Startup Genes I: A Tale of Three IPOs

jamshed #19: I recently had a similar discussion with a friend of mine regarding IT companies that Pakistanis have started. A few funded companies that came to mind are as follows:

Atiq Raza (RazaFoundries, NextGen; sold to AMD), Safi Qureshi (AST; sold to Samsung, Skyline Ventures), Asim Adbullah (Veo Systems; sold to CommerceOne for a major share), Malik Khan (Indus River, Sitara Networks), Farooq Raza (Mayan Networks), Sohail Shafi (S3 Networks), Hassan Ahmad (Sonus Networks), Nasim Ghauri (NetSol; only Pakistani based company on the Nasdaq), Vic Ahmad (Vroom Technologies)

Jamshed #re 20 (electrical enggr)

First, a ``Thank You`` for the reply. Your info was also good.

Nope, I am not yet in US. I am very much in India(Bangalore). The day is not far but. Hope ``gold rush`` it is going to be.. :)

SS7..r u serious..there are protocols in VoIP

which are meant to work with SS7. Then how is SS7 going in danger unless you say the whole circuit switched n/w migrate to packet one. But that would be asking too much, considering the amount of money involved/already invested and effort required to switch over. All this only says that SS7(circuit switcing) is here to stay.

BTW you say optical n/w is coming into CORE sector. But as far as I know presently switches(long distance) cater to T1 spans(US). I have not heard of any talk of accomodating optical fibres. Or is there such a thing going on in US?

If yes then(say more on it..) that would again involve a lot of changes in the existing features provided by these switches and a humungous effort! Are SPs ready for such a price. In these circumstances don`t new entrants stand a better chance or as you say Cisco..to exploit this situation.

One more conclusion is that, if any of it is true then your job is not in danger. Infact you will be needed all the more...for easy transition to the packet world.

What is DWDM? I don`t think this jargon has hit India yet..or has this word passed my ears anytime...thinking...

Anyway as the chowkwallas attack/defend their motherlands,their religion and their hygeine...in other forums..I am off to read them..while I wait for serious(and usefull) stuff here.

until next time,

Pullu

Umair,

What I don`t understand is that why won`t VCs who fund these start-ups keep track of their money by checking on the spending and progress of these companies? The banks do it with their borrowers all the time.

I had the opportunity to attend a couple of annual TiE conferences here in LA and most folks seemed hard working conservative businessmen who would not engage in such outrageous behavior. Probably that`s why South Asians are so successful in Silicon Valley. One hitch though, South Asian is not the exact word I should be using. Except for Safi bhai and a couple of others, most guys were from the other side of the `hood. Just an observation. I hope you guys are doing something to change that equation a bit.

BTW TiE SoCal are organizing a cricket tournament at Woodley on Sept. 16 as an informal networking event. What are you guys doing up north for folks from Saat Number?

Take Care,

Rehan.

Hi Pullu Bhai!

so what have u been doing on the east coast? workin or just out of school??

welcome to gold rush!

convergence of data and voice networks??

check out the stock of sonus networks (they got key contracts in VOIP / media GWs)......it ws IPO in may at around 15??.....n it hit 280 ...and currently on 170.....the market is listening!

Data communications was designed on a distributed architecture coming from ARPANET...... (based on the defence department requirements of dependable communications in distributed mesh styled networks in the wake of a nuclear attack). Initially, it ws designed as a command /control and mailing network to provide LAN / WAN connectivity. It WAS NT initially a voice network. VOIP / VOATM / VoX standards r even now being worked on by IETF.

Conventional telephony network is centralized based on circuit switching and WAS NT designed for data traffic.

Firms like cisco who were working on the periphery or the enterprise networks went in to the Long distance Service providers suggesting that they can easily throw away the bulky Lucent 5ESS or the Nortel DMS circuit switches and buy in their data products. These products would be packet switched and they would be able to carry voice / data / video at the same time, thus cutting the service provider cost of mainiting a seperate data and voice network. The data firms like cisco are ofcourse interested in the huge revunues that the SPs are spending on circuit switched equipment.

This put pressure in the old circuit switched companies like lucent / nortel and they had to move towards data / packet technologies. This is where lucent bought ascend at 25 billion and nortel bought bay networks at ?? billion.

The promise from data firms like cisco was to provide the same QoS (quality of service) as is avialable in a conventional voice call. However, even at this time most of the products for VoIP are not able to produce the required QoS. QoS is related to delay, lost packets and guarenteed bandwidth etc.

There r four major markets for VoIP.

Long Haul or CORE, Transit / Class 4, Access / Class 5, and Enterprise / business LAN / WAN. Datacom firms like cisco are succeesful in the enterprise market and working on Class 5. Class 4 is moving on the ATM way.......and to some extent ATM is in the long haul too.......

But guess what?? the optical players just landed in the market........and they r saying......the core is ALL OPTICAL!...... what with SONET n DWDM, the days of atleast......circuit switching (n SS7) are over in the CORE...... SOON!

(in the SP market, soon means five years.......for hte enterprise market soon means three months........hence hte product life cycle differences between cisco and lucent.....)

By the way.......now there r new start ups like CORVIS saying .......forget electrical engineers....... we r gonna make all optical switches.....

i might lose my job u know...Soon...........

i mean another 5 years or so!

jay

By the way Umair......

Refering to your experience......how would u respond to this.......Sitting in the valley, i have seen indians, tiawanease, chinease even iranian fellas bring up successful start ups.........but pakistanis??.......

its quite rare to see any pakistani guys setting up shop in high tech. infact i can remember only atiq raza setting the start up scene to fire with his raza founderies or hassan ahmed with sonus networks. How many do u know??

Re: harimau Reply #17

......ofcourse.....i am a happy bachelor......

the best part of it being....

i dont need to be home by six every day.....and i dont have to do grocery shopping on kmart every weekend.......and ofcourse, i can wash my dishes, thank u!!

an old joke from my college days.....

Q:whats the difference between a BV and a TV??

A:U can always switch off a TV.....

Q:whats the similarity between a BV and a TV?

a:U r always on the listening end .......

jay

Dot-coms are still a very new concept that needs lots of time to mature even in ``Web Years``. I`m highly skeptical that most of these dot-coms will be around in the next few years. Even the highly touted Amazon is still awash in red cash flow after several years. Can`t see how much longer the CEO plans on expanding without generating profit before it all implodes.

Personally I think whenever Wal-mart decides to get serious about selling stuff on the net alongside their ``real-world`` business, Amazon will disappear.

Consider me old-fashioned but even in this new age one needs strong products that fill a real need and improve business processes. Most dot-coms in my opinion fall under the category of window shopping displays hoping to catch someone`s attention.Even if they generate traffic, it`s generally for information browsing. Actual exchange of money is nominal.

Web portals are a great tool to be used in conjunction with a solid product or service. I.e dot-coms are just the fancy cyber door entrance of . Fancy doors don`t make money though.

If the VC`s want to throw a small % of their billions at a dot-com to see if they strike rich. Fine! Though I feel sorry for the average joe who got caught up in the frenzy and bet their life savings on this stuff.

I`m not against the idea of creating dot-coms portals, they are great tools in helping to organize the frontier known as the Internet. But making money off them? Thanks, but I`ll wait to see what business models evolve in another 5-10 years...

Regards,

Fozia ``not a dot-com investor`` Zaidi :)

Ref jamshedN #: 15

{Comments froom Zohra #5

40 million $s is a hell lot of money to go shopping ma`am!!!}

It is obvious you are still single!

Hello Umair,

As a software engineer, to join my friends in a startup company in california soon, I read this article of yours with great interest.

I never did hold these dotcom comapanies in very high esteem.. more because they hardly differed from each other but all claimed to be funded by big names. Ofcourse hotmail and yahoo stand in a different league altogether.

Most of the Dotcoms really wanted us to believe that they had atlast found an easier stairway to heaven.

Now that Men have been separated from boys..it is quite clear that even dotcoms` need ideas. And ideas don`t come cheap.

BTW do you have any idea and information in the world of telecom and convergence(VoIP) and the strategies telecom and ISP companies are employing to face new opportunites? Do dotcoms have any role to play at all in this field? If yes then How?

Since you yourself are a co-founder and chairman, your views would be valuable.

Hope to expect something from you, if you have time.

Else you can, at your leisure, mail me at:

pullu@indiatimes.com

I saw your other sites,they are good and I wish you the very best.

pullu

Comments froom Zohra #5

40 million $s is a hell lot of money to go shopping ma`am!!!

n also, These guys were nt really working on product development but hanging around on monterey beach on project money.......thats sheer dishonesty!!!

Also, I think most of these dotcom founders were new kids from Ivy league Mba schools....

these kids focused on dare devil marketing budgets and flimsy class room business models and targeted for a market which wasnt ready and in cases was nt there even ..... ofcourse they had a party time while it lasted!!

If you had stocks worth 300$ a share in MARCH ........ lets suppose u had 10,000 Shares...... (dotmers were getting multiples of thousands of shares at 5 cents a share!).....so how much were u were worth in MAY when the stock was worth 5$??

JEEE........I KNOW U R HAPPY CAUSE U NEVER INVESTED !!

becasue for investment....

u need to save = less shopping

:-) !!

Hi Umair!

A nice hindsight on dotcom fiasco.

You have a valid point that if these dotcoms had not spent the start up money by being totally extravagent, they would have had a better chance of surviving and realizing their business models.

You r, ofcourse, aware of the Boom and Bust Cycle for new Technologies. The current Ecommerce market is well into consolidation period and out of the fifty something start ups running for the same market only few will eventually survive in each market segment. So there were always GOING TO BE few winners and bundles of losers. Firms like YAHOO or ARIBA or AMAZON are very much alive.

Consolidation arrived in the IC market, drive market, PC , operating system, server, ASP markets and it has set in for the dotcoms. May the very best survive!

Incidentally, at this time, start ups are springing up on both on east n west coast for optical access, MAN, WAN and core products. Also, wireless IP is another buzz word as is xDSL and wireless LAN / LMDS. Eventually consolidation has to arrive in that sector too. But for the time being all new IPOs in these sectors are hitting gold big time.

Silicon Valley is unique in the sense that if you are familiar with the emerging technology, if you work out a high level product design, and if u can attract a management team (just a director level guy fro many established firm).......Money is PAS D` PROBLEM!!!

Incidentally, VC investing will exceed more than 40 billion for start ups for this year exceeding last years figures. ...(was it 28 billion??)

SIlicon valley is GOLD RUSH!

Quoting Vinod Khosla, a start up should not try to gather momentum and try to sell itself to the first nortel or cisco or lucent knocking on its doors. There is more potential in the market if the start up firm develops a solid product and manages to deliver it to the competitive market. This is the real excitement of a start up.

This is what Engineers are all about........unlike MBAs.....!!

By the way........

Who really lost the money in the dotcom fiasco??

VCs and Investment funds for the pre IPO stage firms??? For VCs, most of the money made is only in 10% of the total investments that they make. A few million dollars in the initial rounds of venture funding for firms like Yahoo returned more than billion dollars for the VC. So for a VC investor, if 9 out of 10 firms goes down, and 1 scores, the VC is still in business and happy enough.

Developers and Enigneers?? Sure, because they were the ones who spent long hours with stock option dreams that never materialized. The only thing that is good about it, has been the experience working in a start up firm. The most harm is done to those guys who were working on H1 visas and who have to go through transfer processes / green card problems etc.

Ordinary investors in wall street?? Sure who witnessed their stocks dropping from 300$ valuations to below 5$. These were mostly those average investors who did nt understand technology evaluation and lost big time with the bust.

For Silicon valley investors, most knew what was coming anyways.....right????

Clickmarks looks like an excellent and useful website.

Re 5:

There is nothing cautious about doing a startup. Likewise there was nothing risky and exciting and cool about dotcom style spending - it was just laziness - a reluctance to work and create. The shortcut they thought existed, did not.

Re P2P:
Investors are looking for a self sustaining business. The bigger the idea the longer they are willing to wait for the crossover point.

Cheers

Umair

Re #1,4,6-8. DITTO. Are you meeting with the delegation from MOST or the CE next week by any chance?

Azam

Great article Umair.

Question: Do you truly think that showing JUST a path to profitability is enough for VC`s/investors to invest further into a firm. How long do you think a P2P should project before it actually reaps rewards? The numbers obviously vary depending on the product/service offering. I think this new burn rate fest is just nature`s way of diplaying the survival of the fittest.

Clickmarks is a great site; very clean and well designed and the service is awesome. You guys will go far, I`m counting on it :)

My moment of reckoning with regard to the dot-com tulip mania came about 8 months ago in a suburban NJ Sheraton. The place is very well-known in desi circles for its religious AMWAY gatherings.I was walking thru the lobby when I noticed a bunched of formally attired desis clutching similar folders. A closer look revealed the title which went something like ``The dot-com revolution: What every Indian housewife needs to know``.........

The IPO game is not over yet.The big boys who got into the act too late are sitting on losses worth billions of dollars. They`ll find a way to get their money back(And the housewives will be back!!).

later

-sac

IMPRESSIVE.(talking about your other sites here:))

I have visited both of them and must Congratulate you on your Ideas and Work!..both stand out for their usefulness and innovation.keep it up!

hope to hear more silicon valley stories soon.

regards,

Taimur.