Profiles

Two to Change the World: Idris Kothari & Saeed Kazmi

Two young men carried their passion for engineering from Pakistan to the US in the early 1970’s. They had no plan; only big dreams and lots of ideas. Technology was only beginning to make its impact and influence on the world and had they not met when they did, this intriguing story would have never taken place.

This is an abridged tale of a partnership that spans across 34 years and is still going strong. The only thing Idris Kothari and Saeed Kazmi had in common was an NED University education in Karachi. They found each other in the right place, at the right time and became business partners. The concept of a partnership is a leap of faith – it’s not only about finding someone who will help you realize an idea or concept, it’s also about working with someone to keep it running. That’s the challenge many businesses can’t survive.

But the story of Idris and Saeed is not the usual one you’ll come across. Together they created technologies and solutions, built companies, developed teams, endured hardships and ultimately experienced great success through acquisitions and buyouts, several times. All of the success is due to the fact that they were so good at what they did. They engineered concepts and products at the forefront of technology innovation, usually much before their time. But no matter what they did, failure or success, large or insignificant, Idris and Saeed always had fun.

What a strangely, relatable concept for many businesses.

Idris Kothari, Vertical Systems

Idris is quite literally, the kid from the slums of Karachi, born fourth among 11 children. A mediocre student brilliant only in Math, Idris didn’t realize how much control he had over his destiny until the ‘kids at the popular table’ at school were discussing which family businesses each of them  would be running. Acknowledging that education was his only out in life, he topped in his BSc which granted him automatic admission into the country’s most prestigious engineering university, NED… until it didn’t.

Because of a technicality, NED refused him admission at which point Idris did the only thing that he could think of: he sued them – and won!

After four years of studying at NED, he raised funding from family friends and community members to go to the US for his Masters, and subsequently quit in the middle of PhD program at Illinois Institute of Technology, only to find the US job market in the worst slump.  After doing a few odd jobs in electronics for as little as $3/ hour, he landed a real engineering job at an engineering company and thought his life was set.

And then he met Saeed Kazmi and the rollercoaster ride just began.

Enter Saeed Kazmi

The fact that Saeed Kazmi worked at the Karachi Airport by night while studying Electrical Engineering at NED by day speaks volumes about the type of individual Saeed is.  He graduated from NED in 1973 and landed at Oregon State to do his Masters in Microelectronics with only  $300 in his pocket and an attaché case. He was living by the seat of his pants and life couldn’t be any simpler.

Saeed moved to the Valley in 1976 when the semiconductor revolution was just taking off, business was booming and he landed a job a Monolithic Memories, a chip design company. “I quickly found out that my passion was not engineering. Within a year, I changed my job function to Marketing.” The company had a new product called Programmable Array Logic (PAL), the first ‘hottest’ thing in the semiconductor industry. Saeed’s job as an Application Engineer was to interface with customers, understand their problems and then bring that information back to the company.

So Saeed was no longer an engineer sitting on his desk and designing circuits; he was performing well in one of the first technology and marketing hybrid positions. “Often times the gap between what the company has created and what the customer needs is where the opportunity is.” Saeed started to focus on these opportunities, which was how he discovered and nurtured the idea of his own startup. He just needed to find someone to collaborate with.

Startup with a Healthy Breakfast

So Idris was 30 and making good money at his job designing chips, and Saeed was happy climbing the corporate ladder. Since both had common friends, one night, 16 engineer friends got together over dinner. “You know how it is,” starts Idris, “After a good plate of Biryani on a Saturday night, you were dreaming up great ideas and rolling in imaginary millions. Everyone talked about the cutting edge work and what the future looked like and wanted to ‘do something’. Lots of discussion took place about how the time was right to make the leap, and we agreed to meet the next morning for an 8am breakfast at a place in San Jose.”

Only two guys showed up. 34 years later, they are still business partners.

They sat down and brainstormed the fundamentals: how to setup a potential business and what they needed. Both had to keep their jobs in order to support themselves, but they held great resolve to take this idea forward. They opened up a bank account, deposited a few hundred dollars each and got a business license. Next, they needed a name for their company. “Since I was the marketing guy, I put together all the buzzwords I could think of and ‘Semi-Custom Logic’ or SLI was formed, Saeed recalls. Idris rationalizes the brilliance of the name a bit more. “It was the semiconductor industry, I was a logic designer and we wanted to make custom chips. SLI ran us for 10 years and we kept coming back to the consultancy even after we started other companies.”

In the early 80’s, SLI landed its first defense contract through a contact. The contractor needed a chip design that needed to be used in Stinger missiles. “The electronics made the missile too large to shoot and needed the size to be drastically reduced, and run with low power batteries. CMOS technology had just been introduced and could be used to build the chip they needed. Idris designed the chip and I did the selling.” Idris’s design combined 18 chips into one and the customers loved the team and SLI made money for the first time. “This was part-time money since both of us were single and working weekends,” says a reminiscent Saeed, “but it got us hooked enough to keep going.”

Saeed was already eyeing the manufacturing prowess of Texas Instruments and the thousands of chips they used to make with the help of the big yellow reference book. Since he had been exposed to Programmable Logic at MMI, he realized that he could program one chip to do the functions of all the chips that were making the boards too big and bulky. He talked the idea over with Idris and began writing a business plan to pitch to VCs. “I had come from an Urdu medium school system and my English was terrible. I didn’t have the need to really learn it. I gave the plan to a friend’s wife who was a PhD in English and she redlined everything! It was so depressing and we hadn’t even gone to the VCs yet!!” Their business concept was solid, but the communication element was completely absent.

Both Idris and Saeed were relatively new in the US and had no clue what stereotypes were wrapped around educational institutions or VCs for that matter. “We were so new, we didn’t know what it meant to be at Stanford or what the difference between different VCs were. We walked into the VC offices with the attitude that we were the hottest thing since toast, when in reality, even if we were talking to a big gun, we didn’t know it. That played to our advantage because we were just never overwhelmed by anyone.” In those days, it used to take about $100 million to start up a semiconductor company and Saeed’s pitch to the VCs was this they didn’t need to build a large chip fabrication facility or Fab – they could take these programmable chips from one company, customize them and sell it to the other company who needed it. “Nobody would fund us on that idea back then. If you look at the industry now, that’s exactly what everyone does. That’s the concept of the fabless semiconductor.”

One of the problems with having a combination the likes of Idris and Saeed is that they had the intelligence and creativity to look at the industry and literally dream up ways of doing it better. “And that was a problem because a lot of the ideas we came up with, were a little ahead of our time.” Especially since they were ‘nobodies’ with no real track record to prove themselves. Convincing people to fund them, was always a problem.

While raising VC funding for their ideas was proving to be difficult, they actually had continued success with their consulting business through SLI. There was an Air force base that wanted to set up their fab and invited SLI to come and present. Recalls Saeed “Idris had no clue about fabs but knew that I had done my Masters in Microelectronics so I knew how to make chips, albeit only in the lab. It was a million dollar project and we got it!” They did a lot of learning and hired people all while they were still doing this ‘part time’ since both now worked full-time at VLSI. Amongst all the things Idris was good at, he was a very quick learner. “When this project came along, I hit the books and talked to all the people I knew, and learned everything there was to know about it.” So they built a prototype Fab, which was smaller and fulfilled their requirements, and were successful once again. SLI was on a roll!

Around 1987, about 6 years after IBM introduced the first PC where there were about 100 chips on a board, of which 90 were made by TI. Saeed had another light bulb go off while he was driving down Highway 101, from work to the SLI office during his lunch break. “We could combine and reduce all these chips down to 5 and keep the memory and Intel microchip. Idris knew how to custom-build most of them and I knew how to program a few, so we put our heads together and built this board.” A friend of theirs who was raising funding, had a quarter-of-a million dollars and wanted in. With that, Idris and Saeed left their jobs and began working full-time to establish LogicStar. “Yes, Saeed came up with all these names!” Idris mentions enthusiastically.

Somewhere in the middle, Idris recalls another incident. They had pitched their design to a chip design company who ultimately copied the idea and threw Idris and Saeed out. Vengeance? Of course! Idris, claiming to be the smartest in the group, said he would develop a design so there were only two chips. Saeed convinced Idris to stick to the 5-chip design, and make them pin-for-pin compatible with the competitors design – so they could ‘steal’ sockets from the larger, better-funded competitors. “That way, we didn’t need to get any boards designed, because our chips matched their boards. Every product the competitor sold helped market our chip!” explains Saeed.

While they were working on the design, Saeed also decided to do a little market research on who their customers could be. In those days, all the companies that were supplying PCs were from Taiwan. Saeed got all their details and started faxing the datasheet and details. “We got such an incredible response and the product wasn’t even ready yet!” Saeed flew to Taiwan, was treated like a king and people lined up around the block to meet him waving US and Pakistani flags.  “Some wanted to be a reseller, others wanted to be a distributor because everyone was getting into the PC business and everything that would make things more cost effective, was something worth doing for them.”

Saeed’s methodology that Idris was working on would reduce all the components, making a significant size and cost reduction – When you added the sizeable volume of units, the cost of this PC model would really give IBM a run for their money. Then a series of unfortunate events got into the company. Fujitsu heard about LogicStar and wanted to invest. Don Brooks, who used to head TI and Fujitsu, joined LogicStar to become its CEO and the company was renamed VIA Technologies Inc.  “We were very frugal with our spending, but when Don and the Fujitsu’s $4-5 million came in, these guys started spending like crazy. Long story short,” says Saeed, “Fujitsu didn’t want to invest any more money, so we ended up getting money from a Taiwanese company who acquired VIA.”

Though Saeed and Idris didn’t make as much money from the venture as they would have had things gone as planned, but they did learn some key lessons: having a big name as a CEO is great for fundraising, but the business was so new and the founders were so inexperienced, they completely lost control of their company. Still today, Via Technologies is one of the largest publically traded company in Taiwan and a really big deal there.

Funny enough, Idris actually didn’t want to do any of these companies. “I am an engineer and I am averse to things that don’t make perfect sense to me, and if Saeed came to me with a really crazy idea and I could make it, I thought it was a great idea and leaped at the challenge to build it.” Idris was a very talented engineer who could build anything and what he didn’t know, he learned. And it took a lot of creative engineering, and learning, to come up with the kind of stuff Saeed needed. “But with my background, I had learned to be very innovative, after all, that’s what engineering is about. If you can dream it, I can build it.”

Innovating Times

It was 1992 and the business partners went back to focusing on the consultancy work that was ongoing at SLI. They still had projects ongoing and people running those projects, which gave Saeed time to come up with revolutionary ideas. Although some of the things these guys built didn’t actually go anywhere.

They created the prototype of an electronic book in 1992 called ‘Portabook’ and the idea was to put a book inside this mobile device with flat screen and have some way of navigating through it. “We started copying books into memory cards that can be inserted into the Portabook.” Just like the Kindle only 20 years ago. Saeed and Idris traveled to the East coast to pitch the idea to the major publishers before they went to any VCs. The publishers would throw us out thinking we were just crazy. They kept asking us, ‘who is going to read a book on THIS?'”

If you have a bit of money and want to do something that hasn’t been done before, you tend to think ‘How can I use technology to solve a problem and make a new product?’Right? “Because electronics was our passion, we wanted to put in all our resources to building things that had a purpose. First you conceptualize it and make a prototype, then plan its packaging and go-to-market strategies – that’s what we loved doing.”

A few years after Apple launched Newton, Saeed felt the device was good, but wasn’t powerful enough to replace a PC and he needed something that was in between.  As such, they designed a tablet and called it Vista. “There was still no touchscreen or Internet, but it was a complete PC that had all the ports and worked on AA batteries. So we designed all the tooling and hired an industrial designer to build Vista with the idea that you could read any manual or book with an interface that had search, font size functions.”

Unlike the Newton, Saeed had Idris put in a GPS system, so they used Trimble, a mapping company’s chip and fused it into Vista. “We’d keep this in my car and drive around to test it.” Saeed and Idris took the concept of PureGPS to car manufacturers but realized they wouldn’t survive their sales cycle.” It would have taken 5-10 years before we made any money.”

So they repackaged the Vista to be a vertical application and pitched it to real estate companies. “They could insert updated information into the tablet through a PCMCIA and using the GPS, move around. But again, because it was before Internet, the product didn’t go anywhere.” It was again ahead of its time.

Using his experiencing identifying niche opportunities by interfacing with customers, Saeed and Idris had built feature-rich products that had what their competition did not. The ports and the large screen size made their product better, but look who they had as competition: Apple and Palm. Despite the fact that they didn’t have much success with their products, they still continue to innovate, had a lot of fun and learned a lot.

Often times, the market just takes its time to evolve. Saeed gives the example of a product that VSi Technologies, their current company, has developed. “It’s a smart terminal that hospitals can install at each patient’s bedside, giving the doctors the information they need, and give more control to each patient. This solves a big need hospitals have, but since nobody has used it before, they cannot absorb what it can do for them. In 5 years, everyone will be using this but today, it’s a challenge. At the same time, it’s important to understand that it took Apple 5 years to make iPod popular – once the first device caught on, everything else was much easier.”

The difference between innovation and disruption is the number of steps between the current and the next. “When innovating, you lead the market forward by one or two steps – for real disruption, which has much more risk, you are completely changing the behavior of people,” explains Saeed.

A few years down the line towards the start of the communication revolution in 1991, Idris and Saeed wanted to build an IP Telephony system and setup a company specifically for that space and called it VPNet.  With the advent of the Internet, people like Saeed and Idris realized that soon, a lot of data would be sent as multimedia and data communication increased. To keep it from ‘hogging’ the bandwidth, they began looking at compression technologies. If you compress a packet at one point and uncompress it after it reaches its destination, it will be faster and be more bandwidth-friendly. When they went to the VCs, the response again was, ‘Internet is for the hobbyist and there would be no real need to do what VPNet was trying to do.’

“Saeed dragged me to a meeting to present the idea to someone who I felt, clearly wasn’t interested in what I wanted to build and had a need of his own. Since I didn’t have Saeed’s level of tolerance, I almost walked out of that meeting when Saeed encouraged me to sit and listen to the customers. They needed someone to create encryption over the Internet something I had no clue about. I went and learned about it and then created our first product through VPNet. So amazing enough our first product was actually the result of a broken meeting that I almost walked out of”.

Idris designed and built the first Virtual Private Network (VPN) product, securing the Internet and VPNet raised $30 million in Venture Capital. “We eventually sold VPNet to Avaya for $180 million, who does about $1.5-2 billion a year now. If you look into the product details, most of their products came from VPNet.”

Idris just smiles and says, “We get bored easy. Besides, we have a rule, when the badges come in, we leave.” After the acquisition of VPNet, the two partners had made their money and settled in with their families but really weren’t, let’s just  say, the retiring type. “We started looking at other companies and technologies and came up with the idea of developing software for travelers. So in 2001, Saeed and I established Vertical Systems Inc.”

They were tired of running after VCs and the chaos of startups and decided they would establish Vertical Systems with their own money and work at their own pace.  They developed products that would be used in hotels and hospitals: the kiosks, machines and bedside computers. They learned about the hospitality industry and started working their magic.

Saeed would interface with customers and identify needs and Idris would build. He developed FreshStart, a technology that solved one of biggest pain points hotel business centers were struggling with. “Each time the computer system would power cycle, it would produce a brand new system which takes away common issues such as hard drive corruption and viruses. The systems that run FreshStart are virus-free.” None of their software is a billion lines of code, explains Idris. “We have a lot of small utilities – 10,000 lines of code each but lots of them. We build 30 different things and assemble them in a unique way. We have mastered the art of micro-collection. We have good technology where we can automatically process credit card transactions and account for them.”

One of the most important lessons Idris and Saeed have both appreciated over the years is they have to keep learning something new. “Learn something new every day, otherwise you risk getting bored which can be very dangerous. The Valley is full of very smart people. For everything we do, there are three guys that can run us out of the market. Google, HP, SUN, Intel and Apple – everyone is right here, so you have to work very hard, very fast. If you’re faster, that’s the only way you can survive in the food chain.”

The Wealth

The key to making all their efforts and ideas possible is their partnership. Partnerships are what make or break a business because grappling and interfering partners more often than not cause companies to crash and burn, so to speak.

When it became clear that the partnership between Idris and Saeed was working, Saeed actually moved even further away from the actual engineering role to give his complete focus to sales and marketing. They developed a very symbiotic relationship where Saeed was the brains behind the business and Idris was the brains behind the technology, and neither could operate without the other. “Saeed and I have very complementary personalities – we each have our own areas of expertise and it works very well for us. We overlap in a certain area so we can understand things. I’ve always been the engineering part of the company and he has always been the marketing part.”

One of the most difficult decisions a first-time entrepreneur will make is letting go of the monthly paycheck. “It’s one of the biggest decisions, especially if you have a family and responsibilities,” explains Saeed. Startups aren’t guaranteed success and the chaos that comes with it can make some people go crazy and no matter what the time, there are always risks associated with it. That’s why it’s always a good idea to make the jump into entrepreneurial experimentation early on in life.

Saeed laughs as explains this next lesson. “You’ll always make mistakes, but smart people always make new mistakes.” The ability for entrepreneurs in the Valley to laugh about failure, brush the dust off their jeans and then get back up again, is incredible. No matter who you talk to, you’ll always hear the line about how “it’s okay to fail”.

Everyone in the world has tried to emulate a Silicon Valley kind of ecosystem. “The Valley is a perfect storm. There’s a large pool of highly educated workers coming out of local universities and a constant influx of highly educated students trying to enter it from around the world. Silicon Valley has a tremendous risk-taking culture. People put billions of dollars on ideas that might sound really stupid to most people and even if 7 out of 10 companies go bankrupt, they continue to invest. Because the one company that will succeed, will succeed so greatly,  that you will make all of your money back and more in just one shot.” Idris would know. He has supported and mentored many entrepreneurs in the US and in Pakistan.

“Not all problems are solved by their ‘traditional owners’ anymore.” Idris gives the example of Tesla. “Silicon Valley would be the last place you’d think of setting up a business that manufactured cars. But they’ve taken 100-year old technology and changed the world. In Pakistan, if you want to create a Silicon Valley type environment, everyone has to come together. Students cannot do it alone, nor can universities. Investors have to pitch in and unfortunately the investment part of the equation has just not jelled. We have a very set investment value system where you only put money into things you know. Individually, Pakistanis are high risk takers; however, the investment community has not been able to take any risks.” The kind of investments that are needed for a country the size of Pakistan is just not happening. “Very insignificant amounts of investment are being made into the students who will make the future Googles and Facebooks of Pakistan.  No funding means that they will go and get a job and become part of the food chain.”

Idris says, “By the time you graduate, you are an expert at reading, and ironically, that’s the first thing you give up when you get a hold of a degree. People stop reading because they think you know everything, which is why self-learning is such an under utilized phenomena in the industry.” Idris picks up a book at the drop of a hat and if he needs more help, uses Google. “To me, learning is very exciting.  And especially in Silicon Valley there is no shortage of material to learn.”

And from both business partners, one thing they often refer to is people they have connected with throughout their journey and how incredibly important networks are. The world is round and if someone befriends you or you burn a bridge, chances are high that it will come back to haunt you. Employees, customers, partners, vendors, anyone; it doesn’t matter who, every single individual has a value proposition. Networks like OPEN, the Organization of Pakistani Entrepreneurs of North America and TIE, play crucial roles in helping people connect. With a little negotiation and tact, you can make any relationship work.

Finally, a lot of ideas and concepts depend on skill, timing and luck. “I have no luck lines on my hand but I don’t think you will come across someone luckier than me!” says Idris. Innovation, disruption or anything else, if something is meant to happen it will, even if it’s at 8am on a Sunday morning breakfast in San Jose, California.

 

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