何毓琦的个人博客分享 http://blog.sciencenet.cn/u/何毓琦 哈佛(1961-2001) 清华(2001-date)

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How to start a successful company 精选

已有 3531 次阅读 2019-12-5 03:43 |个人分类:S&T|系统分类:海外观察

For new readers and those who request to be “好友 good friends” please read my 公告 first


My good friend and Fraternity brother, S.K. Ho (no relation) started a successful company BISCOM years ago after being an engineer at WANG LABs for many years. I asked him the other day about writing up his experience of starting a company. Below is his unedited contribution in four sections: Motivation, Product, Raising Capital, and Conclusion.

All ambitious young entrepreneur needs to know!

PS. You may also wish to read http://blog.sciencenet.cn/home.php?mod=space&uid=1565&do=blog&quickforward=1&id=909246 why I am not successful

PPS. Because the content of this article is timeless and the 48 hour limit on comments and questions by ScienceNet, may I suggest that for late comments/questions, readers send it via me by e-mail at ho@seas.harvard.edu . I’ll transmit them to the author who may choose to reply. If there are enough such comments, perhaps I can publish them in a separate article for the benefit of all to see.


Below text by S.K.Ho

 

Motivation:

My career at Wang Laboratories spanned 19 years.  When I joined the company in 1968, Wang’s revenue was less than $20 million. When I left, revenue was over $3 Billion! And that was over 39 years ago. The number of employee rose from 200 to 30,000. Wang was a prestigious company, a leader in technology and innovation. Hower as the company grew, innovation stagnated and was replaced by red tape. Getting new ideas to the surface became harder. Meanwhile, overconfidence about its future and belief that growth would continue forever, colored management’s objectivity and decision making. Management was always looking at the winning (revenue) side for Wang. For example, the company built huge buildings in anticipation of future growth, instead of putting some cash in the bank in case of more difficult times.

I left Wang in 1979 and joined Qume in California (a Company known for manufacturing Daisy wheel printers). Because Qume had been acquired by Xerox, many employees made a lot of money and complacency had set in. There were more fancy cars in the parking lot than new ideas.  When my daughter sent me a post card (people wrote letters and cards back then), saying she missed me, I decided to return to Boston. I got an offer from Digital Equipment Corporation (DEC) and when Dr. Wang found out, he called me one night at 11:00 and asked me to go back.  After some careful thought, I decided to rejoin Wang.

At the time, Wang’s stock was trading at an all-time high and the company atmosphere had totally changed.  People spent more time in meetings rather than doing actual work. I largely avoided the bureaucracy, and soon after returning, showed Dr. Wang a new product.  I called it the PIC (Professional Image Computer).  I wrote the outlines during the time I came back from California, the specifications of which were notarized on every page by a notary public.  I showed the design to Dr. Wang and he liked it. I formed a new group, hiring three engineers and some support staff.  In fact, there was a rumor that AT&T liked the product so much they thought about acquiring Wang.  

At the same time as we were developing the PIC, personal computers started to permeate industry applications. My group also developed the Wang PC, similar to IBM.  However, for some reason, the PC project was taken away from me and assigned to a different group.  That move was irritating.  Meanwhile, Wang’s business started to show some cracks. One indication was the company started to promote early retirement for employees over 55 years old.  When I found out about the terms, I called my wife and told her I wanted to “retire.” I told her she would have to support the family, and luckily, she immediately agreed.  The good thing about my wife (she was a nurse anesthetist) is that she never fully understood what I was doing.

In August 1986, I started my own company, BISCOM. Two engineers initially joined me and we later added more staff and started operations.  On August 18, 1992, Wang ran out of money and declared Chapter 11 bankruptcy. That day my phone rang off the hook.

Product:

Alexander Bain invented the fax machine in 1843. The idea was to send an image from one place to another remote location.  Since then, many improvements had been made, but the real application was still painfully slow. However, in the 1980s, compression algorithms improved and greatly increased transmission speed. The fax’s popularity took off.  Fax machines were in every business office. However, in business, most documents were stored in a computer system, and unfortunately, fax machines did not talk to computer systems.  This opened the opportunity to develop a fax server that connected to a PSTN (phone) line, and a computer system, which would send and receive image files via phone line. An interface-software command language also connected files to different computer systems.

In our Fax server, there are three major parts, (1) a fax board that simulated a fax machine, plugged into the motherboard of a PC, (2) a phone interface software that connected T.30 Protocol to send and receive fax; and (3) a file conversion software to convert all files into an image file called tiff. We also created a command langrage to interface with various computer systems, which also had other features to manage fax traffic, log files to monitor system activity, accommodate customer special requirements for cover pages, and could remotely monitor and administer tech support to customers.

Once the idea firmed, we named the server FAXCOM, and the command language to computer system FCL (FAXCOM COMMAND LANGUAGE).  We found an office, got a lawyer to register Biscom as a Massachusetts corporation, and started building the Server.

Of the two engineers who joined me, one designed a fax board, which acted as the equivalent of a fax machine, while the other wrote the file conversion software (to convert a file to an image file called TIFF).  The server system was built on a PC platform, without a keyboard or monitor. It tested and ran well. My daughter (then a high school senior) wrote a news release for EMMS magazine announcing the product.  It attracted the attention of many large companies and system integrators.

 Because the FCL of FAXCOM could talk to any computer including IBM, HP etc., one of our first customers was MCI, who used multiple computer systems.  They ordered 256 FAXCOM servers to their data center. They loved it; there was no key board, no display, only three LED lights, red, green and yellow. In addition, it looked different from a PC. Even today, many large corporations are still using FAXCOM. Some send over a million pages a day.

Since the first fax server, we have developed more products in the secure file transfer area. About 10 years ago, I started a cloud fax system, a subscription model to send and receive faxes without the Fax Server hardware and software. Users can just send and receive faxes from their computer system. All fax traffic goes through one of our Data Centers (VZ, ATT, Level 3), yet the user can still monitor the fax traffic. The newer subscription model gives the company stable revenue income, a big success for the company. 

We originally selected the UNIX OS for our Fax server software because of its reliability; however, UNIX was not user friendly, so we later switched to Windows OS, which was more popular with customers. Unfortunately, we made the switch a couple years too late, and as a result, lost some market share.

Now Cloud computing and Mobile communications have become the new standard and primary means of data communication. Our R&D functions have switched their focus to digital faxing and secure file transfer. In digital fax we just received two patents and more are on the way. Digital faxes not only provide high resolution and color, but also higher speeds that lowers cost by eliminating phone lines.

 

Raising Capital

To raise money, first you need a business plan and a working model, to show investors who can truly appreciate the product. Our attorney introduced me to Chris, a graduate from MIT and Harvard Business School, and together we created the plan while the engineers finished a working prototype. We had some VC interest and follow-up meetings, but in hindsight, I am not sure they fully understood the market potential for FAXCOM.  Meanwhile, a company in Taiwan liked the product idea but did not have the capability to design a fax server, so they invested $1 million in Biscom.

Oftentimes, having strong personal relationships who can serve as references matter. Two of my friends, one who was Wang’s Taiwan general manager, and the other a college classmate, knew both the owner of the Taiwan Company and me well. The deal was done within a day.

Also an interesting story, before I went to Taiwan to close the deal, I met a wealthy investor from Perth, Australia. He had come to Boston to visit Arthur D Little, and had heard about Biscom. He invited me to a party, showed me his business interests, including a winery, bank, gold mine and real estate, all of which were heavy users of fax applications. He ask me how much I needed to get Biscom off the ground, so I presented him a spreadsheet I prepared myself showing $700,000. He looked at me and said “no problem,” but wanted a 50% economic interest and a swing vote.   Because of the swing vote, which would ultimately give him control, that deal did not go through. Later, I sent a fax to his gold mine from my home basement, and the quality of the fax was so clear, he was impressed.   The reason the fax was so clear because the file does not go through a scanner and I designed the character font specifically for fax transmission.   

 

Conclusion

 

After four years in operation, Biscom generated positive cash flow. We participated in many shows and everyone had a good time. We travelled everywhere, from Las Vegas through Europe. Many dealers wanted to sell our fax product, but one of the problems I experienced was that when certain resellers took our product, made sales, and collected revenue, I had difficult getting money from them!

Over time, many copycats used our registered FCL command language for their systems, and we had to spend a lot of money in lawyer fees to go after them. In one of our lawsuits, the agent from our competitor realized we had a patent called Efax, a machine that could send an email or fax based upon the input address, which could be quite useful. The agent ultimately sold the patent for us for $10 million, but after tax and his fee, not much was left.  

So, 33 years after Biscom introduced the fax server, we’re still in business and continuing to evolve. 10 years ago I built a Cloud fax system, so users do not need a physical fax sever anymore; it is a subscription model and customers only pay when they send/receive faxes. The system is now the major revenue generator for us, even though we have a number of other products.

The last thing I would say is to start a business is actually not that difficult. With perseverance, hard work, and diligence, not only can you achieve your product goal, but financial rewards can come too. Moreover, it can happen regardless of age, old or young. A good idea and some experience is all that is necessary.

 

 




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