San Francisco Chronicle
Written by Yu Ning
From China to Silicon Valley
Immigrants with get-up-and-go bring imagination, industry to new ventures

Despite the gamble, Imin Lee liked the odds when she left a high- level job at Cisco to start her own company in August 2002.

She and another Cisco employee wanted to develop a monitoring system to help foil attacks against corporate networks. With a solid business plan and backing from outside investors, the two quickly got their operations up and began shipping their product in October 2003.

The company, Protego Networks Inc., had grown to a staff of 40 and was generating $1 million a month in revenue when Cisco acquired it in February for $65 million.

Lee is among a large number of Chinese who came to this country in the 1990s to attend college and decided to live in the Bay Area, working in semiconductor, software and telecom companies in Silicon Valley.

Restless and ambitious, the more entrepreneurial in this group left their companies to start their own ventures, relying on their work experience, savings and outside investors.

China's growing economy also figures in the story. Increasingly, Chinese companies in Silicon Valley are turning to China to manufacture their goods cheaply as well as to sell their wares.

"More and more immigrant Chinese are becoming entrepreneurs because they are unique in their ability to develop businesses here and in China. They understand the needs and markets and have the local knowledge to build these businesses," said William Chen, president of the Asia American Multi- Technology Association, a Silicon Valley networking organization that promotes pan-Asia business relationships.

Lee and a colleague at Cisco, Partha Bhattacharya, quit their jobs and established Protego Networks at a risky time economically. Silicon Valley was in an economic downturn as companies were cutting their workforces. The two, though, felt they had a good chance of succeeding.

They had noticed from their network security work that attacks against corporate networks were on the rise and were going to be a growing problem. Sensing an opportunity, they came up with a network security monitoring system that would provide a company with all the information it would need to counter an attack.

Cisco acquired the company earlier this year and integrated it into its Security Technology Group. The two returned to Cisco after the sale.

For Yvonne Li, who came to the United States from Hong Kong in 1977, starting a company has meant a lot of hard work, patience and her own money.

She worked for two startups after getting a bachelor's degree in electrical engineering and additional computer science coursework from the University of Houston in 1985.

But it was in her job as a director of sales for Silicon Optix, a San Jose supplier of integrated circuits that process video and digital images, that she was inspired to get into the digital sign business.

She sensed the industry was growing rapidly from her daily contact with wholesale suppliers of digital displays and from the trade shows she attended that displayed the latest in digital sign technology.

More and more store owners were putting up flat TV screens to flash the latest price changes and promotions. In her research, however, Li found these new signs could be expensive, because new computer hardware and software had to be installed and someone had to be hired to handle the technical chores.

Li believed she had a cheaper, easier solution: a Web application that would allow store owners to create content for digital signs that they could display on monitors. The cost for the subscription service: $55 a month.

She and a Taiwanese friend have invested $500,000 in her company, ADurance Inc. The workload has eased since the early days when Li had to do everything herself. Now she has three part-time engineers and two business advisers to assist her. She is demonstrating her product to companies while waiting for patent approval.

Despite the risks that are inherent in any startup, Li is determined to forge ahead. "I don't have kids and don't have a family to support,'' she said. "If everything fails, I can go find another job.''

As Chinese companies in Silicon Valley grow, they are setting their sights on larger markets and bigger opportunities beyond the Bay Area. China's fast-growing economy has figured in their plans, both as a base to manufacture products cheaply and as a huge market for goods.

Spreadtrum Communications Inc., a Silicon Valley company that makes digital wireless chips and software for mobile phones, is a case in point.

The company has prospered producing chipsets that can process data faster for the range of uses of today's increasingly sophisticated cell phones, such as e-mail messages, text messages, photos and video games.

Established four years ago, the company has operations in Sunnyvale and Shanghai. The Sunnyvale office, which has 50 employees, designs chipsets for cell phones that are used around the world.

Ping Wu, the chief executive officer and one of four co-founders of the company, said the office also serves as a place to raise venture capital, maintain connections with global partners, employ experienced personnel and stay close to a significant center of cutting-edge technology.

Across the Pacific, the Shanghai operation, which employs 350 workers, also does design work, including work on a chipset for newer cell phones that can handle faster Internet connections, software development, marketing and customer support for its large Asian clientele. The company contracts out the production of the chipsets to a Taiwan company.

Wu said the Silicon Valley-China operation allows his company to lengthen work days to 20 hours by taking advantage of time differences. As a result, the company reduced the time it takes for product testing from six months to one month.

Spreadtrum, which ships 150,000 chips a month, had $15 million in revenue last year.

While China represents a big opportunity for companies like Wu's to cut product costs and reach a huge market, it has been a difficult place to tap for money. Wu and others have found it easier to get venture capital funding in Silicon Valley. Spreadtrum, for example, has raised $62 million in three rounds of financing.

China's booming economy also lured Wayne Dai, a former professor of computer engineering at UC Santa Cruz, to set up operations three years ago in Shanghai, where his company, VeriSilicon Holdings Co. Ltd., designs chips and monitors them as they go through the manufacturing, packaging and testing phases.

Dai said his company plays a valuable role in China's quest to produce more chips of its own. The country has to import 25 percent of its chips.

It's Dai's second startup. He co-founded Celestry Technologies, a chip- design software developer, before it was sold to Cadence Design Systems for $103 million in 2002.

VeriSilicon, a spin-off of Celestry Technologies, employs 140 workers in Shanghai and 10 each in Silicon Valley and Taiwan. The Silicon Valley office plays a key role in chip architecture and marketing, said Dai, the company's chairman, president and CEO.

The company, which has seen revenue jump from $1 million in 2003 to an estimated $20 million in 2005, has received $6.5 million in two rounds of venture capital funding and is close to completing a third round that will raise an additional $13 million.

Chen, the head of the Asia American Multi-Technology Association, sees companies like Spreadtrum and VeriSilicon as part of a growing trend for Silicon Valley companies that are establishing operations in Asia.

"Asia offers these companies more resources, cost advantages and market opportunities," he said. "The arrangement allows them to increase the pace of the delivery of their products, while taking advantage of lower production costs."

Chris Gill, president of the Silicon Valley Association of Startup Entrepreneurs, agreed. "Businesses are always going to look for ways to do things in a cost-effective way.

"Does that mean the demise of Silicon Valley? Absolutely not, Silicon Valley offers an environment unique in the world, with its universities, large companies, infrastructure and very capable and motivated people.''

Hong Chen, chairman and CEO of the Hina Group, an investment banking and private equity firm in Beijing and Palo Alto, noted that the environment for Chinese startups in Silicon Valley has improved in the past five years.

He said it's easier for them to get financing because VC firms are seeing more success stories and because of China's huge market potential.

Walden International, an international venture capital fund based in San Francisco with about $1.5 billion under management, has invested $150 million in Chinese startups in Silicon Valley. Lip-Bu Tan, the fund's chairman and founder, said most of the Chinese entrepreneurs are first-generation immigrants. "They work hard and are very aggressive,'' he said.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/06/26/BUG60DEJJT1.DTL&hw=william+chen&sn=001&sc=1000