Sept. 13, 2002 — The climate may be difficult but it is nevertheless a good time to start a company, said angel investor Paul Atherton at a microsystems trade conference Thursday.
Despite the lack of IPO exit opportunities and uncertainty about when emerging markets will re-emerge, Atherton said, assets are cheap, experienced people are available and this downtime could be used constructively to prepare for the market’s return.
“Historically, this is a good time to invest,” he said.
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His remarks were part of a midmorning keynote address that highlighted the final day — devoted to venture investing and other forms of capital formation — of the seventh International Commercialization of Micro and Nanosystems conference (COMS) in Ypsilanti, Mich.
Atherton, who is a director of Sussex Place Ventures and vice president of the European Society for Precision Engineering and Nanotechnology, cited Bookham Technology of Oxfordshire, England, as a good example. “It has a lot of cash, and is using it to buy cheap assets.”
Atherton’s talk was peppered with nuts-and-bolts advice. He called on entrepreneurs to be flexible about their business plans and be sure to meet a real market need. “This may sound glib, but if nobody has a strong need, you don’t really have a business opportunity.”
He also offered specific ideas — for example, suggesting entrepreneurs “find ways into business which are not mission critical to your partners.” He said a partner is more likely to be understanding of inevitable setbacks when the project in question is not crucial to its survival.
Atherton’s keynote was followed by presentations from Manher Naik of ASGL Inc., Mike Dierks of Intel Capital and Steve Johns of Ardesta LLC, each of whom echoed the general back-to-basics sentiment while adding specifics of their own. Ardesta is the parent company of Small Times Media.
Equating his experience managing startups with managing his infant grandson — both are, apparently, notoriously unpredictable — Naik urged entrepreneurs to build a solid board of directors and to take advantage of it. “Try to get complementary expertise and as many outsiders as you can,” he said.
“To the extent you can find people close to you, I think that helps,” Dierks said. While experienced VCs almost always try to be in close geographic proximity to portfolio companies, entrepreneurs aren’t necessarily aware of the importance of face time. Johns suggested entrepreneurs size up the overall services of a VC beyond the cash. For example, “Do they have the capability of rounding up a syndicate?” he asked.
On Wednesday, Janusz Bryzek pointed out how his company has already benefited from the developments Atherton described. Bryzek, president and chief executive of Transparent Networks Inc. and a veteran entrepreneur, established the company in Silicon Valley in 2000 at a time when telecom was hot, the photonic switching market was competitive and the cost of office space and equipment was high.
Demand for new optical devices withered during the economic drought, forcing Transparent to lower its prices and readjust its strategy. In the meantime, some of its competitors shut down, expensive resources became affordable and the region’s legendary traffic jams eased.
“The change in Silicon Valley allowed me to get a better facility for less,” Bryzek said Wednesday during a presentation comparing his company in 2000 and now. “I could buy auctioned equipment at 8 cents to the dollar.” And his commute time improved appreciably, he added.
Stephen Senturia, co-founder and president of optical networking firm Polychromix, said during his keynote speech on Tuesday that the only two words that matter in a business plan today are “conserve cash.”
The successes of Polychromix and Transparent Networks in weathering the storm are good illustrations of the reason why building a business is ultimately the real challenge. “Raising the money is actually the easy part,” angel investor Atherton said. “Finding customers is the hard part.”
But, he implied, the trials are worth it. “You have to kiss a lot of frogs to find a prince,” he said. “I spent 15 years kissing frogs.”
(Small Times Senior Writer Candace Stuart and Staff Writer Jeff Karoub contributed to this report.)