Funding for startups

Wu-Fu Chen: It's Tough out There

OptiMight Communications Inc. has closed, but the fate of its technology and its assets is still up in the air, according to Wu-Fu Chen, its CEO, who briefly spoke with Light Reading on Tuesday (see How To Build A Successful Optical Networking Startup and Wu-Fu Chen ).

Chen confirmed that OptiMight fired its staff on Friday and that the company's board is set to meet again soon to decide whether OptiMight should liquidate or file for bankruptcy protection (see OptiMight Be Shutting Down).

"There's not much new I can say about OptiMight," Chen says. "I still believe its technology is impressive, but the revenue opportunity has been pushed out to sometime in 2003, and investors are conservative regarding how much money it takes to bring the company to revenues and profitability.

"I think the current investors are supportive -- and they have been supportive -- but they're making a statement about the market right now. Today's VCs have all become bankers. The questions they ask are all about revenues and revenue backlog. They almost don't fund companies without revenues. It's unfortunate. I can't blame anyone. It's just the economic environment.

"It's going to take some time for people to get over all the bad news surrounding companies like Enron Corp. and Global Crossing Ltd. [see Global Crossing: Telecom's Enron?]. I don't think I can blame any particular party for not trying hard enough. OptiMight's technology, as you know, had been in trials at WorldCom Inc. and they were supportive in helping us raise money. We had also entered into trials with another big carrier. So clearly the technology is solid."

What does that mean for Cinta Networks Corp., another Wu-Fu Chen portfolio company that makes a long-haul box combining dense wavelength-division multiplexing (DWDM) transport and optical crossconnect capabilities?

"Cinta is going to have a tough time, unfortunately. The companies that are lucky are the ones that raised money at the right time. They'll have a better chance. Of course, we're raising money and insiders are pretty supportive, so it'll be interesting to see how we pull this thing together." (See Cinta Gets Leaner, Cites Attacks and Startups Suffer Setbacks.)

Of course, not everyone feels it was just the economy thats held back Chen's startups. In fact, some point out that Chen's assembly-line approach to startups during the rise of the bubble is what got him in trouble in the first place.

"You can quote me on this... Wu-Fu was one of most disappointing things about the whole experience," says Tom Walsh, the former head of sales at Geyser Networks Inc. who is now with Ethernet PON startup, Salira Optical Network Systems Inc..

Indeed, Chen's entrepreneurial hand has recently been cold. OptiMight is on its last legs, Geyser Communications recently shut down, and Cinta, as Chen mentioned, is struggling for funding (see Wu-Fu Chen Startups Hit the Skids).

It's a far cry from the Opticon conference in August 2000, when Chen painted a picture of easy money, boasting of bullish prospects for his companies (see Wu-Fu Chen: In It for the Long Haul).

"In the old days people said, 'We make money the old-fashioned way; we earn it,'" said Chen at the time. "But in optical networking we say, 'We make money the new-fashioned way -- we print it!' " — Phil Harvey, Senior Editor, Light Reading
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lifer 12/4/2012 | 10:58:49 PM
re: Wu-Fu Chen: It's Tough out There "In the old days people said, 'We make money the old-fashioned way; we earn it,'" said Chen at the time. "But in optical networking we say, 'We make money the new-fashioned way -- we print it!' "

Is this quote for real?
This arrogance could be interpreted as criminal!

As engineers and production workers let us hope
that a living can once again be made
the old fashioned way.

docdwdm 12/4/2012 | 10:58:48 PM
re: Wu-Fu Chen: It's Tough out There Well,
This little tune is best sung to the rythem
of American Pie.

Bye bye to OptiMight's pie.
They spent more heavy than Chevy.
Until the bank levies arrived.

Those good Ol' Boys were still driving
Ferarris in style

Singing, this will be the day OptiMight

Repeat as you wish.

BlueWater66 12/4/2012 | 10:58:48 PM
re: Wu-Fu Chen: It's Tough out There The days of GÇ£Hired Gun CEOsGÇ¥ should be END. VCs move into a start-up with a good idea and good employees, and then DEMAND that they hire a new CEO. They force upon the team individuals who are CEO of more than one company, commuting CEOs etc. It is absolutely horrible. These name brand individuals will negotiate against employees interests during liquidity events (because they depend upon the VCs for their next position), flip positions and demand a large chunk of the company. Start-ups (and any company) require a team effort and long-term perspective. VCs really trash that concept with hired-gun CEOs. In this market, success can take a long time.
alligator 12/4/2012 | 10:58:48 PM
re: Wu-Fu Chen: It's Tough out There ha... he was probably out printing optical money

Wu-Fu Chen Startups Hit the Skids
Subject: Re: Most founders are not! Date: 9/25/2001 3:39:33 PM

Funny. It was same way at Shasta Network. Some people used to joke where is WuFu. There was an office, but he was never in the building. The founders brought him in as a bigname CEO.
HWxPERT 12/4/2012 | 10:58:47 PM
re: Wu-Fu Chen: It's Tough out There LR calls this guy an entrepreneur. I call him a shyster. Good riddance to bad rubbish!
myresearch 12/4/2012 | 10:58:46 PM
re: Wu-Fu Chen: It's Tough out There I can understand people's feeling but I would say that take it easy and look at the whole picture.

What happened is a once-in-a-life-time bubble.
We thought the Internet would change the world upside down. But it didnt. We are all part of the bubble: engineers, VC, bankers. We almost take it for granted that we will get millions of dollars by working in a startup for a few years. But based on what?? People in other fields never have such expectation. In fact, they were shocked that some of the new graduates from colleges could get paid $100k+ lasy year; They dont even think we are worth the high salary we are getting now :-)

aa 12/4/2012 | 10:58:46 PM
re: Wu-Fu Chen: It's Tough out There Its amazing how this guy blames the economy for
his companies which are folding.
While that may be true, the reverse also was true. It was the economy which helped him sell all those over-hyped companies he sold before for lots of money! Did he think it was his genius?

This pattern repeats itself with all the wonder boys of late 90's. Blame the economy now, but not realize that it was the economy and not them (or thier brains) that got them all the money and fame before.
pablo 12/4/2012 | 10:58:44 PM
re: Wu-Fu Chen: It's Tough out There
What WuFu said reflected the status of the industry back then. If you'd been in one of the companies he, in some way or another, helped sell and made his fortune of, I gather the judgement would be less harsh.

Statistically speaking, one doesn't get just "lucky" as often as WuFu did.

These are the days of polarized diatribes, hardly anything is viewed with a certain sense of balance anymore - a leftover from those bubble days we better get over soon.
lighthearted 12/4/2012 | 10:58:39 PM
re: Wu-Fu Chen: It's Tough out There Does anybody have any insight on ANDA Networks, another WuFu beauty?
nbwaite 12/4/2012 | 10:58:39 PM
re: Wu-Fu Chen: It's Tough out There So, Microsoft and Cisco did well.
Netscape said that they were going to take
over the desktop and, thus, be "another
Microsoft". And, along the way, their
browser would effectively reduce
geographic distances to zero, provide
friction-free commerce, and change

Gee, I went to a Web site selling
furniture. Saw little pictures about 120
pixels square of formal shots taken maybe
60 feet away. Concluded that they had no
intention of selling furniture.

Went to a Web site selling polo shirts.
Saw some distant shots of some models
acting like they were enjoying
companionship in the great outdoors --
looking closely maybe they were wearing
the polo shirts. For the shirts
themselves, saw a distant shot of a pile
of three. If look closely, may even have
been able to estimate the number of
buttons. Maybe. For dimensions (in
inches), weight (in ounces per square
foot), details of construction, shrinkage,
details of colors and patterns, no help.

So, the Web site was designed by people
that (1) didn't care about selling via the
Internet, (2) followed the old idea in
selling that should communicate the
minimum until "Yes" and leave out more
that might result in "No", (3) wanted to
sell only to 'high-end' shoppers
interested in a fast click in a new
direction, (4) didn't want to threaten
sales from their retail stores or printed

Generally better information on the
products was available in the stores. In
one case, the Web site had the same
photograph as the printed catalog, but the
resolution on the Web was too low to be
useful and the resolution in the printed
catalog was much better.

That Web site didn't really want to sell
polo shirts.

Generally had to conclude that nearly none
of the Web sites wanted to sell anything.
And, wonder of wonders, apparently they
didn't sell much.

So, the Internet hasn't changed everything

But, there was a lot of bubble blowing.
So, once more in financial history, we got
some bubble blowing and then the bubbles

Clearly the VCs, investment bankers,
institutional investors, some of the
entrepreneurs, and some in the media were
just masterly at bubble blowing.

Some 401(k) accounts of individual
investors not yet once burned and twice
shy got drained.

So, bubble blowing is over for at least a
few more years.

Now, back to reality. Computing and
communications really should be the best
means we have for important increases in
economic productivity. We really can
often engineer what we want, and in this
way these fields are far ahead of
biotechnology which puts that field in a
distant second. All the rest is far

The Internet is an easy way to check
status of a FedEx package, to send e-mail,
for various discussion fora, for 'Light
Reading', etc.

The Internet and Web can provide
electronic catalog shopping but so far
only for appropriate products: Mostly the
old 'supply chain' will want to retain
some of their old advantages and not
participate. E.g., going to the Web sites
of weavers in Pakistan did not yield lower
prices on bath towels than J. C. Penny --
the price was the same to the penny. So,
an alternate supply chain will be needed.

I used the Internet to identify sellers of
polo shirts to commercial accounts and
wanted to buy three dozen -- no way could
I get any vendor to sell to me. NO WAY.

The COB of FedEx was quoted as saying that
for low value goods, the present
distribution system is relatively

But, for some goods, say, a niche product
that might get enough customers in total
but can't justify space in every shopping
mall, a Web catalog might work.
Apparently so far it hasn't been tried
very often.

A furniture manufacturer in Pennsylvania
gave some information on their products
but not enough to make a buying decision.
Soon enough it became clear that they had
a Web site because it was 'expected' and
they only wanted it as a teaser to get
people to drive a few hundred miles to
their factory store where the sales staff
could work them over in the traditional

To make selling via the Internet work,
have to deemphasize marketing approaches
that worked well in the past but won't
work well on the Internet: So, in the
past, a high-end retail store would sell
status, prestige, ambiance, and it's
essentially impossible to get such things
across in a meaningful way on the
Internet. Many of the traditional
approaches to retailing won't work on the

So, to sell via the Internet, need to
emphasize approaches that do work on the
Internet and where the Internet has
advantages. So, one major advantage is
completeness of information. Not all
buyers want information instead of
ambiance, but some do. So, Amazon has
lots of such information, but a simpler
approach is often just to get out a good
digital camera and a copy of Photoshop and
document the product in overwhelming
detail, with lots of close-up photographs,
and put the Web site JPGs with several
resolutions. So, buyers that want to look
at the details of how the buttons are sewn
on, which they can do in a retail store,
will still be able to. And, can show what
happens in shrinkage after 1, 5, 10, 50,
100 washings -- not reasonable in a retail
store. Etc.

But, it was rarely tried.

Tiffany's sells some nice cut glass, made
in Portugal. So, the factory in Portugal
should have a Web site and sell direct?
Hmm. Likely not yet.

A future application of the Internet may
be high quality video conferencing.

More generally, we will have to give up on
bubble blowing and return to some things
that are solid, e.g., increasing economic
productivity via exploitation of science,
mathematics, engineering, technology,
computing, etc.

For this, we should return to the basic
question, where can we apply this
technology to get some solid economic

Yes, it's a really bad day when we have to
be reduced to such pragmatic and
utilitarian concerns instead of riding
bubbles to 40,000 feet. Yup, to have to
suffer the slings and arrows and such
demeaning insults of cruel reality.
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