Entrepreneurs and venture capitalists in Silicon Valley may be pressed by the economic climate, but at least one Valley legend has made his reputation -- and a sizeable fortune -- by zigging when everyone else is zagging. And it looks as though he is doing it again.
Andy Bechtolsheim, a co-founder of Sun Microsystems Inc. (Nasdaq: JAVA) and an early investor in Google (Nasdaq: GOOG), is once again putting his large brain to work on the hardware that makes the Web run.
Bechtolsheim has just announced that he is leaving Sun -- where he has been chief systems architect ever since the company bought his last startup in 2004 -- to focus on an Ethernet hardware maker known as Arista Networks Inc. The company's main product is a 10-Gigabit switch, which puts it in direct competition with networking-equipment giant Cisco Systems Inc. (Nasdaq: CSCO), as well as a couple of smaller players.
If you're going to go up against a company like Cisco, it helps to have someone who knows the opponent on your side. Arista has just that: The company's new CEO is Jayshree Ullal, the former head of Cisco's corporate data center unit and an engineer with a background in highspeed Ethernet switches. (She wrote about her new job here.)
The company's new chief scientist is Stanford University computer-science professor David Cheriton, who has been involved in two previous startups with Bechtolsheim and was also an early backer of Google.
According to a report in The New York Times, Cheriton and Bechtolsheim are financing the company themselves -- which probably isn't surprising, considering each has a net worth that is estimated in the billions.
Cheriton, a Canadian, helped to connect Google founders Larry Page and Sergey Brin with the venture capitalists at Kleiner Perkins Caufield & Byers , while Bechtolsheim provided the very first $100,000 angel investment to Google, at a time when the company was still based in a garage and hadn't even been legally incorporated.
Bechtolsheim and Cheriton co-founded two other networking equipment companies that were later acquired: Gigabit Ethernet company Granite Systems was bought by Cisco for $220 million in 1996, and Kealia was acquired by Sun in 2004 for an undisclosed sum.
Although Arista is a hardware maker, Bechtolsheim has said the company has an edge over other high-speed networking equipment providers in the software that runs the switch. The Sun co-founder says too many switches use what amounts to slow, outdated software routines that don't take advantage of the speeds available within a network. He says they also don't allow for rapid prototyping and customization the way most Web-programming software does.
Arista touts its systems as more easily updatable, and the firm says it will even offer users a form of open API that will allow them to add their own features. Arista is also reportedly aiming to price its wares lower than its competitors.
As venture capitalists and investors of all kinds question the benefits of pure Web 2.0 services -- the ones that have managed to survive until now despite a lack of a revenue model, based on the "build it and they will come" philosophy -- it's likely that many of them will turn toward solutions that are rooted in hardware, as Arista's is. The benefits of a faster switch are not only more tangible, but more immediately obvious for companies that spend millions on their networks.
As usual, Andy Bechtolsheim is ahead of the curve.
Written by Mathew Ingram