Be fast, be frugal, be right. These are the business principles that spurred Janie and Victor Tsao to transform their home-based start-up into a $500 million powerhouse that Cisco Systems just couldn't resist buying.
Just like Bill Hewlett and David Packard, Janie and Victor Tsao had a garage.
"Everybody starts with a garage," Janie says.
Hewlett and Packard's was a tinker's shed, a rustic hut that to this day whispers of science-fair projects and woodshop dreams. It's the epicenter of technology's sepia-tinged creation myth, the kind of place where you find a stone and brass monument naming it the "Birthplace of Silicon Valley."
The Tsaos' garage, on the other hand, sits on a cul-de-sac in the Woodbridge section of Irvine, Calif.--the preplanned heart of Orange County--and dominates a khaki-colored house that faces a park dotted with bolted-down picnic tables. Framed by brick columns and a basketball-hoop crown, the garage speaks of SUVs, recycling bins, and home repair. It is an unexceptional place: mass market, suburban, retail.
It is in this garage that, in 1988, Victor and Janie founded the company that would become Linksys, the computer peripheral company whose seven-year run on the Inc. 500 list culminated last spring with its purchase by Cisco Systems for $500 million. And if the Hewlett-Packard garage symbolizes the quintessence of an inventor's jolting inspiration, the Tsaos' garage signifies the other side of entrepreneurship, an immigrant story of hard work and calculated risks.
THE ENTREPRENEURIAL CLOCK
Two decades after emigrating from Taiwan, Janie and Victor Tsao have created, in Victor's words, a high-tech version of a "mom-and-pop Chinese restaurant," dividing the work in half and watching costs with the tight fist of someone who turns out the light on leaving a room.
They are both tall and straightforward and they are steeped in the minutiae of their company, even now with 300 employees. They are frugal but not cheap (until recently they drove a 12-year-old car, but it was a Mercedes) and they are willing to let their company permeate their life to an incredible degree. "We never set up any systems or boundaries, like not talking about work at dinner," says Victor.
Most important, they work hard and fast. They don't fancy themselves as inventors; they are popularizers of technology, which means any advantage they have in a price-slashing, commodity market that includes brutal competitors like NetGear and D-Link comes from making the right intuitive leaps, getting out new products a few weeks faster, keeping costs down, and negotiating tough.
Like not a few business owners before them, the Tsaos heard the entrepreneurial clock ticking: They were determined to be independent before they reached the age of 40. Victor was 37 and Janie was 35 when they decided to put to use their familiarity with Taiwan (where they'd met at Tamkang University). They were both working in information technology--Janie at Carter Hawley Hale and Victor at Taco Bell--and with Victor a step higher on the corporate ladder they decided that he would continue to punch the clock while Janie launched the business, a consultancy they named DEW International. The new company mated American technology vendors like Northgate Computer with Taiwanese manufacturers that could make their wares cheaply.
Soon, one of those manufacturers brought them an idea. At the time, the cables used to connect printers and PCs could extend only 15 feet before the data began to degrade. To solve this, the manufacturer invented a setup that used telephone wire to extend the reach to 100 feet. This company needed someone to market the thing in the U.S. "With companies like that," says Victor, "actual English was not their strength." The manufacturer came up with products that connected multiple PCs to multiple printers, and the Tsaos renamed their company Linksys. Victor quit his job in 1991, and within two years Linksys had moved twice, eventually to a 2,000-square-foot office, and each month was selling 8,000 Multishares, as those units were called, through tech catalogs like Black Box. In these early years, the Tsaos invested $7,000 in Linksys, the only capital the company required until it tapped a bank loan for the one and only time, in 2001. (They paid that loan off in less than six months.)
Linksys slowly expanded from printer-to-PC connectors to PC-to-PC Ethernet hubs, cards, and cords, gear that let small businesses and nerdy households connect computers so that they could share data. It was a niche market, and with 1994 revenue of $6.5 million the company was far from a behemoth. But slow growth was the only way the Tsaos could expand without taking on debt or investors. While Victor managed operations and finances as CEO, Janie handled sales in her job as vice president of business development. As Mike Wagner, the company's director of marketing, puts it, "Janie brings the money in, Victor keeps everyone from spending it."
Frugality and a focus on the future were obvious in the Tsaos early on. While taking M.B.A. classes at Pepperdine in the mid-'80s, Victor met Bob Klein, who recalls Victor telling him that someday he would move to Newport Coast, far tonier than Irvine. The Tsaos made that dream a reality in 1997. Klein and Victor's first business lunch occurred at the Japanese fast-food chain Yoshinoya--and they meet at comparable places to this day (though, Klein says, Victor has taken to picking up the check). Indeed, on the night the Cisco purchase was announced, there was no celebration. Instead, Victor ate a $5 dinner box at his desk. "It wasn't good at all," he admits.
With the birth of Linksys, Victor took to working 100 hours a week, with occasional naps on the office floor. He involved himself in every part of the business, dealing with U.S. operations during the day and Taiwanese manufacturers at night, and his employees still know him for his 3 a.m. e-mails. He drew no salary until the mid-'90s--he refers to the preceding years as the "Linksys Peace Corp" era--while the couple and their two boys got by on Janie's salary of $2,000 a month. Linksys operated with comparable leanness. Calvin Liu, a designer who Victor calls "Mr. Linksys Look and Feel," first worked for the company as a freelancer in 1991. As it still does, Linksys produced its own graphics. Liu would photograph the products, scan the photos, send them to the printer, and later glue the labels to the product boxes.
