Two announcements in as many weeks provide strong validation for Georgia's strategy of investing in university research to spur development of technology-based start-up companies and new jobs from existing firms.
The first announcement involved Digital Furnace Corp., which barely one year ago bowed before investors at the venture capital conference, Venture Market South. The company, which provides broadband voice, data and video solutions, was the talk of this year's conference when it revealed February 28 that it would be acquired by Broadcom Corp. of Irvine, Calif., in a stock trade valued at more than $136 million.
Digital Furnace's flagship software, Propane, uses sophisticated algorithms to improve efficiency of broadband networks, as much as tripling the speed of data flow. The acquisition will enable Broadcom, a leading providing of integrated circuits, to turbocharge its cable modem chips.
The second announcement came March 9, when Georgia Governor Roy Barnes unveiled Broadcom's plan to create 100 broadband communications development jobs in Georgia over the next five years as a member of the Yamacraw Design Center. The move will help the company maintain leadership of broadband communications technology.
Some Synergistic Matchmaking
Digital Furnace's success story unfolded so rapidly that it amazed even its founders -- John Lappington, Dr. John Limb and Daniel Howard -- who credit Georgia Tech and the Georgia Research Alliance (GRA) for providing resources and a setting that enabled them to commercialize basic research at lightning speed.
In fall 1998, Lappington had some time to spare, having left an executive post at Antec Corp. under a non-compete agreement. He volunteered to do some work for the Advanced Technology Development Center (ATDC), Georgia Tech's incubator for high-tech start-ups. ATDC's Ben Hill introduced him to Limb and Howard in the Georgia Center for Advanced Telecommunications Technology (GCATT), a research facility supported by the Georgia Research Alliance (GRA) at Georgia Tech.
Recruited to Georgia Tech in 1994 as a GRA Eminent Scholar, Limb launched GCATT's Broadband Telecommunications Center (BTC) along with Howard, and the two were researching ways to improve speed and efficiency of cable modems. The trio began pooling ideas -- in particular, looking at ways to improve the DOCSIS industry standard -- and decided to form a company.
Digital Furnace was soon up and running and entered the ATDC fold. Lappington admits he was initially lukewarm about joining ATDC: "I didn't feel I needed it." No rookie entrepreneur, Lappington co-founded Electronic Systems & Products in 1989 and Digital Video in 1993.
Yet Lappington changed his mind about ATDC's value as Digital Furnace moved forward. Compared to his previous start-ups, Digital Furnace has been "a piece of cake," Lappington said. "Now I'm a disciple."
ATDC allowed Digital Furnace to focus its efforts on product development instead of infrastructure, Lappington explains. By providing office space, phone and computer systems along with access to a network of attorneys and other service providers, the incubator eliminates a myriad of details that can distract entrepreneurs.
Upstairs, Downstairs
ATDC leased Digital Furnace space on the fourth floor of GCATT, which had been built by the Georgia Research Alliance to help bring industry and university faculty together under one roof.
Indeed, proximity to researchers proved crucial to Digital Furnace's blast-off, Howard said: "When you're in GCATT you're one or two floors away from the people you're giving research grants to." Typically, industry and researchers are isolated and weeks can pass without contact -- the lack of communication taking a toll on commercialization. "Many times you get a new piece of information which changes your direction, and yet researchers may continue to study a problem that you've decided is no longer important," Howard explained. No such gap exists at GCATT where a constant rubbing of shoulders keeps everyone on track.
The GCATT location was also an asset for Limb. A professor in Georgia Tech's College of Computing, Limb continued teaching. Yet with his second-floor office just two flights away from Digital Furnace, Limb was able to optimize time with both students and the start-up. Other universities allow faculty to consult with industry, but Georgia Tech bends over backward to help, Limb maintains.
Access to an immediate talent pool was another plus; Digital Furnace hired several grad students to help with R&D. "This is a fast-changing technology," Limb said. "Students here are on the leading edge of technology. When given a problem, they can understand it and attack it quickly."
Aside from logistics, ATDC helps entrepreneurs fine-tune their market strategy. "We learned that there was a very narrow window of opportunity for companies like us," Howard said. If you're solving a problem that everyone knows about, large companies are undoubtedly working on it too. On the other hand, start-ups must take care not to work too far ahead of the curve -- otherwise they'll run out of funding.
Even with his 20-plus years of business savvy, Lappington appreciated ATDC's counseling. "Being president is a lonely job," he said, explaining that there are few people to turn to for objective advice. In particular, he praised Hill for serving as Digital Furnace's "core adviser."
ATDC also sent a steady stream of investors over to GCATT to look at Digital Furnace. By the time the start-up was ready for venture capital, there were more offers on the table than necessary, Howard says. "Getting to the point we are now involved a lot of interactions -- and Georgia Tech was the glue that allowed it to happen," he added.
A Higher Survival Rate
Indeed, Digital Furnace's exponential growth reflects a new trend in collaboration as independent university programs partner together in the spirit of economic development.
When ATDC opened its incubator in GCATT in 1996, it was an innovative experiment in technology transfer. "Too often research operates in a vacuum -- even if it's sponsored by industry. By putting incubator space in a research facility, we're fostering interaction between researchers, business and investors," said Wayne Hodges, director of Georgia Tech's Economic Development Institute and ATDC.
Research can evolve into business on its own, but there are a lot of fatalities, points out Dr. J. Michael Cummins, director of GCATT. Someone may hatch an idea in the lab, but have no resources to commercialize it. Other times a company may even take root, but lack of venture capital causes it to die on the vine.
"Do we let nature take its course and have only 1 in 1,000 research ideas come to economic fruition -- or do we get a higher yield off resources?" Cummins asked. "What we're doing here results in a higher survival rate. We're compressing an entire life cycle, collapsing it in terms of both space and time."
In just 18 months, Digital Furnace accelerated from a three-person company to more than 35 employees -- high-tech jobs that will remain in Georgia as the company is folded into Broadcom's residential services unit in Atlanta."This is the one of the biggest successes that we've seen -- and not just from the financial side. This is the first time all the pieces of the puzzle have been put into play," said C. Michael Cassidy, the Georgia Research Alliance's president, pointing to the networking among his organization and ATDC. Even Alliance Technology Ventures, which provided Digital Furnace with $500,000 in seed money, traces its roots to GRA.
Digital Furnace's new owner is no stranger. A few years ago, the California-based Broadcom sent a landing party to Atlanta, taking root first at the ATDC. The move stemmed from Limb's efforts to establish an industry "test bed" within BTC. Deeming Limb a magnet, Cassidy says. "If you get the right people here, industry flocks."
Broadcom Joins Yamacraw
More "pieces of the puzzle" came together when Governor Roy Barnes announced March 9 that Broadcom had become a member of the Yamacraw Design Center. The state-funded initiative aims to bring high technology jobs to Georgia and enhance the state's leadership in the field of electronic design for broadband communication technology. The Yamacraw Design Center serves as the focal point for the initiative's multi-agency economic development effort.
"Broadcom's technology and focus make the company a perfect fit for the Yamacraw Design Center," Barnes said. "These are precisely the type of jobs we expected Yamacraw to attract to Georgia."
Thomas J. Quigley, senior director of Advanced Broadband Architectures for Broadcom, said the company shares Yamacraw's view that advanced broadband communications technologies are critically important to enabling a future Internet economy.
"In order to tap into the full potential that an Internet-fueled economy promises, massive amounts of information in the form of voice, video and data must be quickly and easily transferred between homes and businesses around the world," noted Quigley. "Broadcom is committed to maintaining a leadership position in the design of high-speed data transmission devices over a broad spectrum of communications networks. Our partnership with Yamacraw will help us combine our strength in design and commercialization with ongoing research into these technologies."
Broadcom will work closely with the Yamacraw research faculty to identify market needs in the area of high-speed data transmission that can be addressed through research at the Yamacraw Design Center. Both Broadcom's Atlanta operations and Digital Furnace were spearheaded by Georgia Tech graduates, benefitted from business advice and office space provided by the ATDC, interacted frequently with researchers from the Broadband Telecommunications Center at GCATT, and together already employ 100 high-tech Georgia professionals.
"Our work with the Broadband Telecommunications Center has shown us the quality of research in Georgia. Working with the Yamacraw Design Center will give us expanded access to the work of top researchers and give Broadcom entrée to their students upon graduation," Quigley said. "Broadcom hopes to double its staff in Georgia over the next five years. Working closely with the students in the Yamacraw Mission will make it much easier for us to find qualified people for those positions."
Dr. James Foley, Yamacraw executive director, said Broadcom's decision to join the Yamacraw Design Center confirms that Yamacraw's research is providing a firm basis for commercial development. Said Foley: "Broadcom's established success in turning design research into commercial applications makes Yamacraw's pool of talent a great resource for the company."
Broadcom has a substantial and growing commitment to Georgia, with the Digital Furnace team now joining its cable modem development group. Added Quigley: "We are very grateful to Georgia and academic institutions such as the Georgia Research Alliance and the ATDC for their important roles in the development of both Digital Furnace and Broadcom's cable modem development group."
The twin announcements show the benefits that can arise from partnerships between Georgia's research community and state's growing band of experienced entrepreneurs.
There are more John Limbs out there doing research "ripe for guys like me to build companies from," Lappington agreed. "Unfortunately, I'm going to be busy for awhile."
Research News & Publications Office
Georgia Institute of Technology
430 Tenth Street, N.W., Suite N-116
Atlanta, GA 30318 USA
(www.gtri.gatech.edu/rco.html)
Media Contact: John Toon (404-894-6986); E-mail:
(john.toon@edi.gatech.edu);
Fax: (404-894-4545).
Writer: T.J. Becker