Scary Smart

First you found the company, then you look for something to do.

The sad truth about T.J. Rodgers, the middle-aged, self-styled Silicon Valley buccaneer I wrote about last week, is that his time has passed. His company, Cypress Semiconductor, makes chips. By the fashions of Silicon Valley, he might as well be making steel. The people who control the money that flows into Silicon Valley are no longer wild about semiconductors. Semiconductors, small as they might be, are nevertheless things that have to be made. Making things requires factories and workers and other expensive inconveniences. You can’t multiply your investment 100 times with that kind of financial burden. To get the kind of return that today’s venture capitalists demand, you need a naked idea–some novel little brainwave that will speed the world up. Eric Ver Ploeg thinks he has such an idea.

Eric has just started a company with the mysterious name of Angara Database Systems Inc. Angara has its offices in San Jose, Calif., in something called the NASA incubator. The incubator was born in 1993, when the space agency decided to privatize tiny pieces of its research division. The idea was that the government should help its newly jettisoned employees onto their feet. But like many institutions, the incubator developed a will of its own. The last former NASA employee has long gone. The incubator remains, now subsidizing the rent of entrepreneurs who, if they succeed, will become the multimillionaires of tomorrow, indignant–like T.J. Rodgers–at government interference in the free market.

From the outside, the place looks like a third-rate German motor lodge. Inside, every room contains a new private company. “Company” in this case is a guy with an idea. “There’s John,” says Eric, pointing through a glass wall to yet another young man in need of a shave and a good night’s sleep. “He’s got an idea for an Internet telephone.”

Eric and his partner, Ivor Frischknecht, graduated just a year ago from Stanford business school. (Eric also has a Ph.D. from Stanford in electrical engineering.) They are sufficiently handsome, groomed, and articulate to attract female attention even if they weren’t about to become very rich. They are stealth nerds, whose nerdiness becomes apparent only when they.

Eric and Ivor followed the new rules for entrepreneurial ambition. The old rules began: 1) Build a better mousetrap. The new rules say: 1) Start a company. Do not wait until you have decided what your company will do. 2) Seek out other scientists and engineers whose pet projects have been overlooked by the market. Do such unturned stones exist? Yes, indeed. It turns out that Silicon Valley is filled with scientists and engineers who have invented something they can’t sell. These people are a bit like Charlie, the tuna with good taste who could never understand why people preferred tuna that tasted good. All of them think that their product is superior to the available technology, and many of them are right. But a better mousetrap is probably insufficient as well as unnecessary: No one is going to back your browser, even if it is superior to both Microsoft’s and Netscape’s. The trick is to find a hole in the market–something no one else is doing–and to leap through.

Eric and Ivor spent the first six months looking for something for their company to sell. They settled upon some software developed by an old friend of Eric’s who had figured out a way to speed up corporate databases. (As usual in this series, don’t ask me any more.) Selling to corporations is not as sexy as selling to people, but there is a lot more money in it.

T he next thing Eric and Ivor needed was a name. They started by making a list of several hundred words with the connotations they were looking for: fast, change, excellent, smart… The trouble is that every other upstart in Silicon Valley is looking to project precisely the same image, and most go about it in precisely the same way. Every word Eric and Ivor thought of had been trademarked, including meaningless words they themselves had coined. That someone else had bothered to dream up Cogence is perhaps not surprising. But someone else had also dreamed up–and trademarked–Membada, Alacratrix, Extensity, Zyra, and about 50 more like them.

So Eric and Ivor chucked their list and went hunting for the name of a big river. “High water flow, high data transmission, that was my thinking,” says Ivor. The wild success of the online bookstore put paid to any hopes of landing anything as obvious as the Mississippi or the Nile or even the Ganges. A Siberian river called the Angara was available for the taking, however. Angara they became.

And Angara they will remain, for the company has just been given $2.5 million by Kleiner Perkins, the most famous of Silicon Valley’s venture capitalists. Kleiner Perkins plays the same role in Valley capitalism as Steven Spielberg plays in the movie business. More important than Kleiner Perkins’ money is Kleiner Perkins’ blessing. The firm creates the illusion of zero risk in a very risky business: A blessing from Kleiner Perkins is a promise of success so widely accepted that it is nearly self-fulfilling.

When word got around that Kleiner wanted a piece of Angara, other venture capitalists, who just a few days before had turned up their noses, turned them back down. Thirty-two-year-old Eric Ver Ploeg, who has never created a business and whose company has yet to earn a penny, is now receiving unwanted calls from grown men who plead with him to take their million-dollar investments. From the point of view of the incubator, Eric and Ivor have just hatched. They are, in some ways, already a success. Outside Eric’s cubbyhole is a row of champagne bottles. There is one bottle for each of the company’s goals. They’ve just opened and consumed the third one, marked “The Check.” Between that and the one marked “First Accelerated Query,” which translates to “First Time We Actually Do Something Useful for Someone,” there are three more bottles to be drunk.

Eric Ver Ploeg, upon any one of his several graduations, could have worked for whomever he pleased. He figures his starting salary after business school would have been at least $120,000. Instead he started a company that pays him nothing. He lives in a rented room in Palo Alto. He owes $80,000 to the banks that lent him the money to pay his Stanford tuition. He owes another $20,000 to credit-card companies that keep him fed and clothed and housed. As a graduate of Stanford business school who by all rights ought to be earning upward of $120,000 a year, Eric is constantly importuned to accept new credit cards at special introductory interest rates. He accepts them all. And each month, he rolls his debts from one card to another. The more he borrows, the more they wish to lend him. He also owes tens of thousands of dollars to his lawyer and to his accountant, both of whom have worked for Angara on the understanding that it will pay when it can afford to pay.

You might think that Eric would be worried about his many debts. But he could not be more relaxed if he were a 9-to-5er at General Motors. His trick is to know with perfect certainty his value in the marketplace: At any time he can take the jobs he declined to pursue a year ago. If Angara flops, he has lost only his time. The credit-card companies may be a bit miffed, of course. But the lawyer, the accountant, and the venture capitalists will, if anything, admire him. He failed. But at least he tried. Silicon Valley has done many things for mankind. One of them is to encourage the nerd to take a flier.