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Raza's new company, Raza Foundries in San Jose, Calif., expands on the models defined by classic venture-capital firms and startup incubators. Venture capitalists traditionally provide cash and limited management hand-holding to teams of entrepreneurs with a workable business plan. Incubators, on the other hand, seed ideas -- sometimes dreamed up by their own partners -- from scratch and give the fledgling companies a small amount of time and money to build a management team and find more capital. But in Raza's view, neither approach gives entrepreneurs the kind of infrastructure and support they need to concentrate purely on developing great products. Rather, he says, entrepreneurs too often get bogged down in the details of starting a company, everything from finding office space to handling payroll, or flounder from a lack of rigorous engineering and management processes. A FAB FOR THE FABLESS. Raza's alternative is more like a startup factory. Indeed, his firm takes its name from the hugely successful chipmaking "foundries" that have sprung up in East Asia to fabricate semiconductors for "fabless" chip designers too small to afford their own billion-dollar manufacturing plants. So far, his idea seems to be working. Since starting Raza Foundries in October, 1999, he has invested about $40 million in nine networking startups, only two of which have been publicly identified. And he has already sold one of those, YuniNetworks, just three months after it began, to Advanced Micro Circuits Corp. for an eye-popping $300 million. "Raza Foundries is a company that builds companies," he crows. The concept is simple. Raza doesn't try to dream up all the good ideas himself, instead relying for inspiration on an extensive network of contacts developed over 21 years in Silicon Valley. When entrepreneurs approach him with a proposal, he immediately subjects it to market testing with potential customers. "They have to really want it -- to grab it out of our hands," he says. Once the concept is validated, Raza starts building a management team, staffing the startup in part from his own stable of 22 employees, all of whom have experience launching and running companies. One position he never fills from his own ranks, though, is the CEO. "Visionary leadership is the key in the early days," he says. BATTLE-TESTED TOOLS. The next step is Raza's most crucial difference. Applying project management expertise culled from his team's years of experience, he forces the startups to set a tightly scripted schedule. Then they have to adopt a set of battle-tested development tools and procedures, such as computer-aided design software and testing routines laid down by Raza Foundries. What they don't have to worry about is administration: The foundry provides office space, computers and networks, testing labs, and all business functions such as accounting, human resources, and legal counsel. Raza himself helps recruit key talent and typically acts as chairman. The process "takes away the headache of being a startup," says Bill Joll, CEO of Maple Networks, a company Raza launched with a $9 million investment. Joll figures Raza's help whacked 12 months off Maple's development cycle, allowing it to get a product to market early next year, just a few months after a rival that had started more than a year beforehand. This company-builder sure could have used some hand-holding earlier in his career. After getting an undergraduate engineering degree from London University, he returned to his native Pakistan and took a job with the national telephone monopoly. But frustrated by the bureaucracy and concerned about his homeland's political climate, he headed off to Stanford University in 1979 for a graduate degree. That led to a job at chipmaker VLSI Technology, where he stayed until 1988, when he was recruited to join a promising startup called NexGen that was developing a rival to Intel's 386 processor. Two years later, Raza became NexGen's CEO. HEIR APPARENT. That company, though, had a troubled history. NexGen got caught playing a never-ending game of catch-up with Intel, in part because it lacked the kind of engineering discipline Raza now espouses. Developers kept adding new features in a bid to get ahead of Intel, then schedules would slip and the product would miss its market window. Finally, Raza sold NexGen to AMD in early 1996 for $850 million, and under the larger company's tutelage, its processor became the basis for the highly successful AMD K6 line. Raza was awarded with the job of president and chief operating officer in 1998, and people inside and outside AMD assumed he would inherit the CEO position when the company's legendary founder and CEO W. "Jerry" Sanders III retired. But Raza and Sanders had different management styles and clashed over how to fix AMD's myriad problems. Finally, in the summer of 1999, Raza suddenly quit to become a private investor. Taking chances isn't unusual for Raza. As a child, he recalls riding his bike through the streets of Lahore and grabbing onto the backs of trucks for a faster, if more dangerous, trip through the city. His decisions to emigrate and to leave VLSI for NexGen were similarly risky. But he has also taken more conventional steps. He's still married to his first wife -- whom he met, in the Pakistani custom, through an arranged marriage. He says being introduced to his wife, who is now a Silicon Valley attorney, was the most exciting moment of his life, and that his heart still pounds when he sees her smile or talks to her on the phone, which he does many times each day. They have two children, a son who attends University of California at Los Angeles and a daughter in high school. SECRET SAUCE. These days, though, Raza's real babies are the startups he's nurturing. In addition to Raza Foundries, which received much of its funding from venture firm Benchmark Capital, he also has established a $90 million venture fund, which includes $20 million of his own money. That fund has already invested in 18 companies, mostly later-stage deals in the manner of traditional venture capitalists. Raza won't necessarily invest money from his fund into companies launched by Raza Foundries, but he has the option to do so. After a career of bringing products to market with greater or lesser success, Raza is convinced that he has found the secret to rapid and consistent innovation. "We have developed a pipeline for how companies grow," he says. If he's right, people everywhere will have access to new technology faster than ever. And Raza could earn his place in Silicon Valley history as the pioneer of a more productive model for launching tech superstars. Reinhardt covers technology for Business Week from Silicon Valley |
