Mukesh Chatter : Nexabit
Branching Out
Nexabit's Mukesh Chatter eschewed the family business to grow a networking giant.
By Justin Hibbard
Red Herring magazine
From the September 1999 issue
Mukesh Chatter remembers an Indian proverb his father taught him: "A big tree does not grow under another big tree." The words have guided him in life and in business. Born into a family of wealthy lawyers who own marble mines, Mr. Chatter felt as a young man that he had to leave India and pursue his interest in engineering. Similarly, when he founded Nexabit Networks in 1996, he knew that the company had to develop networking technology that broke with tradition in order to succeed.
If Nexabit's claims are true, Mr. Chatter's self-reliance has paid off. The company says its switch can transfer data 100 times faster than comparable products from competitors like Cisco Systems. That's the kind of speed that telecommunications companies will need in the next decade to support millions of new Internet users and to transmit heavy loads of audio and video.
Achieving unprecedented speed with unconventional technology was a personal triumph for Mr. Chatter. "Everyone told us it couldn't be done," he says. In fact, some skeptics still aren't convinced. The data transfer rate Nexabit claims -- 6.4 terabits per second -- can be proven only in a lab, and Nexabit is highly secretive about its technology. "Mukesh has certainly been successful at creating buzz with big numbers, but we can't trust the huge technological claims without being able to look at it," says an analyst who requested anonymity. But Lucent Technologies clearly buys Mr. Chatter's story. In June, Lucent announced its intention to acquire Nexabit for $900 million, the largest payment ever for a prerevenue company.
Mr. Chatter wasn't always so successful. A series of jobs at ill-fated startups left "plenty of scar tissue," he says. In 1989 Mr. Chatter considered starting a document management software company but got a rude introduction to financing. "By the time I was done trying to raise money, I realized the equity left for myself was in the single digits," he says. He abandoned the venture and instead started a small consulting business, Celinx Research, which designed networking hardware and supercomputers for clients including the Center for High Performance Computing, the Massachusetts Institute of Technology, and the U.S. Air Force.
In 1994 Mr. Chatter founded NeoRAM, a company that applied for patents on networking technologies with the intention of licensing its intellectual property. But when he discovered that the market for NeoRAM's switching technology was larger than he anticipated, he added manufacturing to the company's capabilities -- and Nexabit was born.
In 1996 Mr. Chatter was introduced to Ray Stata, the chairman and founder of Analog Devices, a chip maker that would generate sales of $1.2 billion in 1998. After a 45-minute meeting, Mr. Stata agreed to invest his own money in Nexabit and serve as chairman. "That was a big turning point -- to get somebody who has been through it all before," Mr. Chatter says.
He credits Mr. Stata with teaching him the fundamentals of nurturing a startup: "From day one Ray said, 'Take good care of the people, and good things will happen.'" When Nexabit's senior managers considered forgoing life insurance for employees, Mr. Stata upbraided them, Mr. Chatter recalls. "He said, 'When people are working long hours, spouses and kids are participating in building the company. It's our moral obligation to provide life insurance.'" Nexabit spent two and a half times its annual payroll on life insurance. The investment has paid off in employee loyalty, Mr. Chatter says.
He knows about long hours firsthand. Mr. Chatter sometimes regrets not spending more time with his two young children. "There has been night after night of reading bedtime stories on the phone," he says. "That's a torturous process." But it's part of growing into a big tree. |
