Tech booms aren't hard to spot. Wireless LAN chipsets are the obvious case – so obvious that even VCs won't touch them any more. WLAN switches and smart antennas are headed there. Even optical is getting a bit bubbly, with the promise of 10-Gbit/s transceivers and reconfigurable OADMs (see 10-GigE Transponders: Update and ROADMs Could Boost Components).
With the number of times we've gone through the boom/bust cycle, you'd think we'd get better at it. Especially having lived through the inflation and decimation of the Internet bubble. Can't our forefathers teach us something, those souls who braved the rise and fall of mainframes or pocket computing?
At the recent MicroVentures 2003 conference, where the lunchtime speaker was Nvidia Corp. founder Jen-Hsun Huang, I tried to absorb some wisdom at the knees of the greats. Nvidia was one of about 30 hopefuls developing 3D graphics chips in the mid-90s, and it's now considered the market and technology leader, with second place (and survivor status) going to ATI Technologies Inc. (Nasdaq: ATYT; Toronto: ATY).
Nvidia is a tech boom victor. No argument. No BCS computer confusion. So what went right? Could Huang offer some insights into surviving telecom's next bubble?
Huang's wisdom, it turned out, was recycled advice from his Day One investors. Most of it sounds obvious – but then again, so many companies miss the point by several miles. Here are the highlights:
- Pick a big enough market. Nvidia's chips are gawdawful expensive, but the video game market provided enough to cover the tab. Contrast that with the 25 or so ROADM guys fighting for what might be a $20 million market next year.
- Change quickly. Nvidia started by licensing its technology just to get revenues, but it killed that plan upon realizing it would take real chip sales to stay afloat. Other startups hang on to one idea too long; one VC at MicroVentures complained about an 802.11 play that refused to come out of stealth mode and missed the acquisition wave that benefited Radia Communications Inc. and Intersil Corp. (Nasdaq: ISIL) (see TI Snaps Up Radia and Intersil Exits WLAN).
- Keep a laser-like focus. Don Valentine, a VC godfather in the startup world, bestowed this upon Huang, calling it his most important piece of advice. Must have been good, because arguably, lack of focus killed rival 3dfx Interactive Inc. As its chips fell behind Nvidia's, 3dfx made a desperate dive into the boards business. The pricey acquisition didn't save 3dfx, nor did it fix the problem of its slow chip development.
- Build a killer product. Nvidia did this, but does a telecom product have to be "killer"? Nvidia was lucky enough to serve a market where technology matters above all else; gamers underwent whatever forklift upgrade it took to get the best graphics card. Several optical components startups assumed their market would be similarly hungry, and they got slapped down. The same could happen to some smart antenna startups eyeing the 802.11 market.
It's not the product that has to be great. Plenty of Light Reading readers love to point out how Cisco Systems Inc.'s (Nasdaq: CSCO) reign is a triumph of marketing, not technology. Too many startups assume that lesson doesn't apply to them.
Huang made magic with his company, but even the tough 3D graphics world lacks telecom's special brand of brutality. Nvidia isn't the right role model for building the next telecom-equipment dynasty. But that's okay. Hopefully a startup will find some VCs with the wisdom to know the difference.
And, if you're looking for inspiration to get you through the next tech boom, you can't do better than a chat with Huang. He's a tech industry version of Andy Reid. And you've gotta like a graphics designer who still loves Battle Zone.
— Craig Matsumoto, Senior Editor, Light Reading