Startup to Focus on R&D, Not Marketing

FRAMINGHAM (07/06/2000) - In Silicon Valley, the start-up-in-search-of-an-IPO is cliché, and the pure research and development lab is an unattainable dream for many engineers.

Now a group of Silicon Valley veterans is trying to combine the two in a company whose goal is to design technology for specific needs, turn marketing of the technology over to outsiders and go on to the next development project.

The goal of the brand-new Packet Design, founded by Judy Estrin, is to develop Internet Protocol services technologies that enhance the performance, scalability, provisioning and ease-of-use properties of the Internet infrastructure.

Examples of the kinds of technologies with which Packet Design will be dealing are optical networking, voice/data convergence and ways to scale the Internet to support a vastly larger number of users.

All of the technology developments from Packet Design will be spun off as separate venture-funded businesses that will turn the technology into a product or license it to other developers. Packet Design and its shareholders will make money by getting a piece of each new spin-off.

That way, Packet Design can focus exclusively on developing technology, not marketing or selling it, said Estrin, Packet Design's president and CEO.

Why this business model?

"Nobody is thinking anymore," Estrin said. "Everyone is so time-to-market-focused that you've got a situation where it is difficult to solve problems that aren't related to the present quarter. Everyone is operating on Internet time. At Packet Design, our time horizon is a little broader."

But what about the research parks and the labs, such as Lawrence Livermore National Laboratory in Berkeley, California?

"They are great," said Estrin, "but their time frames are too long for most companies to really benefit from their solutions, and they aren't tackling specific problems dealing with the growth of Internet traffic."

Estrin has co-founded three successful technology companies with her husband, Bill Carrico. They co-founded router-maker Bridge Communications, which went public and merged with 3Com Corp.

They also founded X terminal maker Network Computing Devices Inc. (NCD), which went public in 1992, and streaming video software maker Precept Software Inc., where Estrin served as CEO until it was acquired by Cisco Systems Inc.

In other words Estrin and Carrico, have what Hollywood would call a track record, and Packet Design boasts a stable of other bankable stars.

The company's chief scientist is Van Jacobson, who held that same post at Cisco, and Packet Design's new vice president of business development is Doug Klein, who helped found NCD.

The company also has $24 million in backing from Foundation Capital, Carrico, Estrin and individual investors, including former Netscape Communications Corp.

CEO James Barksdale.

"Judy and Bill are recognized as visionaries, but public investors are willing to pay a premium for companies with experienced management in place," said Christin Armacost, an analyst at SG Cowen Securities Corp. in Boston. "But success will be based on the ability of the new company to attract and retain talented management to take the company forward."

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