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IITSINE - Building Succesful Hi-Tech Companies

Anil Saigal
04/27/2004

IITSINE organized a meeting focusing on “how to build a company” on April 25th, 2004. The event was held on the premises of GT Technologies in Nashua, NH. The two speakers of the evening were Anil Singhal, CEO of NetScouts, and Ashok Sood, CEO of Magnolia Optical. Anil started the evening by giving a history of the company. In 1984, it started as Frontier Software. For the next three years, the cofounders, Anil Singhal and Narendra Popat, knew they wanted to do something but were not sure what. They continued at contract programmers for Nixdorf. However, after they were laid off with a two-week notice, they decided that they wanted to develop a product in the networking space. After working on a business plan and unsuccessfully chasing venture funding for two years, they returned back to consulting to fund internal development of a product in “Remote Monitoring of Networks”. Finally in 1992, after 8 years of struggle, they finally received a $500K contract from the USAID. Over the next three years, NetScout cornered the lucrative wall street market with Lehman, Morgan, Goldman and ATT amongst its clients. During the next three years, VCs started to chase them but they were now in a fortunate position to say ‘no’, and as most of their competitors exited the market or were sold out, NetScouts was enjoying a 50% annual growth. In 1999, the company went public. Over the next two years, Cisco which contributed to 50% of NetScouts revenue, decided to abandon its OEM relationship and the events of 9/11 had a significant impact on the financial services industry. This left NetScout struggling once again and reinvigorating the enterpreneurship spirit within the company. For the past two years, there has been more accountability, but no layoffs, while developing major new products. Today the company is in an enviable position of $83M in revenue, 8000+ installations, solid cash reserves and no debt.

Netscouts current products deal with network Utilizationbut they also see applications in emerging areas such as: Security, Usage Based Billing, Policy Management and Network Convergence. After being in this business for more than 20 years, here are the key lesson learned according to Anil:

· Believe in yourself
· Stay focused
· Do what ever it takes
· Do not spend more than you earn
· First be different and then sell value and not vice versa
· Two founders is optimum
· Long term view requires control of the company

In short, if they did not have total control of the company as they do as they did not have any VC funding, NetScouts probably would not have been in business today.

The story of Ashok Sood and Magnolia Optical is not to different. It was incorporated in May 2000 and for three years it struggled. In March 2001 was promised $10M, it signed a lease for 15,000 sq. ft, hired 9 employees, only to find out later that the deal did not close. Ashok said, the only way they were able to stay a float is because they were honest and were able to negotiate lease to a smaller facility. Once again failing to secure VC funding, Ashok decided to pursue government funding and were finally reawarded for their patience in December 2003 with a $600K funding. “As there is a lot of capacity out there, it is wise to make minimal capital investement,” said Ashok.

The areas in which they are involved are:
High speed photonic subsystems
Ultra high speed Tx/Rx modules
High performance EO/IR component/systems
High performance UV dectectors
Wide band gap semiconductor devices

So for all the enterprenuers out there, be patient and do not forget one the the prime sources of funding, the tax payers’ money and the federal government. It got both of them going!



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