Will New England Ever Have a Cisco?

BOSTON – Last night, at the TIE Boston Outlook 2007 dinner and VC panel discussion, Rob Soni, general partner at Matrix Partners , sensing the crowd’s disappointment in the face of such nervy questions as “Are deals getting smaller?” or “is enterprise software still a play?” pulled the pin on this little grenade and lobbed it into the frigid New England night: “I don’t know exactly what causes it, culture or what, but Boston VCs are not swinging for the fences, and not taking the big bets to create great companies.”

Some nervous shuffling ensued, snatching the moderator away from the jaws of defeat by a panelist willing to actually say something provocative. And he wasn't done:

  • Boston VCs play it too safe, and pull out of companies too quickly, happy to take their losses and push for their remaining companies to give them a comfortable three- to five-times return, while Silicon Valley VCs and investors will stick with their companies longer, keep a real faith in the ones they love, and nurture a comeback when others would walk away. Big examples include Redback Networks Inc. (“The greatest comeback in the history of telecom,” said Soni), Calix Inc. (NYSE: CALX) and Infinera Corp. (Nasdaq: INFN), two companies with investors in it for the long haul, even those who’ve been squashed down along the way, and now in a terrific position to go public and reward patience and perseverance in a way New England companies never would be.
  • Silicon Valley VCs, for their part, love the game, and the risks. “It’s like the Cardinals and the Yankees. One will focus on manufacturing runs, the other on home runs.” And what team does every kid from Puerto Rico to Japan want to play for when they get to the major leagues?
  • Silicon Valley, for whatever reason, loves the consumer, and that’s where the real historic companies make their mark (think Amazon, eBay Inc. (Nasdaq: EBAY), Google (Nasdaq: GOOG), YouTube Inc. ), and once those make it big, then others come out to join the party, and build a critical mass of entrepreneurs that are chasing the same dream. Boston? Scratching of heads, darting of eyes, “Um, EMC?” one of the panelists offered. Ooh, that hurts.

Bruce Sachs of Charles River Ventures got into it too. He’s been commuting back and forth between Charles River offices in Waltham and Menlo Park and sees the difference every month. Boston-area entrepreneurs don’t have the visions of grandeur of Silicon Valley counterparts, and are quite happy enough to take the millions from their first sale and relax, walk away, spend more time with family. You know, spend the money. “In California, the saying goes, someone with $100 million is a frustrated billionaire," said Sachs. We have no Jeff Bezos, Page and Brin, Steve Jobs, and may never at this rate.

Sachs also had a point to make about great universities. “At Stanford, if you are a professor and you haven’t taken a sabbatical to start a company, you are a loser. We don’t see that attitude at MIT.” MIT feeds a lot of talent into the Boston-area startup community, but professors there seem to actually like being academics, and have this sense that “money is dirty,” said Sachs.

It all raises the question, will New England ever have a Cisco Systems Inc. (Nasdaq: CSCO)? No one on the panel (Soni, Dalton, Sachs and Jamie Goldstein of North Bridge Venture Partners ) seemed very sanguine about the prospect. Soni did point to a deal Goldstein and Dalton are in, QD Vision, as potentially game-changing, and gave them plenty of credit for that, and put out a call for local VCs to think bigger, or else stay in Silicon Valley's shadow. Areas he’s excited about? Solid-state lighting, open-source software, water purification, mobile broadband. Is there an Intel Corp. (Nasdaq: INTC), a Cisco, or a MySpace among them?

Maybe it’s the weather here. Out in the parking lot the temperature was falling to 9 degrees. This morning, the thermometer at the Boston Museum of Science read 1 degree. Palo Alto? 42, and rising.

— Scott Clavenna, Chief Analyst, Heavy Reading

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OneMoreByte 12/5/2012 | 3:15:38 PM
re: Will New England Ever Have a Cisco? Remember when Cisco and Wellfleet were on par with one another? And then Wellfleet and Synoptics merged to become Bay Networks, which was the beginning of the end for both.
firstmile 12/5/2012 | 3:15:37 PM
re: Will New England Ever Have a Cisco? I only wish I was there to here and see the interplay. Also good to see a young rock star like Soni willing to lay it on the line in a public forum!
lopetus 12/5/2012 | 3:15:34 PM
re: Will New England Ever Have a Cisco? When was Wellfleet on par with Cisco, I must have missed it
deanfro 12/5/2012 | 3:15:33 PM
re: Will New England Ever Have a Cisco? They were on par, or better when Cisco's best piece of HW was the AGS+. When Cisco HW caught up with their SW times changed dramatically.
fiber_r_us 12/5/2012 | 3:15:27 PM
re: Will New England Ever Have a Cisco? Good history lesson of Wellfleet... But, also don't forget, Wellfleet's user interface sucked. They needed a real CLI in a bad way. Their customers (me included) begged them for this and were summarily ignored. Without a decent CLI there was no easy way to script actions on large numbers of routers.

I agree that the Wellfleet platform had superior hardware compared to the Cisco 7000 series. They just needed better software, and things might have turned out differently.
gbennett 12/5/2012 | 3:15:27 PM
re: Will New England Ever Have a Cisco? Hi lopetus,
You are correct. Wellfleet was #2 to Cisco in the router market, when routers were responsible for the majority of both company's revenue. Wellfleet was steadily gaining ground on Cisco in terms of router market share.

However, at the point that Wellfleet and Synoptics merged (October 1993), Bay Networks' revenue was actually slightly more than Cisco's.

Needless to say within a year that situation was "normalised", with Cisco growing like a weed and Bay Networks losing 15% of router market share.

As a matter of personal opinion, I always felt the Wellfleet hardware was superior to Cisco (even the Cisco 7000). And the Wellfleet OSPF (the second iteration that came out in V.7 code) was much better than Cisco's contemporary OSPF. But we all know that having the better product doesn't win the deal. Cisco was focused (at that time) on selling routers at >60% margins. Wellfleet sales guys were too busy selling obsolete Synoptics 3000 hubs at very low margins because sales management had forgotten to give them separate quotas for routers and hubs.

The Bay Networks fiasco is a classic MBA case study on how to snatch defeat from the jaws of victory.

ozip 12/5/2012 | 3:15:20 PM
re: Will New England Ever Have a Cisco? Fiber,

While it is true that Wellfleet had a cryptic console interface, it did have a configuration/management system that ran on another device that was graphical (in those days). Quite suprisingly, we didnt really ignore the critisism and ran many surveys of our customers regarding the UI issue. Every time, the surveys incidicated that the customers prefered the UI (site manager). I dont really think that the UI had anything to do with the problems that Wellfleet had but it was certainly a hotly discussed topic.

Lets face it, whats so great about the Cisco UI other than lots have people have been forced to learn it.

gbennett 12/5/2012 | 3:15:20 PM
re: Will New England Ever Have a Cisco? You both have made good points on the UI issue.

Some people like GUIs, but a lot of people - carriers in particular - prefer a CLI because they can create scripts.

I must admit I always found Cisco's CLI very clunky, and I'm sure the company must wish it could start again with a UI that is designed for the purpose. Given that CLI has not only survived for 20 years, but has been widely copied, I guess they must be doing something right :-)

turing 12/5/2012 | 3:15:18 PM
re: Will New England Ever Have a Cisco? Quite suprisingly, we didnt really ignore the critisism and ran many surveys of our customers regarding the UI issue. Every time, the surveys incidicated that the customers prefered the UI (site manager).

That's a classic self-fulfilling prophecy, don't you think? If you ask your customers, then by definition it's already the set of people who liked the UI, or didn't not-like it enough to buy something different.

I agree with your later point that its doubtful the UI had any major influence on Wellfleet's problems, but I seem to remember everyone complaining about the UI. It was not good, plain an simple. It was annoying to configure and troubleshoot in the lab, and cisco's was easier. But it wasn't why wellfleet lost in the end.
rjmcmahon 12/5/2012 | 3:15:18 PM
re: Will New England Ever Have a Cisco? My guess is a case study would focus on business differences such as maybe a better model for sales or some sort of strategic position in distribution rather than geeky things like UI. This UI discussion may be a reflection of the members who post on these boards rather than a objective analysis of history. Though I don't really know and am only expressing an outsider's opinion.
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