Corrections or additions?
This article by Barbara Fox was prepared for the January 24,
2001 edition of U.S. 1 Newspaper. A minor change was made after the
paper went to press. All rights reserved.
Spinning from Sarnoff’s Web — Part I
In an effort to enhance the reputation of New Jersey
as a global center of technology, efforts are underway to position
New Jersey as the "Innovation Garden State." Any view of an
"innovation garden" must consider greater Princeton as one
of the big hothouses — it has academic institutions like Princeton
University and Rutgers that are helping technology grow, but it also
has the for-profit companies that are bringing technology to market.
Among the most influential of these for-profit companies is the
Corporation, which made significant progress in 2000. For almost 15
years the 800-worker Sarnoff Corporation had been chug-chugging away
at a conversion challenge, converting from being a not-for-profit
scientific think tank to a self-supporting engine that makes profits.
Now, just when many others are starting to predict economic problems,
the Sarnoff people think they are ready for a growth surge. And the
recently announced plans for developing the center into a major
campus is just part of the strategy.
"We are spending a lot more time and energy trying to identify
where the strategic marketplaces are, and then how to get into
says Jim Carnes, Sarnoff’s CEO. "The real strategy here is that
we are in several different marketplaces. We specifically avoid
overweighted in one area."
A recent spate of promotions heralded Sarnoff’s progress. Among them:
Satyam C. Cherukuri was made executive vice president in charge
of operations; he oversees the contract
research that Sarnoff performs for corporations and government
Carmen Catanese has been given a new title, executive vice president
for corporate strategic development.
Anne VanLent now has the title of executive vice president for
management," for tending to the stock that Sarnoff gets from its
spinoff companies. She also is in charge of licensing core technology.
Norman D. Winarsky (also a new executive VP) now
heads nVention, a brand-new incubator for spinoffs from Sarnoff and
Dan Koloski, vice president of Sarnoff products, is now president
of HiTek Manufacturing Company — Sarnoff’s wholly-owned
subsidiary — and reports directly to Carnes.
These three areas — contract research and licensing, creating
value through spinoffs, and manufacturing products — can be
of as representing three legs on a stool of Sarnoff’s strategy.
They have also been compared to the three parts of a good investment
portfolio: bonds, money markets, and equity stocks.
for third parties is like having bonds in your portfolio. You clip
the coupons and turn them in for cash.
nearest-term cash that Sarnoff can access. This method for
intellectual property is like having money markets in your portfolio.
create value for the mother company — or might not. This is like
having equity stocks in a portfolio.
almost no public profile. Then, a preview of Sarnoff’s new incubator,
which is making big news. Finally, the list of spinoffs: Where are
they, what they do, and who is in charge.
Inside the bowels of the Fisher Road headquarters are
extensive manufacturing facilities, not only for making semiconductors
but also for manufacturing prototypes and small quantities of special
"Sarnoff has a very healthy product orientation along with its
spinout thrust, and that is a profitable segment for Sarnoff,"
says Dan Koloski, president of HiTek Manufacturing Company, Sarnoff’s
wholly-owned manufacturing subsidiary. It makes prototypes and
specialty products for government agencies and commercial companies.
Koloski is also vice president of Sarnoff Products and manager of
Sarnoff’s integrated circuit center, model shop, and materials
"Having slow volume production keeps us in touch with
needs," says Koloski. "Clients want one-stop shopping and
accountability. This benefit has put a great sales tool in our tool
For example, if early editions of a product are being made at Sarnoff,
and the product is not quite right, the Sarnoff team can go back to
the drawing board and find out why. "Otherwise, we don’t know
if the R&D wasn’t done properly or the manufacturer screwed up,"
Koloski says. Once the manufacturing process has been stabilized,
Sarnoff can do a technology transfer to the client’s factory.
Sarnoff has not received much publicity for making products and models
and chips. "Sarnoff has always been involved in products, but
that has always been a well-kept secret," says Koloski.
— 90 percent for external clients — are on the rise and are
among the most profitable programs."
"HiTek, over the last four years, has grown to the point and
credibility to the point that we are looking for new business,"
says Koloski. In the fourth quarter of 2000 HiTek booked its first
customer for non-Sarnoff business. Though it has no sales force, HiTek
has successfully relied on engineers to network with their peers and
sell the services.
HiTek’s high volume products include the speed sensors for locomotives
for GE Transportation Systems. This is a highly sophisticated
with Doppler radar, the shape of a two-pound coffee can, that hangs
underneath a locomotive and allows the operator of a train to know
its true speed. HiTek assembles about 1,000 per month or 12,000 per
year. Products that are produced in even higher volume are laser
for the telecommunications marketplace. This production line has a
dedicated team of 10 people.
Koloski came from a career in the semiconductor industry. He was
in Wilkes Barre, where his father worked for the IRS, and stayed in
town to attend Kings College (Class of 1976) and earned another
degree, in electrical engineering, from Penn State. He also has an
MBA in operations management from St. Joe’s in Philadelphia.
Four years ago Koloski had a high pressure job running the
division for Commodore, a 350-person company that was doing high
production 24 hours a day, seven days a week, in Valley Forge,
He was recruited by Sarnoff’s CEO Jim Carnes, and finds himself
by the wide-ranging technology that Sarnoff covers.
"From the heart, I have to say I am having more fun now than I
ever had in my career," says Koloski. "Sarnoff is just
a fascinating place for a technologist to be."
Since 1992, when the engineers at Sarnoff began to teach
themselves the venture creation business, they have spun out more
than 19 companies and have forged excellent relationships in the
Now Sarnoff is spinning out the spinout idea. With a self-funded,
formal incubator, it has opened the doors to outside entrepreneurs
for the first time. "We are taking some of the activity we did
centrally in the company and spinning it into a wholly-owned
called nVention," says CEO Carnes.
Norman Winarsky, one of the new executive vice presidents, was put
in charge of this new incubator and must find young companies in three
business areas related to the Internet: multimedia and broadband
Internet connected devices and systems, and smart services that
customized responses to individual user needs. He aims to raise $20
million to fund 20 companies in the next four years.
This latest spinoff strategy also involves building the recently
— and somewhat controversial — corporate park for incubating
companies on its own campus.
Already Winarsky has landed an unusual grant from the state —
half a million dollars from the New Jersey Commission on Science and
Technology (See Life in the Fast Lane, page 59). He has also lined
up first-rank venture capitalists that can invest new money, up to
$1 million per company.
"These are top tier VCs," says Winarsky, naming such West
Coast firms as Mayfield Partners, Morgenthaler Partners, and US
Partners, among others. "As a top tier technical company working
with top tier VCs, we will create billion dollar opportunities."
(If a company can make $100 million in three to five years, he
the stock is probably worth $1 billion).
Winarsky emphasizes that nVention is opening its doors, that it is
fully funded, and that it has already quietly launched some companies.
These companies have not yet been presented to the venture board,
but that will be remedied at a meeting on Thursday, February 8.
Winarsky helped start the very first spinoff, Sensar, in 1992. From
that first try, the path from thinking like an engineer to thinking
like an entrepreneur was paved with lots of mistakes, Winarsky admits.
"It’s a whole new vocabulary and a new way to think — values
based, and not technology based," he says. "Dollars and not
bits. Markets. Customers and what their needs are. Value, and the
proposition to the customer. It really did take us eight years —
and the Internet revolution — to learn about the venture creation
Early on, Sarnoff structured a spinoff policy that encouraged its
own workers to stay. Its own spinoff companies generally hire a
and technology team from outside. To profit from its intellectual
property, and to keep its employees happy and at home, Sarnoff
an equity share in every spinoff. Every Sarnoff worker gets some
of five percent of that share, but key contributors to a particular
company divide up 15 percent of Sarnoff’s share. Thus members of the
technical staff can build a portfolio of companies and can even make
a substantial profit if one company hits the big time.
Sarnoff also clung to the idea that engineers can pick up marketing
and sales skills on the fly. "I have never gotten my MBA, but
I can do contracts and licensing as well as anybody," says
Everyone learns by doing. "We began to build companies with 20
to 30 people into the building process. Now those 20 people have done
it once — they’ve gotten a taste of blood, and their wives and
families have gotten a taste of stock. They become the seed for the
next ones," says Winarsky. "Eight years later, we have 19
companies, each with 20 builders."
Surely Sarnoff’s timing is off. Look at the stock market! No problem,
insists Winarsky. "The dot com crash was the best thing that could
ever happen to us." The crash, he claims, weeded out the chaff
and made Sarnoff look good. "When I put together my team of
capitalists and board members, we were the prettiest girl on the
he says. "We were oversubscribed with VCS who wanted to work with
He refers to a popular Sarnoff analogy: "We learned how to be
a venture engine, to take the fuel (the intellectual property) from
Sarnoff, then apply our learned strength in marketing and business
analysis, and then take the "air" that comes from venture capital
to make the engine run."
Norm Winarsky has his own brand of fuel, personal
a trait he inherited from his father. "My father radiated energy
— he was passionate about everything he loved to do," he says.
His grandfather — a Russian Jew who was a Cossack horseman and
had a horse farm in Mount Freedom, New Jersey — died young. His
father built a newspaper photography business and also died young,
when Winarsky was just 17. To save money, he entered college on
straight from his junior year in high school, earning his bachelor’s
degree from the University of Chicago in 1969 and staying for his
master’s and PhD degrees.
While he was in Princeton for a year at the Institute for Advanced
Studies, he met his future wife, Lisbeth, a Dane who was then working
as an au pair for Anne Reeves, founder of the Arts Council of
The Winarskys have three children, one still at Princeton High, and
just celebrated their silver wedding anniversary in Denmark.
Winarsky joined Sarnoff in 1976 as a mathematician, working on an
electron gun and then on Sarnoff’s proprietary picture tube
As a group head he was part of the merger team when the company was
acquired by General Electric in 1986. Promoted to director, he ran
the computer vision, information technology, visualization, and
optics groups and was promoted to division vice president and
vice president, responsible for information (Internet) technologies.
He co-founded the National Information Display Laboratory and helped
to found five of the Sarnoff spinoffs: Sensar, VideoBrush, Pyramid
Vision Technologies, LifeClips, and WaveXpress.
Among the seed-funded companies that nVention already hosts is
established in March, 2000, to develop the next generation of
"When we create Internet-based companies, we will get new venture
capital money, up to $1 million per company," says Winarsky.
entrepreneurs from outside of Sarnoff have a great business idea that
needs core Sarnoff enabling technology, we want them to come with
us. We have funding, a venture board, and a great business."
Sarnoff wants to leverage the technology it has, not start from
So new companies might focus an application of Sarnoff technology
on a new product. "Essentially we add a great deal of energy and
value to the venture creation and process in the Internet space,"
"nVention is going to be a huge success. I believe we will create
four or five Internet-based companies per year, real value companies.
Not dot com companies, as in "dot gone," but those based on real
technology. We are looking for great business ideas for real
and we are also looking for great management — we will be hiring
CEOs and CTOs for each of the companies we create.
"nVention is going to bring great value to all of Princeton and
all of New Jersey by creating many companies a year," says
"and a good fraction of them by history, have stayed in New
Sarnoff’s staffing is down, at the moment, from its usual 800 people
to just 750 workers at Fisher Place. Not including the companies that
moved out of state, which employ 214 people, the spinoffs account
for 459 jobs in central Jersey. Bottom line: Sarnoff is boosting
by more than 1,200 good, high paying positions.
Corrections or additions?
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