Martin Shum, Aprisa

My interview today is with Martin Shum, CEO and Founder of Aprisa, which is developing a search engine for electronic components. Shum is a successful serial entrepreneur, having founded and taken another local 101 corridor high tech company, ACT Networks, to an IPO and beyond, and has been very involved in the local industry in helping other high tech entrepreneurs get their own ventures off the ground as well. Shum started as a modem designer at General Datacomm, moved here to join Micom, and ended up founding ACT Networks and now Aprisa.

BK: Tell me a little bit about your background--how you went from a modem designer, to VP at Micom, to founder of ACT Networks?

MS: Most engineers are entrepreneurs at heart, I was no exception. While I was at General DataComm (GDC) doing modem design work, I was approached a number of times to join a start up including being pushed by my engineers to start something myself. I didn't feel I was ready for the task. Starting a business requires more than being just a good engineer. It takes a broad range of skills including business development, marketing, sales, financial management etc. So I went about preparing for such a venture. The first step I took was to move from engineering to business development within GDC. After a couple of years on this job, I transferred to marketing. Then when the opportunity of taking charge of both engineering and marketing at Micom presented itself, I jumped at it. I thought it would give me the chance to (1) be on the west coast where the actions were (and still are), and (2) be exposed to a wider network of business connections. While at Micom, the idea behind ACT Networks emerged. Interestingly enough, it came about more due to necessity than desire. The portfolio of products which I was responsible for were dying on me. I needed a new angle or a midlife kicker to help stop the bleeding. Adding voice capability to low end multiplexers using compression technology was my solution. The management team didn't bite on the idea because they thought I was too aggressive in pushing Micom from a data networking company to a voice/data networking company. In some way, it was they who pulled the trigger to get ACT Networks off the starting line than I.

BK: What was harder in your experience at ACT--starting up the company, taking the company IPO, or running the company afterwords?

MS: The simple answer is, they are all difficult but different.

Starting a company requires a broad range of skill sets (we have talked about this already) and the credibility to attract investors, employees and customers. In the early stage of the company, the CEO has to sell constantly. This level of selling is not something one can learn from school. It has to be in you. My advice to entrepreneurs is that they should be honest with themselves and make sure they are up to the task of such leadership. Otherwise, find someone to help you do it.

Taking the company public requires knowledge of how the system works. This comes from experience. For the first timers, the best approach is to hire a CFO who has done it at least once before. This is exactly what I did at ACT.

Running a publicly traded company is a different ball game. You now have a broad investor base and they are pretty ruthless if you don't perform. About the only advice I can give is to make sure your business has the momentum before you take it out. If you fail to deliver right out of the gate, your company will be black-listed and recovery will be hard. If in doubt, the best strategy is to wait.

BK: How did you decide to start Aprisa, and what opportunity do you see theCubicle filling?

MS: After being at the helm of ACT Networks for 11 years, taking it through the start up phase, IPO, and a number of acquisitions, I was tired. So I appointed a successor and headed towards the golf course. About the only work I was entertaining to do was to be a god father to local entrepreneurs. (By the way, I did look into a number of them and helped two got funded, three to shut down for lack of substance, and join two other start up companies Board.) While I was enjoying myself and seeing some sign of handicap reduction in my golf game, my first ACT investor came knocking. He and a friend of his had developed a prototype of a mathematical-based search engine and he wanted me to take it on and build a business with it. "You should not be retired at your age," he said. "Go create something of value!"

I took a good look at this technology, told him I was not interested in selling it as a software package, and said that if I could identify a killer application for it I might consider giving up on my golf game for a few more years.

The next thing I did was to approach a few people whom I knew and thought would be ideal for my start up team. I challenged them to help me do some investigative work on their own dime and time. The only bait I had out there was that if we could find something useful to do with this technology, I would start a business and they could be part of the venture. Luckily, they all agreed.

We worked in the manner for about three months. Through our due diligence process, we had uncovered our current business model and that is to use this technology to help engineers do discovery work. Though the initial idea was crude but we all felt good about it. So I went back to the man who got me onto this track in the first place and said, "I will take this on if you sell me the technology for stock and put up the initial seed money for me to do the business formation and development." He agreed and we got going as of April 1, 1999 - the fool's day (and how appropriate).

BK: What are your plans for Aprisa, and what are the next big milestones for the company?

MS: Now that we have been in business for one year and we had talked to over 80 companies about what we plan to offer, I feel really bullish of what we are doing. I truly feel that we are addressing a real need in the engineering community and that our products/services will make a difference in the product development process. In addition, I believe Aprisa will help to level the R&D playing field between large and small companies and between industrialized and developing nations. It is always good to leave a legacy behind.

We plan to launch our first service, CircuitNet, this summer. With it, we should begin to generate revenues for Aprisa. It is always better to make your own money than to beg for it. I have high hopes that Aprisa will be a profitable organization by year 2001.

Our next significant milestone is to form one or more strategic partnerships. This is crucial in today's competitive environment. The only way we can capture our first mover advantage is to corner the market in a hurry and this we can only do with the help of synergistic partners - those with established relationship with our target customers. We are working diligently in this area and hope to show results shortly.

BK: How would you contrast the two startup processes you've been through, between ACT Networks in 1987 and Aprisa last year?

MS: Once you have been through it once, you know what to expect a lot more clearly. With ACT, I had to find my way in the dark. My Board helped but not enough. With Aprisa, I can plan out my steps in more details on my own.

There is of course the networking aspect. The connection I had when I started ACT was primarily at the engineering and marketing levels. With Aprisa, I can call on CEO friends of mine across the country and set up meetings with ease. This is a huge plus.

Last but not least, making a deal is far easier when you have done it a few times. I still remember the first deal I tried to cut for ACT - I was so nervous I nearly pissed in my pants.

BK: What has been the toughest part of starting a company this time around?

MS: After you have made some money for yourself, you tend to be less hungry. The toughest part for me with Aprisa was my willingness to deal with rejections in Aprisa's fund raising efforts. Rejection is tough to take no matter what the reasons are. I sometimes feel that I have paid my dues and I don't need the humiliations any more. What keeps me going is my desire to bring up the next group of entrepreneurs - the employees of Aprisa who have trusted me with their future, taken a substantial pay cut to join in the venture, and are working their butts off to make Aprisa happen.

BK: As one of the 101 corridor's notable successful entrepreneurs and having been involved both as an entrepreneur and as you term it a "god father" to local entrepreneurs, what do you think are this area's biggest advantages and disadvantages to starting a company?

MS: The advantage we have in the 101 corridor is a relatively stable and available talented work force. We also have the beginning of a strong venture capital community. Money and good employees can be found if the idea and the founding team are both strong.

The disadvantage we have is a relatively inexperienced entrepreneur community. Most of the entrepreneurs are in the "first" generation and therefore have to struggle to learn the do's and don'ts. We also do not have a good networking structure to pull people together so that they can share their experiences. It is for this reason that I think we need to tap into the few early entrepreneurs we have to grow our infrastructure - the concept of godfathering.

BK: Thanks!