One of the most high-profile victims of the technology bubble at the end of the 1990s was the Canadian firm Nortel Networks. Due to wildly over-optimistic expectations, and a glut of fibre-optic cable, its market cap plunged nearly 99% in the space of two years.
Meanwhile, Vikram Mehta was managing the firm’s development of its Blade network technology, designed for computer servers and data centres. Given Nortel’s problems, he realised that his project was the equivalent of “redesigning the garden while the house was on fire”. Mehta decided that it would be best if Blade became an independent firm.
Thankfully, his superiors proved receptive to the idea. As a result, the firm was formally established as an independent company in 2006, with funding from multiple institutions (which would end up totalling $40m) and support from the parent firm.
Many people might have found this move from a large corporation to a start-up challenging. However, Mehta already had substantial experience in starting businesses from scratch, having played a key role in managing Hewlett-Packard’s entry into India in the late 1980s.
Even so, Mehta realises that there were some key differences between the two experiences. As he puts it, “while most large firms are big enough to deal with the effects of one or two bad decisions, we were dealing with a host of competitors breathing down our neck”. A self-described “worryguts”, Mehta admits that he “constantly slept with one eye open”.
To make sure that his firm didn’t get destroyed by the competition, he worked hard on building a reputation for doing things “that were thought impossible to accomplish”. This strategy proved extremely successful.
The financial crisis failed to slow Blade down. Indeed, Mehta thinks the key “inflection point” was the decision of a major investment bank to use Blade’s technology. Other banks would follow and within two years eight out of the ten largest banks would become customers.
By 2010 the firm was so successful that IBM took it over. While Mehta is unable to disclose the sale price, he notes the first round of investors received 11 times their initial investment. By contrast, Nortel finally went under in 2009.
After spending several years integrating Blade into IBM, Mehta has recently become CEO of Kaazing, a firm that is developing a product called WebSocket.
Mehta thinks that this hardware, which allows simultaneous communication between two computers (as opposed to the rapid one-way communication of the present internet), could improve reliability and speed. In his view this could transform communications “in much the same way as the telephone surpassed the telegraph”.
Mehta has two pieces of advice for those going it alone. Firstly, he thinks it is vital to hire the right people. The pressured environment of a start-up means that staff need a “can-do attitude” and “guts of steel”.
However, he also warns against overconfidence, pointing out that many entrepreneurs end up thinking that “they know it all”. Instead, he emphasises the importance of listening skills, particularly “the ability to listen to what customers are saying”. Firms should “focus on building things that people want”.