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Cswitch is a new Santa Clara company that has created a chip designed to process Internet traffic at the highest speeds at the key points of the network (switches and routers).
Doug Laird, chief executive, was able to launch the company after getting support from the same venture capitalist who had backed his last company, Transmeta, where Laird was chief engineer.
In 2001, Transmeta was on its back, and trying to recover. And yet Laird was still welcomed aboard by that venture capital firm as in-firm entrepreneur to look for the next new idea, which became Cswitch. Since then, Transmeta hasn't done that well -- its stock has continued to languish, and it is still losing money.
It is a stretch to blame Transmeta's problems on the departure of Laird, or to suggest that the venture capitalist, Bill Tai, shot himself in the foot for taking Laird away from his own portfolio company. If Laird wanted to leave, he would have done it anyway. And it doesn't represent a cut-and-run by Tai. Back in 2001, Tai told us he held on to much of Transmeta's stock after its public offering -- even after the expiration of the six-month holding period required by the Securities and Exchange Commission rules, because he said he believed in long-term support of his companies. ''I like to keep building,'' he said. Tai still sits on Transmeta's board.
Still, Laird recruited other former Transmeta executives to join him, and it can't have helped. We're noting this more as a lesson about how Silicon Valley works. If you don't give your key employees incentives to stay (or even if you do!), they will leave after the company goes public and see no more upside to the value of the stock options they hold. And VCs will flirt with newer, sexier opportunities, even if they keep commitments to older loves.
For Cswitch, Laird has raised $44 million in two rounds from Charles River Ventures, ATA Ventures, Bay Partners, Harris & Harris Group, Micron Technology, Masters Capital, Mitsubishi and GF Private Equity Group. The company has 47 employees.