'Deshtined' for greatness
Sycamore's Desh Deshpande is sticking with his third startup.
By Luc Hatlestad
Red Herring magazine
From the September 1999 issue
Some entrepreneurs are restless, starting a company and moving on as soon as it meets some success. Others take it slower, nurturing a company through its growth stage -- perhaps even intending to stay there forever -- before the lure of a new venture, or an irritable board of directors, spurs them onto the next conquest.
Gururaj "Desh" Deshpande falls into the latter category. Now the chairman of the optical networking developer Sycamore Networks -- his third startup -- Mr. Deshpande has built an entrepreneurial r‚sum‚ that borders on the spectacular. In the mid-'80s, Mr. Deshpande's strong academic background -- he has a master's in electrical engineering and a Ph.D. in data communications -- led him to consider teaching before joining the then-growing modem manufacturer Codex Canada, where he recognized the allure of helping a small company grow into a strong enterprise.
After relocating to Codex's Boston office in 1984, he spent the next several years "getting to know the right people" in the investment and technology communities. He left in 1987 to start Coral Networks, a router developer and competitor of Cisco Systems, which back then was a $5 million nonentity. Coral landed $3 million in seed funding, but Mr. Deshpande left over a dispute with his business partner in 1990. "It was the toughest decision I ever made," he says. "We had the right idea at the right time, and starting the company was a dream come true, but we couldn't agree on control." (Coral was later acquired by Synoptics, which was in turn bought by Nortel Networks.)
If anything, the experience spurred him on: "I had no money, but once you've run a company, it's very tough to work for anyone else again." Capitalizing on the networking sector's growth, he started Cascade Communications, a developer of frame-relay equipment, in 1991. After Cascade went public in 1994 and grew to 1,000 employees, Mr. Deshpande sold the company to Ascend Communications for $3.7 billion in 1997, by which time about 70 percent of all Internet traffic was running across Cascade's switches.
He stayed on Ascend's board, but soon he craved something more demanding. So in early 1998 Mr. Deshpande turned his attention to the networking industry's latest and greatest development -- optical switching. He cofounded Sycamore Networks with CEO Daniel Smith, who had held the same position at Cascade.
Sycamore has performed promisingly enough to garner considerable industry attention and has gone from 65 employees in March to more than 120 as of July. Among the company's successes was a contract with Williams Communications, which will spend almost $25 million to outfit its fiber-optic network, the fourth-largest in the United States, with Sycamore devices.
"Cascade was a rocket ship," Mr. Deshpande says, "but Sycamore has exceeded all my expectations so far by being innovative not only on the tech side, but on the business side as well." He explains that until recently, carriers were paying $1 billion to big networking companies for equipment that would depreciate over 15 to 20 years. But because of innovation and the growing demand for bandwidth, the depreciation cycle of infrastructure equipment has shrunk to about 5 years. "Carriers are now buying the equipment they need in smaller chunks -- about $50,000 to $100,000 per purchase -- so you need a different model," Mr. Deshpande says. "Any vendor who gets caught up in the 20-year depreciation cycle will get pushed out."
With Sycamore well on its way, is he planning yet another encore? "Some entrepreneurs start a company, build it a little, then cash out and start another one," Mr. Deshpande says. "I like building large organizations. Cascade was a good size, but I want Sycamore to be much larger than that." |
