As long as there has been a U.S. floppy disk-drive industry, Jim Adkisson has been part of it. Unfortunately, he's had less and less to be part of, as Japanese manufacturers have come to control about 90% of the market. But Adkisson believes the tide is about to turn, and he plans to help turn it with his new company, Insite Peripherals Inc., in Santa Clara, Calif.

Insite is a species of business once thought extinct. With more than $5 million in venture capital, it is the first VC-backed floppy disk-drive start-up in six years. Along with privately funded Brier Technology Inc., in nearby San Jose, it represents America's best hope for regaining momentum in a Japanese-dominated industry.

The hope depends largely on the ability of Insite, and Brier, to leverage classic entrepreneurial strengths: innovation and flexibility. Under Japanese domination, notes Adkisson, change has been relatively slow in the floppy disk industry. Between 1980 and 1987, for example, the storage capacity of floppy disks merely doubled (from about 1 megabyte to 2). Meanwhile, the hard-disk industry, dominated by entrepreneurial U.S. companies, has increased storage capacity more than 70-fold (from 5 megabytes to as much as 380). "The Japanese drive production, but not innovation," says Adkisson.

Lack of innovation has led to a performance gap. Floppies, he points out, have become increasingly inadequate for backing up files and booting up software programs, some of which now require 20 or more diskettes for loading onto a hard drive. Hence the opportunity for any company that can develop an inexpensive floppy disk drive with high storage capacity.

Insite is one of the early contenders. This year, it will begin producing a 20-megabyte floppy disk drive, using a patented Floptical technology that combines optical and magnetic recording capabilities. Then comes the challenge of winning back market share.

-- Joel Kotkin

Published on: Sep 1, 1988