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It's about Extreme and Stupid ­­Optimism
Vimali Swamy
Wednesday, February 1, 2012
One may often wonder, if there is any single magic formula that one needs to crack to be successful entrepreneur. Most entrepreneurs would agree that it is rather a combination of different factors that make or break them — the passion, belief in one self and more importantly, the ‘eureka moment’ when you realize that you have the ability to meet or create the need for something that has been eluding the market for long.

When Syed Ali founded Cavium in 2000, he started with an idea of developing security processors, something the industry had not heard of but was in need of. Late 90s and early 2000s was the era of Internet. Ali saw that the Internet was expanding more and more into business communications and e-commerce, both of which required high security communication. Believing that security could be significantly enhanced by silicon technology, his company successfully offloaded all the heavy computational work onto silicon, which had not been done before.

Just as Intel & AMD builds processors for PCs and servers, Cavium builds processors for different markets including networking, storage, wireless and security. It processes the new wave of data and secures it too. Today, the company provides highly integrated semiconductor processors that enable intelligent networking, communications, storage, video and security applications to worldwide markets and boasts.

From a Startup to IPO

Being first if its kind, Cavium since its early days had attracted quite a lot of attentions from venture capitalists. Menlo Ventures had started investigating the security processor market in early 2002 with the premise that as networking speeds continued to increase, general purpose CPUs would be insufficient to handle ever-increasing processing needs. Products from all public and private companies were evaluated, and assistance was received from design teams at Cisco and F5, who were doing their own research.

Menlo discovered that Cavium Networks was the only company designing security processors using full custom design methodologies. Cavium's full-custom chips promised to be smaller, run faster, use less power, and cost less to manufacture, while the competitors were using an ASIC design approach, which yielded chips with inferior performance. This boosted by seasoned leadership of Ali, and stellar software and IC design teams forced Menlo partner John Jarve to lead the first round of funding in April 2002.

A key challenge facing Cavium in the early days was credibility with the largest and most important potential customers. After the technology bubble burst in 2001, large companies such as Cisco and Nokia refused to consider products from start-up companies like Cavium. They had seen too many start-ups go out of business, including some of their own suppliers.

Menlo Ventures used its $1.5 billion fund to Cavium's advantage, guaranteeing future funding commitments and the financial stability of the Company. Additionally, Jarve met with multiple customers, including Cisco, to pledge financial support and help the company secure design wins. “Winning large Tier 1 customers like Cisco is always a challenging task. Having Menlo and their large fund firmly behind us tipped the scale in our favor. Their financial support and guidance made the Menlo team a critical partner in our success at Cavium,” says Ali, reminiscing of the old days.

Like a horse that’s been let loose on the race course, there was no turning back for Cavium since then. The company’s stellar growth record came to its peak on May 2, 2007, when Cavium completed a very successful IPO on the NASDAQ Global Market with Menlo Ventures as the largest shareholder. Today, Cavium is the leading provider of highly integrated semiconductor processors for intelligent networking, communications, and security applications. Cavium has over 150 customers including Cisco, Nokia, F5 Networks, Nortel, Fujitsu, and Sun Microsystems.

The Race is Still on

Most entrepreneurs see an IPO as the ultimate goal and sign of success and tend to slow down their pace, things seems to be much different with Ali. He still exhibits the same excitement and adrenalin rush that one sees in a newbie entrepreneur. The most exciting part of my job Ali feel is to bring out great products and being able to compete very large multibillion dollar companies and win against them.

Today, despite having all tier one companies in its clientele, Ali is on a crusade to be the largest share holder in the security processor market. Today, several product groups of Cisco, Juniper, Netgear and other companies use Cavium’s processors in their devices. Ali’s aim now is to ensure every product group in these companies build their products around Cavium’s device.

For this he is stopping at nothing. To be successful, Ali and his team must determine what will be needed three to four years in the future. The team is actively designing new processing devices and engaging the various product groups at these companies. "The most satisfying part," he says, "is when the products actually come out, the markets develop, and you have the best product. That's a big high."

What Next?

Additionally, he is also strengthening the company’s product portfolio through acquisitions. Since 2008, the company has acquired Star Semiconductor, W&W Communications, MontaVista Software and most recently WiMax chip pioneer Wavesat.

With the acquisition of Wavesat, Cavium is bracing go up against giants including Freescale and Texas Instruments in the market for chips that will run a new generation of miniaturized base stations for 4G networks. The company's Octeon Fusion family that was launched last year comes with software co-developed with a leading telecom systems company.

Carriers are expected to deploy as many as two dozen micro- or pico-sized base stations for every full size LTE unit as one way to handle the exploding demand for wireless data. The small cell base station market could grow to be worth more than $8 billion by 2016, according to the analysts.

A recent report states that about 1.5 million full sized base stations will be shipped by 2015. Carriers will buy as many as 15 to 35 million a year of the smaller base stations as the 4G ramp icks in over the next few years, Ali’s team forecasts.

Most of the top ten telecom system makers are finishing up their first-generation systems for carrier trials starting early next year. More integrated parts recently announced by Cavium, Freescale and TI are aiming at next-generation systems geared for volume deployments in 2013 and beyond.

"There is a big tug-of-war over how chips for these systems will get integrated, creating a lot of opportunity," said Joe Byrne, a senior analyst at The Linley Group.

With its products, Ali is not aiming for femto cells, low-end base stations serving a handful of residential users. What carriers need are small cells in campuses and malls where there is a high population density and that is where Ali is betting his money on.

Lessons from a Successful Entrepreneur

Ali believes that to be an entrepreneur, there are few things that one needs to keep in mind:

1. Be extremely and stupidly optimistic.

2. Must have a passion for building a great company.

3. Be very careful about the team that one recruits. Ensure there is plenty of diversity culturally, educationally and geographically.

4. Finally, do not be afraid of failure.

“Its looks very difficult to be an entrepreneur and build a successful company but believe me it is not so difficult. Every one of you can start a company, if you have the heart, the desire and the ability to put in a lot of hard work,” he often says. It is this zeal and focused vision that earned him the ‘Ernst & Young Technology Entrepreneur’ of the Year 2008 award for Northern California.

This apart, Ali also has a special interest in student education especially in his alma mater, University of Michigan. The University, in addition to their classroom learning, emphasizes that students work on extracurricular research projects, participate in team projects and organizations, and serve the community. To support their efforts Ali has established the Syed Ali ECE Education Fund.

"I wanted to give back," says Ali (MSE EE ‘81) about the fund. "If it wasn't for Michigan I wouldn't be where I am today." Ali is committed to assisting and encouraging students in their education. Recalling his own experience at Michigan, he states, "I received excellent exposure to semiconductor design and technology. At Michigan, you could implement an entire design cycle for a product, including manufacturing it in the lab, and then testing it. This was very unusual for a University, especially at that time." Michigan is still doing a great job according to Ali, who adds, "Michigan grads are always among our top performers at Cavium."

Advice for student entrepreneurs

*Work in an area you love.

*Visualize where you want to be in 10 years.

*Work with a diversified team.

*Interact with people from different departments and parts of the world.

*Carefully hire your first 50 people.

*Be prepared to adapt to changing markets.

* Don't be afraid of failure.

*Don't take the easy way out.

*Living and working in different cultures is going to be more and more important, because they will be your future markets. If possible, every engineer should go and work in a foreign culture before they graduate.

* Be stupidly optimistic.

*The most important thing is to take a risk. Don't be afraid, do something different.

The Man Behind Cavium

From 1998 to 2000, Syed B. Ali was Vice President of Marketing and Sales at Malleable Technologies, a communication chip company of which he was a founding management team member. Malleable Technologies was acquired by PMC Sierra, a communication IC company in 2000. From 1994 to 1998, Ali was an Executive Director at Samsung Electronics where he started the Flash memory and CPU businesses and put together the business plans that drove sales in each line to over a $100M in less than two years. Prior to that, Ali had various positions at Wafer Scale Integration, a division of SGS-Thompson, Tandem Computer, and American Microsystems. He received a BSEE from Osmania University, in Hyderabad, India and an MSEE from the University of Michigan.

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