He took his family to Africa, visited Victoria Falls. But an itch gnaws at true entrepreneurs that most others do not even comprehend. He had to get back in the game.
He spent many months talking to different people about ideas that they had, ideas that could be translated into products and sold in the marketplace. He talked to dozens of inventors. He knew that what he enjoyed most was growing small companies. He wanted to get into the brand-new economic world being created by the Internet. And he wanted to have a good portion of his new company be based in India.
The person he found was Sanjay Mitral, a scientist who had worked for many years at the famous Xerox Palo Alto Research Center. The fruit of his work was an artificial-intelligence engine that lent itself to being implemented under lava, the hottest programming language on the planet. The engine was versatile and compact enough to be used by Web sites so that customers could configure products with very little assistance.
For instance, if they went to the BMW home-page, they could start with the basic model 3251, and configure it as they desired. As each option was added, the picture of the finished car would change on the fly, and a littIe bill on the side would show what the new total cost would be. The best part of the software was that it would allow rules to be encapsulated. For instance, someone choosing the 3.2 liter version of the car might not be able to choose the turbocharged option. Using Mittal’s software, they would be automatically prevented from doing so. That option would be whited out from their menu of choices.
Jaswa sits today in a small office in Santa Clara. His new company. Selectica, was founded in tune 1996. He has programmers working frantically to finish the release of the SRx product. There are dozens of phone calls to return, a JavaOne booth to plan, financing to arrange, people to hire. His plans call for 40 employees by the end of 1997, half in India. He seems energized by all the bustle around him. Icarus has found his wings again. This man is fixing to fly.
Business Focus: Kanwal Rekhi – The Mentor
I was born in Rawalpindi in the pre-Partition days. We left Pakistan when I was two years old, with nothing but the clothes on our backs. We were completely unencumbered when we settled in Kanpur. Being uprooted every so often is good because insecurity is the most necessary thing for growth. That’s why immigrants succeed in their adopted countries at a higher percentage than natives.
“We were an army family. My grandfather was a soldier, my father was in the army, his brothers all served in the armed forces. Both my brothers went to the National Defence Academy in Khadakvasla. Nobody knew that I had applied to the Indian Institute of Technology. I didn’t take any special courses to prepare for the entrance examination. I’d always been good in mathematics and physics, and I just got into the institute at Powai (Bombay). My father did not even know what the lIT was. He’d always wanted me to become a chartered accountant.
“I studied Electrical Engineering and did well enough to be admitted to the graduate program at Michigan Tech. Have you heard of it? I didn’t think so. It is in this tiny town called Houghton in Michigan. Midwestern, real heartland values. I love the place. They have just invited me to be on their board.
“It was hard to get summer jobs then.
That first summer, I took a bus to Chicago. It was 1968, the year of the famous Democratic National Convention where the police where fighting with students all over the streets. I had $20 to my name when I got off the bus. The boarding house cost $4 a night, and dinner cost a dollar. So I had only four days before my money was going to run out. There was a restaurant that had a sign that said ‘Help Wanted: I walked in and they offered me $3 an hour to wash dishes. I put on an apron and didn’t have to starve for those three months.
“Those were tough years to be graduating as an engineer. The space program was winding down and the Vietnam War was past its peak. Thousands of engineers from these two efforts were entering the work force. I must have applied for a hundred jobs. I got an offer from IBM in Kingston. The second offer came from EAI, which made analog computers, which you are too young to remember. I thought I’d learn more from a small company. I turned down the mighty IBM.
“It was a bad choice. I got laid off within a year. I went back and re-applied to IBM. But they had long memories. They had actually kept my file and noted that I had rejected their first job offer. They said that I had given them insufficient cause! They refused to take me and this sent me into a depression for many months. They had 80 percent of the computer market. But, looking back, it was one of the best things that could have happened because I was stopped from being an IBM lifer. I’d probably be unemployed and selling Amway by now.
“My next job was at Systems Engineering Labs, for which I had to move from New Jersey down to Fort Lauderdale in Florida. They made real-time computers. The company got in trouble with their business with the space program, and I was out on the streets again in eight months.
“I moved up the coast to Palm Beach to start work at RCA. You probably don’t know that they used to be in the computer business. That’s because they pulled out of the computer business eight months after I joined. So you can see that my career did not start out with what you would call much success. The best thing about Florida is that it was where I first met the woman who became my wife.
“We moved completely across the country to Northern California. My new company was called Singer-Link, and it was a defense contractor that made flight simulators to train pilots. This was in 1971. Silicon Valley must have had at most 200 Indians. There were no Indian restaurants in the South Bay, and we had to drive 40 miles to Berkeley to eat at Pasand. When we couldn’t drive that far, we’d find grocery stores nearby that catered to Arabs. Baklava and halvah were close enough to our Punjabi desserts. We used to substitute Syrian bread for chapatis. Now, of course, everybody calls them pitas.
After three layoffs in two years, I had become hardened. I constantly interviewed with new companies to make sure that I had jobs handy, and I constantly turned each job down. I began to see jobs as a purely economic arrangement. Nobody was ever going to take me my surprise again. And it was nobody else’s responsibility to see that I was happy.
“I was at Singer-Link for nine years, and I rose to the top technical rank in the company, which was called Principal Engineer. I’m a very hands-on person, and I learned everything about the company’s products. Even so, I felt that I had peaked in my profession at age 34. r was earning $65,000 a year, which is the equivalent of an annual salary of $200,000 now. I looked around me and saw that all the other Principal Engineers were running small businesses on the side. Outside my industry, there wasn’t much respect for personnel who worked in defense companies.
“Not one of the 30 or so commercial companies that I interviewed with would hire me. One of them actually asked me if I was so smart, why I had worked at Singer-Link for so many years. I ended up taking a 30% pay cut just to be able to join a non-defense-related company. It was called Zilog. They made microprocessors and also dabbled in distributed networking with a product called Z-net. At Zilog, I learned that I had a great aptitude for logic design.
“This was now 1981. There were a lot of companies beginning to build integrated computer workstations. These machines were tied together with what we now call ethernet. In those days, the term was DIX, which stood for Digital Intel Xerox, the companies that proposed the original standard. These workstations all needed different protocols to interface with them. Multibus, VMEbus, Unibus, Q-bus, you name it, there was a company that supported it.
“I teamed up with Indermohan Singh and Navin Jain to start a new company called Excelan. It was going to produce networking products to connect all these workstations together. We each kicked in $10,000 for the initial financing and organized a Friends and Family program to raise another $50,000. The only other Indian I knew of at the time who was an entrepreneur was Jaggi Tandon, down In Simi Valley, CA.
“We made very reliable products-both the adapter cards that fit into the back of the workstations and the software to make those workstations talk to each other. We re-sold transceivers that were made by an English company. These are connectors to tie together short pieces of cable. With these three offerings, we were the only company that could tie your mainframes, your PCs, and your workstations together.
“lnder was the CEO. He had gone to the Doon School and had a Ph.D. from Yale. He was sophisticated and impressed everybody who met him. I suffered from a speech impediment and was not good at public speaking at all. I was happy being the Vice President of Engineering and Operations.
“lnder was quite unfocused as a leader. He constantly churned out ideas and wanted to go after new markets before we even had a chance to get a dominant market share in an old one. We had a code phrase for his enthusiasm. YAFO, we’d call it. Yet Another Fabulous Opportunity. Of course, the F didn’t stand for Fabulous.
“In the first year, we were supposed to bring in $3 million in revenue. We did half a million dollars. In the second year, the expectation was $12 million. We did $5 million. The venture capitalists that had helped fund us were angry. They removed Inder from his post. He wanted both of us to resign in protest, but we were having none of it. I was made the acting President.
“We had 75 employees. We were down to our last million-and-a-half, and we were losing money at the rate of $200,000 a month. The venture capitalists told me to sit tight and not spend any money until they found a real President for the company. But I have never been one to sit on my hands. “We tried partnering with Microsoft from 1986 to 1988 but that relationship was onesided and disastrous. Novell was the champion of networking then. I went to see Ray Noorda, the CEO, in early ’88 about a partnership. He said no because he didn’t see any customer need. But his customers started clamoring for our software by the end of 1988 and he came back. asking for a merger. We agreed. at a $200 million valuation. The merger was a rousing success Holders of EXLN shares got an eight-fold return in two years. I was made Chief Technical Officer at Novell, reporting to the President of the company. I was also given a board seat.
“I managed the release of the Netware release 3.11, which was the crown jewel in the company’s product line.
Those years until 1991 were good years. Steve Jobs, Scott McNealy, they all made a beeline to our headquarters. We had a couple of terrific years. In 1992, Ray split the company in two, one piece concentrating on Unix, and the other on Netware. He seemed to go back to his Mormon roots, wanting to help the state of Utah more than he wanted to help Novell shareholders. That was the beginning of a decline in the company’s fortunes.
‘There were three important migrations happening at the time-towards client-server, towards Internet-based software, and towards wide-area (instead of local-area) networks. Novell didn’t take any of these into consideration when designing Netware 4.0. Microsoft came in with Windows NT and began to take over.
“Ray Noorda retired, and he brought in Bob Frankenburg to replace him. Bob had had a successful stint making Hewlett-Packard a powerhouse in the PC business. Bob came from the consumer side of the business, and he concentrated on it to the detriment of the much larger corporate market where Novell had been so successful. He actually moved to Orem In Utah to be close to the miniscule WordPerfect business unit. Novell continued to decline.
“l had been traveling 200,000 miles a year for three years. Novell business meetings had consumed my life. I was physically exhausted and mentally burned out. I took a three- month leave of absence in 1994 to get some long-delayed polyp surgery. I took my family to the south of France to recover my spirit. When I went back to work, it was with the conviction that I was ready to leave. Bob convinced me to stay on for six more months as a transition period. I left Novell in the first week of 1995.
“I plunged into a Bay Area organization called The Indus Entrepreneur. It was formed to help people from the Indian subcontinent get off the ground if they decide to found a company. I told members that I would offer two hours of my time to review any business plan shown to me in 1995. I must have looked at couple of hundred different business plans that year. I should have made my life easier by not getting involved in a company unless I also invested in it. You have to have some skin in the game.
‘1 oversaw the organization of the TiE conference in 1996 and was elected President of the organization this year. During this time, I have learned some things while talking to all those would-be entrepreneurs and looking at all those perfect-bound dreams. Some of the documents were brilliantly conceived but many, many of them had little hope of success. It is not enough to want something very badly. You must also be realistic.
“Entrepreneurs are born. You have to have that drive, that fire, within you. Don’t be disappointed if you aren’t the leader. Every locomotive has to have 10 grade cars and a caboose. Where would the world be without the grade cars and the caboose?
‘It’s a game for young people. I feel that I slowed down in my late forties. Things are moving so fast in high-technology nowadays that it will be a miracle if the current generation can sustain the pace past their thirties.
‘What advice would I offer young people?
Learn to speak in public. I’ve got my son in debate class right in his early teenage years. Study economics and history they are the great educators. And always ask yourself what value you are adding to any situation. If you cannot honestly say that you are, then get cracking. Life is Darwinian. Step out of your comfort zone. You either grow or you die:ByKanwal R£khi as told to Sukumar Ramanathan