VentureBeat

Vinod Dham has lived the quintessential Silicon Valley rags to riches immigrant story. Born in Pune, India, he came to the U.S. in 1975 as an engineering student with just $8 in his pocket. He became a chip engineer and helped invent Intel’s first flash memory chip.  He went on to manage Intel’s microprocessor projects, including the breakaway Pentium chip that debuted in 1993 and cemented the company’s position as the world’s biggest chip maker. He handled the bad press on the Pentium’s bug and later joined Intel rivals NexGen and Advanced Micro Devices. He became the CEO of Silicon Spice, which he sold to Broadcom for $1.2 billion in 2000. Then he became a venture capitalist, first at NewPath Ventures and now at NEA-IndoUS Ventures, where his aim is to give something back to his native India.

VB: What inspired you get into electronics when you were growing up in India?
VD: When I graduated in 1971, at 21, I ended up at the only semiconductor company that existed in India. It was a start-up that spun out of Teradyne Semiconductor and it happened to be in New Delhi. My home was seven kilometers away. It was perfect for me to live at home with my parents and work. It wasn’t until I worked at this company that my love for semiconductors bloomed. I found it to be a very exciting field because it brought in physics, chemistry, mathematics, and mechanical drawing. I moved to the U.S. and studied for a master’s degree in solid-state sciences at the University of Cincinnati, where I studied silicon germanium and compound transistors. I was doing that back in 1975.

VB: You came with very little money?
VD: I came with $8. In the 1970s, the government of India had little money to spare for foreign travel. They gave $8 to foreign tourists. As a student, I could get an additional $20. You had to go to the reserve bank of India. You had to apply. But it was such a corrupt country at the time; you had to bribe somebody to get the $20. I refused to do that. I said I’ll just go with $8.

VB: How did you get off the ground in the U.S. with just $8?
VD: That was the most amazing part. I kept it with me. There were many distractions. Even on the plane, they would sell cartons of cigarettes. People used to smoke. I used to smoke. The carton cost about as much as I had. The hostess offered me just one. I said I could live without smoking for a day. I went to the foreign student office. There was a lady named Mary Campbell. She had been corresponding with me for a year. She asked what she could do for me. I asked about my research assistant job. That was supposed to pay $325. She said I don’t get that money until I did a month of work. I told her I needed $75 to get into an efficiency and $15 for health insurance. I needed $90 to survive, and I needed more for food. She went to a room and came back with $125 in cash. She said it was a distress fund. I paid it back at zero percent interest at about $25 a month. She saved my butt.

VB: You got work in semiconductors after school?
VD: I went to work for NCR. I had some experience from India. I worked on non-volatile memory (which stores data when the power is off). I had a mentor there, Murray Trudel, who was my boss, my friend. I was like the apprentice. We created some fundamental work. He sent me to present a paper, which was where I met Bill Johnson, a director at Intel. He stole me away to work at Intel. I worked with Stefan Lai and a new college grad from Berkeley. The three of us invented Intel’s flash memory business.

VB: How big is that business now?
VD: It’s billions of dollars. I remember at the beginning I had a guy who was telling me to justify my existence. We had to make projections of the revenue we would generate. We were so wrong it’s embarrassing to talk about it. We never envisioned this whole market that has come about with memory in cell phones. We were only looking to replace an existing chip. That’s the way we thought. It was a linear extension. You don’t think about the things that can be created with it.

VB: Tell us how you became the father of the Pentium?
VD: I left R&D to get involved in Intel’s business with customers. I wanted to be a general manager instead of staying with a white coat in a lab. My first foray there was working on the 386 microprocessor. It was on its 15th or so rev through the factory. A guy named Gene Hill used to run it. They didn’t know why the yield was half a chip per wafer. (Normally, it’s around 100 good chips per wafer). Intel had a lot of pressure because Motorola had its 32-bit chip out already. I got into a task force with Craig Barrett. [Intel co-founder] Gordon Moore got it together because this was a disaster for the company. I was a manufacturing technologist, not a chip designer.  We found that a coupling in the chip was not properly designed. Within nine months, we got to 21 chips per wafer. That was a big boost for me within Intel.

In return for doing that, they let me learn about microprocessors. I started with the new versions of the 386. Then we moved on to 486s. I had to try to build a multi-billion dollar business. Once we succeeded, Andy Grove asked me to do the next one, Pentium. I got associated with this chip.

VB: It was the breakaway chip for Intel?
VD: It was big. But it caught attention because it was the chip that used different branding instead of the numbers. Pentium was where we wanted to breakaway from the crowd:  Sun Microsystems and MIPS Computer and Motorola. The pressure was enormous.

VB: There was a bug that led to embarrassment for Intel and a $425 million write-off. What did you take away from the Pentium bug experience?
VD: The reality never really got told. In my mind, when you are in that position of responsibility, then you have to acknowledge it. There was a paranoia inside that this admission would cause the company to fold and disappear. That was blown way out of proportion. If you own 80 percent of the market, you have to be honest and acknowledge it.

VB: You left Intel in 1995 after 16 years there. Was it a tough decision?
VD: One of the best decisions I ever made was joining Intel. And the next-best decision was to leave Intel. This entire world of venture capital that I am now in – I didn’t know it. You build something when everything is stacked up against you. It’s not the way life is inside a big company. I would have never experienced this start-up life and it is far more fulfilling and learning.

VB: Then you went to the microprocessor start-up NexGen and they got acquired by Advanced Micro Devices.
VD: I knew nothing about the start-up. I’m embarrassed to say I went to NexGen without doing any due diligence. Within a month, I found the company was broken. They would have never gotten through it if I hadn’t told them they needed to put an [Intel-compatible data pathway] on the chip. AMD CEO Jerry Sanders told me many times that he would never have bought that company (for $800 million in 1995) if it had proprietary technologies. That’s what NexGen was doing when I went there. They would have continued to do it. I told Mike Yamamura, the NexGen engineering head, that it was a disaster and they had to put a Pentium bus on it. Mike’s first reaction was: impossible. That very day, he came back in the evening and said he thought we could do it with just 4 percent penalty on performance. For me, AMD was a total culture shock. It was run by someone who ruled it absolutely. He loved and hated that I challenged him all the time. He was surrounded by yes men. I knew I would not last in the AMD culture. It was very different from Intel.

VB: It had to be exhilarating to grow it and sell Silicon Spice to Broadcom for $1.2 billion in stock.
VD: It was a blessing. In normal times, it would have been hard to sell the company for $120 million. We rode the wave. I don’t want to come across as some smart ass guy who knew how to do a $1.2 billion start-up. Sometimes you get lucky. Sometimes you are unlucky, like with the Pentium bug.

VB: You got your shot at venture capital after that?
VD: Yes, thanks to Dick Kramlich and Mark Perry at New Enterprise Associates. They wrote the first check for Silicon Spice. We started NewPath Ventures. I wanted to do something in venture capital and something in India. It was payback time for me. India in 2001 wasn’t on the map. People were afraid to set up in India, so all of my investments at NewPath were in companies set up here that could utilize labor in India. India had capital efficiency. After the dotcom crash, it was clear you couldn’t sell companies for $1.2 billion anymore. It will be sold for $100 million or $200 million. You had to reduce the capital going into the startup to get a healthy return. That was why we went to India.

VB: Were you able to extract your own holdings from Silicon Spice and put it directly into NewPath?
VD: No. I rode it enough to lead a comfortable life but nowhere near close to what could have happened. As a principal at Broadcom, I could only trade during certain windows and only so much. I felt blessed to get what I did. You only get in life what is due to you.

VB: So NewPath Ventures was raised from a group of investors?
VD: I put a little of my own money but it was mostly outside. I also put some of my own money into the follow-up fund, NEA-IndoUS Ventures.

VB: NewPath Ventures invested only in India-related startups?
VD: All of the companies had sales and marketing in the U.S. and engineering in India. One company, Telsima, also does sales and marketing India because it is a WiMax company and its market is in India. Insilica, a chip design play, has markets around the world but it has engineering in Bangalore. The same thing with Nevis Networks. The chip design and networking software is done in India and the marketing here. It was more of an incubator with a few big plays with a $130 million fund. But we are doing subsequent rounds with a lot of capital that came from other VC firms.

VB: And how is NEA-IndoUS Ventures different?
VD: It is my first true VC fund where the money has not come from people I knew as VCs. It has come from limited partners. It’s a $189 million fund. I felt with this one that India was ready to do companies based in India. I needed people who could be in India. The new name reflects the new partners and the change. NEA wanted to partner with us. We can do big bulky investments, dubbed venture growth equity. We have invested in 16 companies already and next year we will hopefully go for a new fund.

VB: How is your scorecard?
VD: The exits aren’t what they used to be. It’s not three or four years and is more like seven or eight years. Through the rounds of funding, we can judge the valuations of the companies and they are looking healthy.

VB: You had a setback with Montalvo Systems, the company that tried to take on Intel. (see our story on Montalvo).
VD: It’s OK. The rule of thumb in the VC world is that you have to do dozens of companies to get one or two right. We know that is going to happen and it was a good attempt.

VB: For the future, you expect cell phones will be the engine of the future, not PCs?
VD: Absolutely. I’ve had that view for many years and I’m glad to see that Intel has that view now. Paul Otellini has said that and it’s a major acknowledgment.

VB: What sort of usage of cell phones will happen?
VD: There is nothing except maybe Excel spreadsheets that you can’t do on a cell phone. You can do mails, SMS, MMS. You can do photo sharing. You can find the nearest restaurant. You can’t do the latter on a laptop. It’s a far richer medium. You will see a lot of big screens in the home and a cell phone won’t compete with that. But the ubiquitous device that you won’t leave home without is the cell phone. In India, when they’re fishing, they call back and say how many pounds of fish they caught and when they will be back. That creates a real-time market with buyers.

VB: What’s your view of the venture business?
VD: I think it’s one of the most exciting businesses in the world. You can nurture entrepreneurs, invest, and make a difference in areas like energy and biotech. Semiconductors is running out of steam and nanotechnology has backfired. It hasn’t produced anything worthwhile. India, China and emerging nations will have tremendous opportunities to create applications and services to enable new technologies and their populations will benefit from that.

VB: Your son went to India. That’s full circle, right?
VD: Yes. Ankush Dham. He’s a venture capitalist. He’s working for Reliance Technology Ventures. He has been there almost a year. It’s not an easy place to live but he wanted to experience it. I would come home from these trips and say it’s not companies being built, but a country being built. That’s a once in a lifetime phenomenon. Everywhere you look, something is under construction. He wanted to be part of that. Life is tough and demanding there. Kids who grow up in a bubble life don’t realize what it’s like. My youngest son, Rajeev, is an analyst at Goldman Sachs and next year he will join Silver Lake Partners in private equity work.

VB: And you have strong feelings about the immigration laws that enabled you to come here?
VD: India and the U.S. should look at each other as natural allies. They’re democracies that depend on each other for geopolitical safety and the talent both need to continue to innovate and grow. There aren’t enough students going into engineering here. Ultimately, having a good relationship with a country like India is a win-win. It shouldn’t be at the expense of people here.

VB: Well, it’s your fault and the Pentium’s fault that everybody wants to play Guitar Hero now instead of study math.
VD: We had no clue that it would lead to that and the Internet and this whole idea of Thomas Friedman’s book “The World is Flat.” There was no way to let the intelligence flow back and forth across the world so easily. Now it is possible.

If you liked this Q&A, please check out our others:

Byron Acohido, author, “Zero Day Threat”, on who to blame for identity theft

Bob Aniello, marketing chief at THQ, on mass market video games

John Antal, chief of staff and military/historical director at Gearbox Software, making “Brothers in Arms: Hell’s Highway”

Wagner James Au, author “The Making of Second Life”, on life in a virtual world

Robbie Bach, president of Microsoft’s Entertainment & Devices Group, on Zune

Robbie Bach, president of Microsoft’s Entertainment & Devices Group, on Xbox 360

Robbie Bach, president of Microsoft’s Entertainment & Devices Group, on Windows Mobile

Mark Bernstein, CEO of the Palo Alto Research Center, on life beyond Xerox

Jeff Boyd, CEO of Miles Electric Vehicle, on the future of cars

Lucy Bradshaw, vice president in charge of production at EA Maxis, on making Spore

Jim Crowley, CEO of Turbine, on keeping the online game machine humming

Jon Goldman, chairman Foundation 9, on game development as a model

Seth Goldstein, CEO Social Media, on social networking’s future

Bing Gordon, former chief creative officer, Electronic Arts, future partner at Kleiner Perkins, on leaving EA

Mark Jacobs, general manager of EA Mythic, wants to go to WAR

Steve Jurvetson, partner at Draper Fisher Jurvetson, on the cleantech revolution

Max Levchin, CEO of Slide, on social networking

John Lilly, CEO of Mozilla, on the hybrid nonprofit-for-profit business model

Marissa Mayer, vice president for search at Google, on social search

Paul Marcoux, Cisco vp of green engineering, on making data centers energy efficient

Ray Muzyka and Greg Zeschuk, co-founders of BioWare, on making great games

David Nordfors, director of Innovation Journalism program at Stanford, on teaching new journalism

PopCap Games top executives Dave Roberts and John Vechey, on making games fun

Steve Perlman, CEO of Rearden, on funding R&D for startups

Ted Price, head of Insomniac Games, on expanding a high-quality game development studio

Jeff Pulver, VOIP pioneer, on the future of voice

Gordon Ritter, Emergence Capital, on software-as-a-service

Henk Rogers, Tetris pioneer, on saving the earth

Curt Schilling, founder of 38 Studios and Boston Red Sox pitcher, on starting a fantasy online game

Dwayne Spradlin, CEO of InnoCentive, on expanding R&D crowdsourcing

Bill Watkins, CEO of Seagate, on the storage business and roughing it with Eco Seagate

Mark Zuckerberg, CEO of Facebook, on hiring an outsider as COO

Tags: co:Broadcom, co:Intel, co:montalvo-systems, co:silicon-spice, co:Telsima, inv:NEA-IndoUS-Ventures, inv:newpath-ventures, inv:reliance-technology-ventures