How To Defend Your Dream Against All Odds: Alex Bouzari, CEO of DataDirect Networks (Part 2)

Sramana: What did you do after you completed your master’s studies?

Alex Bouzari: After a year there I was starting to explore my PhD, and at the same time I really wanted to get a company going. A friend from Caltech was involved in helping some technology companies get established in the U.S. and introduced me to a VC-funded company that was doing handwriting recognition in the mid-1980s. The CEO ran into some issues with the VCs, so the VCs pulled the plug.

We saw an opportunity to get involved with that company, so we approached one of the investors of the company and proposed that he give us a few hundred thousand dollars to get things going. He agreed, so we trimmed down the size of the company, migrated some of the engineers from Europe to the U.S., and started a marketing campaign in Macworld and MacWEEK. The ad we put in Macworld had the highest return of any ad they had ever had. We ended up running the business to the break-even point and licensing the technology.

Sramana: What did the product that you advertised do?

Alex Bouzari: The product was a piece of software that recognized handwriting. The concept was that a user would combine it with a tablet or digitizer for occasions like filling out forms on a digitizer. That is similar to what the UPS guy does today. We had the precursor to that technology. It was extremely appealing and sexy. Everybody loved it, but it was ahead of its time, which meant we were not generating a lot of revenue. Fortunately, we did not have a lot of expenses.

We did learn a good lesson from that experience. Just because something is cool, sexy, and interesting you should not assume that it will translate into a profitable company. That was our first lesson of entrepreneurship. We went to Sand Hill Road and tried to raise money. We were very young, and we had illusions that people would just give us money because our product was so cool. We realized very quickly that VCs don’t think that way. The best offer we had was somebody who liked our passion and intelligence enough that he was willing to put a million dollars into the company, but he wanted complete control. Back then, the thought of giving control away was something that we could not consider. We declined and tried to do it on our own and ended up licensing the technology, which made us a few dollars.

When it came time to start the next company, our main focus was starting a company with real applicability. We wanted it to be something that had growth opportunity. This was in 1988, and we started looking around and found Tandon. They had just released a removable hard drive, which we thought was neat, but they targeted the home office market. We realized that perhaps there was an application there but from the security aspect instead of the work at home aspect. We figured companies would be interested in being able to lock up their data in a safe, which would appeal to the defense and government market.

We put a prototype together. It was a plastic shell with a hard drive in it. We then got a booth at a government trade show and pitched our concept. The show was in D.C., and lo and behold, we had all these guys coming from the Army and Navy who thought the concept was very interesting.

Sramana: Why did they find the concept so interesting?

Alex Bouzari: We were pitching the ability to take confidential or sensitive data and lock it in a safe where it could not be accessed or tampered with. They really liked that notion. We did our show in 1988 and walked away from that show with a bunch of orders. We had to figure out what to do with a bunch of orders when we did not even have a real product! Fortunately, these were government customers so they did not operate at the speed of light. They were very patient when it came to receiving the product. We scrambled and hired some engineers. We developed the software interface to make the product operable and had an offering six months later. That was the beginning of Mega Drive Systems.

This segment is part 2 in the series : How To Defend Your Dream Against All Odds: Alex Bouzari, CEO of DataDirect Networks
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