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How To Build A Successful Optical Networking Startup

Column
Column
Column
3/26/2000

Stephen Saunders photo They say that a new restaurant needs three things to be successful: location, location, and location. Optical networking startups also need three things: marketing, people, and technology.

In that order.

Okay, maybe that’s a little extreme. Maybe marketing isn’t really the most important element in a startup’s success. Maybe, some day, some company will forgo the marketing budget and let their technology do the talking.

Maybe.

But doubtful. As Wu-Fu Chen told me before we’d even started Light Reading, marketing is crucial to the success of any wannabe optical networking company—and bad marketing is the number one reason why optical networking startups fail (see Wu-Fu Chen ).

Given the importance of marketing, Light Reading thought it might be helpful to provide a guide to marketing-driven rollout strategies for optical networking startups. We developed it by studying the marketing strategies of some of the most successful optical networking outfits—sitting at the feet of the masters, as it were.

These are their tactics ('antics' might be a better word). So if you don’t like the guide, blame them.

Step 1: Pump Up The Valuation

These days, VCs are using a simple formula to work out the valuation of optical networking startups: Take the number of engineers employed by the company, and multiply it by $10 million.

So, start hiring engineers. Doesn’t matter what kind. Sanitation engineers. Kitchen appliance engineers. Railroad engineers. Let the choice be yours (although we do recommend cheap ones). The important thing is that when a VC looks you in the eye and asks you how many engineers are working at the company, you can stare right back and say “250.” (Just don’t giggle when you say it—spoils the effect.)

Really slick startups will want to polish their engineering roster by hiring engineers whose names have that authentic engineering ring to them. These fall into two categories:

· Names with no consonants
· Names with no vowels
Step 2: Find The Right VC

Picking the right VC is crucial. Try to find one that’s already funding a few service provider startups. That way, they can get you together and broker a fictional ‘contract’ showing that you’ve sold $50-million dollars worth of your non-existent optical networking product to their non-operative optical networking service. Don’t worry: The contract isn’t worth the paper it’s printed on—but the publicity is.

(Note from Light Reading to VCs participating in this activity: We know who you are, and we’re coming to get you.)

Step 3: Do Not Develop A Product

About six months after starting your company you’ll face your first real crisis. Some of those engineers you hired will get bored and try to build a product.

They must be stopped.

You have two options:

· Gather the rest of the marketing department; shout things like, “What do those clowns think they’re doing?” and wrestle them to the ground
· Buy them a bigger whiteboard and some new magic markers (it’s just like giving crayons to kids—keeps them quiet for days)
Is the no-product rule radical? No. It’s realistic. Building a product reduces the amount of resources available to your marketing department. That’s bad. And what if the product doesn’t work? That’s worse.

Better, and safer, to have no product at all.

Step 4: Select Your Exit Strategy

You might think that lack of product will cramp your exit strategy. Au contraire—you still have three ways to make your nut:

1) Get bought by a networking superpower that wants to get its hands on your crack engineering department. The fact that they haven’t heard of anybody that works in it will only heighten the mystery (“They must have brought them in from overseas!”) and drive up your price yet higher

2) Get bought by a European vendor. There is, apparently, no word for ‘due diligence’ in the French or German languages.

3) IPO, and then use a slice of the billions to buy the products that you claimed you were developing. (For more information on this tactic contact Cisco.)

If you absolutely must develop real product—and we recommend strongly against it—make sure you build it using shake-and-bake FPGAs (field-programmable gate arrays), rather than more expensive ASICs (application-specific integrated circuits). FPGAs are cheap, cheerful, and you can buy them by the pound from Radioshack. The performance sucks, but who cares?

Step 5: Write Your Product Spec Sheets

These must be as real as your product is virtual. Use heavy paper, lots of sheets, and a fancy folder. Remember: Weight counts, and most analysts can’t read.

As far as content goes, make sure your acronym count is in triple figures. Invent a couple of new ones—for texture, and to keep the trade press off balance.

True marketing savants will want to explore the OEO (optical-electronic-optical) and OOO (optical-optical-optical) acronyms. In today’s ultra competitive environment, OEO is O-U-T. Three Os also is not enough; OOOO is now the minimum, and OOOOO is preferable. (Note: Adding an exclamation point after the fifth ‘O’ has the added advantage of driving X-X-X search engine traffic to your Web site.)

Additionally, you may find it helpful to blind readers with science, using complex, bogus equations. (SilkRoad showed what can be done on this front when it won a Best of Show award at Supercom, with a presentation that cited the "Laguerre Gaussian Principle" and gave a picture of Albert Einstein.)

Summary

Following this plan will, of course, generate pushback. Some reckless fools in your company may tell you that you need a product to make money. Ignore them (and report them). That kind of sclerotic, old-school business logic has no place in the brave new world of the optical networking industry. Stamp it out before it spreads.

—Stephen Saunders, US Editor, Light Reading, (http://www.lightreading.com)

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