Corrections or additions?
Author: Melinda Sherwood. Published in U.S. 1 Newspaper on March 22, 2000. All rights reserved.
Dialogic’s Formula: Build from Scratch
The older generation has a knack for making younger
generations look spoiled. In the early 1980s, when Kenneth Burkhardt
Jr. set out to build a company that sells components for automated
voice systems, investors unanimously turned him down, saying he couldn’t
possibly turn $10 million in profit selling “parts.”
Today’s venture capitalists think somewhat differently, and profits
aren’t always of immediate concern, but for Burkhardt, co-founder
of Dialogic, financial hardship can be character-building for a start-up.
“The best thing that happened to us was not being able to successfully
raise money because it forced us to get a good business and marketing
plan,” he says. “By not having money, we couldn’t go out and
waste it.”
Last year, Dialogic sold over $300 million in components that account
for most of today’s voice mail systems, and that was just before it
was bought out by Intel. Now, Burkhardt is back at it, this time building
a company on the West Coast that is pioneering developments in a wireless
Internet.
The thrills of building a high-tech company from scratch will be the
topic of Burkhardt’s lecture at the 10th anniversary of the Rothman
Institute of Entrepreneurial Studies on Thursday, March 30, at 6 p.m.
at the Mansion on the campus of Fairleigh Dickinson in Madison. The
lecture and dinner are open to the public. Call 973-443-8842. Cost:
$50.
If Burkhardt had listened to his critics, or worse, listened to over-eager
investors, Dialogic might never have come into being. “I just
had this idea that you could build a computer board that you could
plug into a PC that would connect voice to a computer, and that using
the PC as a computation resource, you could build very powerful voice
processing systems very cheaply,” says Burkhardt, who has a BS
in physics from Cornell, Class of 1967.
A former systems programmer with American Cyanamid who taught at Rutgers
for seven years, Burkhardt proposed his idea for voice cards to his
former employer, Burroughs (now Unisys), but executives there canned
the idea. Unlike today, Burkhardt explains, the concept of open software
and hardware was strange and unfamiliar in an industry dominated by
companies like IBM. “People didn’t understand how you made money
by selling individual parts,” he says. “It was the basic semiconductor
model, but they didn’t understand what the added value could be in
selling low level components.”
So Burkhardt gathered interested colleagues, raised $1 million in
capital, and founded Dialogic in 1983. By today’s standards, the company
had little start-up cash, but in the end it helped the company, says
Burkhardt. “You see a lot of companies raise $5 or $10 million
and burn through it in a year,” he says, “and if the market
isn’t ready for it, they disappear. By bootstrapping we were able
to synchronize the development of the product with the development
of the market.”
When the company went public 10 years later, Dialogic had roughly
$100 million in sales, and its components made up nearly 40 percent
of the market. “We pretty much enabled the growth of the voice
mail market by making the voice mail products inexpensive,” says
Burkhardt.
Not every successful company needs to be built as painstakingly as
Dialogic, says Burkhardt. It just depends on the situation. “I
would say that there are instances when there’s a narrow market window
and you need money, but in our situation we were profitable in a short
period of time,” he says. There were also benefits to not seeking
an IPO early, says Burkhardt. “By the time we went public, my
partners and I owned 90 percent of the company.” Burkhardt’s advice:
Write and annually rewrite business plans. “If nothingelse, finding holes in your plan will pinpoint areas where you needhelp,” he says.Hire great people.Define a good corporate culture. “I don’t care whetheryou are self-funded or if you’re someone who has been able to raise$10 million from a venture capital firm — if you don’t have agood corporate culture you’re not going to be successful,” saysBurkhardt.Dialogic chose to have a flat organization — no reserved parkingspots and stock options for everybody — but hierarchy can workwell too, as long as your culture is clearly defined by the management.Be prepared to continue your education.Even though Burkhardt has his Ph.D. in physics, he is continuinghis education as a board member of Dialogic, and CEO of Aloha Networks,a San Francisco-based company in the R&D phase of building hardwarethat allows high-speed bi-directional Internet access via satellites.Aloha’s system for uploading information to the Internet by satelliteis 10 times faster than a telephone line. Not a bad choice for a secondbusiness.— Melinda SherwoodNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
