Start-Up Hopefuls Face a Wake-Up Call

For most of us who live in Silicon Valley, years of daydreaming have turned the process of creating a start-up company into a series of well-worn snapshots.

The images from my own false memories start with a huddled team of engineers scribbling on place mats in a vinyl restaurant booth, a Palo Alto office full of white pine and venture capitalists and a delivery truck that unloads the cubicle partitions into our low-slung office space.

They accelerate forward to the blurry-eyed nights of debugging, the spray of champagne as the first working product comes back from the fab, and fade out with my triumphant drive back from the Mercedes dealership.

Because I have these dreams, and because I’m a writer who has let his programming skills languish, I have followed the story of San Jose-based Alteon Networks with more than a professional amount of interest and envy.

Founded by four engineers last winter with the lucrative goal of being the first to create the next generation of networking equipment known as gigabit ethernet, Alteon will make its debut this week at the NetWorld+Interop trade show in Las Vegas.

During the intervening 16 months--a terrifyingly short amount of time even by Silicon Valley standards--Alteon has gone through the entire gestation period of a start-up. This process has been remarkable both for its pace and the intimidating risk-reward ratio that faces Alteon.

On Wall Street, the gigabit ethernet market is followed with the kind of obsession normally reserved for announcements from the Federal Reserve Board. Tim Weingarten, an analyst with Robertson, Stephens & Co., predicts that the gigabit ethernet market will go from zero to $1 billion by 2000 as companies whose current local area networks are overloaded look to upgrade to high-capacity gigabit ethernet.

Despite the lucrative market, Weingarten is pessimistic about Alteon.

“I’m not sure how many start-ups will be able to survive,” he says. “There are at least 12 start-ups pursuing this market right now, and it’s going to be a very tough market to compete in.”

During the next few months Alteon must translate its head start into market share. The focus at the company is shifting away from the engineers, and over to the marketing and business departments.

Alteon’s genesis follows the same contours as my daydreams, but it fills in the sometimes-unpleasant details that I blur over.

Alteon wasn’t founded in the restaurant booth of my imagination; instead, it grew out of a tiny office that Mark Bryers used for his network consulting business. Bryers, 32, was aware of the growing excitement over gigabit ethernet technology, so he gathered together three other engineers--Wayne Hathaway, John Hayes and Ted Schroeder--who knew each other from a small company called UltraNetworks Technologies.

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Back then, the four men had worked together on a different kind of high-speed networking protocol, called HIPPI. That protocol is largely forgotten today, but it has important similarities to gigabit ethernet, and the experience gave the Alteon founders a valuable leg up on the competition.

“When the venture capitalists asked why we thought we would succeed, we would drop the working networking card we had designed at UltraNetworks onto the table,” recalls Hathaway. None of the four engineers had ever gone through the venture capital process before, but they had friends who had and who coached them through the steps.

After a quick month of meeting and negotiations, the Alteon team had succeeded in securing $5 million from two venture capital firms--Matrix Partners and Sutter Hill. Now came the hard part.

The process of leasing office space and setting up a business proved to be almost overwhelming. Every decision, no matter how small, had to be agreed on by everyone and was totemic.

“You don’t want to get a wimpy copy machine, because you’re hoping that the company is going to really grow,” Bryers recounts, “but you don’t have the money to get real fancy one either. It’s a question of confidence.”

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It was a period that the founders still remember fondly--and it was short-lived. Unlike most start-ups, Alteon didn’t initially have a chief executive to handle the day-to-day business tasks. However, they eventually found Dominic Orr, formerly an executive with Bay Networks. The selection of a CEO was an important milestone, but the transition was sometimes wrenching.

Bryers points to one particular moment when he realized that he was going to have to cede control.

“I was signing a bunch of checks, and our accountant joked about how I must be looking forward to having a CEO and not having to do this anymore,” Bryers says. “I laughed, but when she left, I became real depressed. I realized I wasn’t going to be running the show anymore.”

Now founders needed to start concentrating on actual development. Although the engineers knew what they had signed on for, the work was sometimes oppressive.

“It’s impossible not to end up with an attitude that says the later you stay, the more Brownie points you get. But we tried to avoid it as much as possible,” says Bryers. “We’ll still have crunch periods, with people working in shifts and sleeping in cots, but we try to keep that to a minimum. It’s when mistakes happen.”

It also takes its emotional toll, as Bryers discovered.

While Alteon was developing its initial designs, Bryers’ wife had an emergency birth that threatened her life and the life of their son. Bryers quickly found himself in an impossible situation, torn by conflicting demands.

With his wife and child still in the hospital, “I had two babies to care of,” Bryers confides. “My wife wanted to know why I wasn’t there every waking moment, and everyone at work was like, ‘OK, so Mark had a kid last week. Why isn’t he here helping us now?’ ”

There were plenty of strains, and tempers sometimes flared. Bryers says it was the image of the products being used in the real world that kept him going: “To me, that is the definition of success.” With last week’s announcement that Sun Microsystems will market Alteon’s products under its own name, that dream seems well within reach.

Though they are careful to downplay it, achieving the dream would seriously enrich Alteon’s founders too. With Cisco’s purchase earlier this year of another gigabit start-up for $200 million, the big score must seem tantalizingly close.

So would Mark Bryers ever do another start-up?

“That’s like asking my wife if she wants to have another kid,” says Bryers. “Maybe someday, but right now I don’t even want to think about.”

The comparison is apt. Before you get the money or the beautiful baby, there are plenty of times best forgotten. Times that make me realize why, for most of us, doing a start-up will remain the stuff of daydreams.