Love and War, and Cisco

We have been lucky to have created three highly successful cybersecurity spin-out companies in the university (two of which have been acquired by major companies, and a 4th is advancing to further investment). In fact, the university is now ranked in the Top 10 in the UK for university spin-outs and has another two on the way to spin-out in 2024. As part of this, we have been involved in every part of advancing these spin-outs, from the initial ideas to the eventual raising of funds. A core part of this has been in getting the right spin-out team in place — and which might not always be the original co-inventors. So, let’s look at one example of where a start-up team struggled with gaining investment but which had an amazing product.

Love and war and innovation

Often, it is love and war which advances innovation. And it is perhaps love that created one of the mightiest of technology companies: Cisco Systems. With that, it is alleged that Leonard Bosack and Sandy Lerner created routers as a way to send love letters to each other, as they didn’t have an electronic way to do so at the time.

Once Leonard and Sandy had created a prototype of a router, they went to their employer — Stanford University — and asked if the university wanted to commercialise their work. Overall, Stanford is one of the most innovative universities in the world and has created companies such as Google and Sun Microsystems. It is also one of the best places in the world to create a company which aims to disrupt our world. But the university spurned the chance — perhaps because Leonard and Sandy were not tenured academics and with a long track record of academic research.

In the 1980s, Leonard was a support engineer for Stanford’s mainframes and actually implemented the first campus-wide LAN at Stanford. This linked over 5,000 computers within a 16-square-mile campus, and which was a major challenge at the time due to compatibility issues. Sandy, too, worked for Standford as the director of computer facilities at the Graduate School of Business. And, after being rejected for their idea of creating the router, in December 1984, the couple registered “Cisco” — named after “San Francisco” and quit their jobs to focus on creating routers. The new home for their business was Menlo Park (and which would also become the home of Facebook at 1 Hacker Way, Menlo Park, CA 94025).

An amazing product but the wrong team?

What the couple created for the original router was amazing and built them in the garage they shared with their next-of-kin. They had no marketing budget, and they sold their product just through word-of-mouth. In fact, it so far ahead of any of the competition (and who often could not see the power of TCP/IP), and where companies such as HP could not get enough of the product.

And, so, with an amazing product and growing sales, and being on the West Coast of the US, you would think there would have been VC (Venture Capital) companies that were desperate to invest in the company. But, no! Leonard and Sandy were not the standard university spin-out team — their genius lay not in their academic record of research and innovation or their success in pitching the company — but in the product that they had created. Just as, at the time, Steve Jobs was perceived as a “hippy who needs a bath”, the couple were seen as uninvestable as they did not fit into the mould of a start-up leadership team. They were generally more anti-establishment than a team would could drive a tech company forward.

The risky investor?

And, so it was Don Valentine — with his Sequoia Capital VC firm — who came to the rescue of Cisco. Generally, his company had invested small-scale funds in highly risky companies. Two of the riskiest of these were Apple and Atari — and which were run by “non-conforming founders”, and who generally struggled to showcase that they had the business and product development skills to drive the company at scale.

Steve Jobs, at the time, was not the business leader that he became, but he wore jeans, a T-shirt, and sandals and could be abrasive in his discussions with investors. At Atairi, too, Nolan Bushnell hardly fitted with the corporate way of doing things. But Apple and Atari had amazing technology that beat the competition hands-down. Don was one of the few who could see around the initial impressions and took a gamble with the risky companies. He was thus able to steer the board of these companies so that more experienced business leaders could take over the main responsibilities for product development. In fact, Don was so dedicated to making Cisco a success that he served as the Chair of the company for many years. Once Len and Sandy were moved aside, more experienced people took over to advance their product.

Conclusions

Overall, Cisco is a classic tale of having an amazing product that no one could actually see its full potential, but it initially lacked a start-up team which could drive the company forward. Once Len and Sandy had been replaced by more seasoned leaders, the company grew faster than any other company had ever done.

A spin-out/start-up team might thus not be the team that can drive your company forward, whereas the team that grows the company to 10 employees might not be the one who can grow it to over 1,000. And, for investment, a start-up team that lacks core skills in influencing will sometimes struggle to get investment, but core investors should see through silky pitches and the core of the innovation — so don’t be put off by a poor pitch — try and help support the innovation if there is some real potential. In the end, it is people who innovate, and not companies — so trust people more than processes.

Postscript

We need to make sure every part of our innovation infrastructure works.

Without the people with ideas, there will not be an innovative company created.

Without the people with leadership skills, an invention will not be sustained.

Without the people who know how to find, attract and keep great people, the company will stagnate and never go anywhere.

Without the people who know how to grow a company and focus on the customer, the company will never scale.

Without a vision, a mission, a belief, and a purpose, great ideas will never go anywhere. Believe in people and not in AI!