Serial Entrepreneurship in Pittsburgh: Ron Bianchini’s Amazing Journey (Part 3)

Sramana Mitra: So this is the story of your first company. What happens next?

Ron Bianchini: I stayed at FORE for about four years. In three years’ time, we were acquired by Marconi Communications. They acquired us and I stayed there another year. In 2000, I left. Having been a professor in the past, intellectual distance between the companies was very important to me. Scalable was a networking company. A year after the acquisition, I and a couple of other FORE colleagues got together and started a company in file systems. My next company was called Spinnaker Networks and we started that in January of 2000.

Sramana Mitra: One little detail in the first company, did you raise money to do that?

Ron Bianchini: Yes. This is a really good point of fact. For my first company, we went to VCs and basically, they saw two babes in the woods or rather two professors with a really cool patent who had never developed a product or built a company. For the first company, we raised our first and only round. It was a $2 million raised on a $4 million pre. For $2 million, they got a third of the company.

The interesting thing is that when we raised money for Spinnaker Networks, it was exactly 10 times that. We raised $20 million on a $40 million pre. Our experience really helped us when we started Spinnaker. We just had a much stronger background as a management team.

Sramana Mitra: At that time in Pittsburgh, all this was viable? You were able to raise $2 million for the previous company and then $20 million for Spinnaker?

Ron Bianchini: That’s a good question. For the first company, we talked to East Coast and West Coast VCs. Then, we talked to a Pittsburgh VC called Adams Capital. We got term sheets from a number of funds and most of them asked us to move after we got to a certain stage. But people at Adams Capital didn’t. They said, “Here’s your money. We’d love to see you do this in Pittsburgh.” That was local money.

When we did Spinnaker, we raised money from our Series A which was led by two Silicon Valley firms, Menlo Ventures and Norwest Venture Partners. They co-led our Series A. They invested in us from Silicon Valley.

Sramana Mitra: I think part of it is you had already done one project that had a reasonable exit. That generally gives people a lot of confidence that you know, at least somewhat, about what you’re doing.

Ron Bianchini: You’re asking some very good questions. Once people invest in you, you get invited to their annual partners meeting. Every once in a while, you’re asked to present. I went to the Menlo Venture partner meeting and John Jarve introduced me. It was perfect. I had talked to him back in the Scalable days. He was one of the people who said, “Eventually, we’re going to have to get you out here.” At Spinnaker, while introducing me he said, “The next company I’m going to introduce is Spinnaker networks. We invested in them because they’re 100% located in Pittsburgh. Pittsburgh is where you go if you want to do data storage and file systems.” In about a four or five year time period, his opinion about Pittsburgh changed quite dramatically. He was actually correct.

When I was a professor at CMU, I learned about the working of the National Science Foundation (NSF). A lot of what they do is put little bits of their money everywhere. They choose the best of the breed. The other things that they do to try and create a networking effect is to give extra money just to one university because they feel that it attracts people and when people talk, the whole is greater than the sum of its parts.

When I was a professor, we competed for an NSF Center of Excellence in Data Storage. We competed against Berkeley, MIT, and Stanford. Carnegie Mellon won it. At CMU, they have the Data Storage Systems Center and all these distributed and file systems programs going on. A lot of that was before the NSF but a lot of it happened because of that Center of Excellence. The way Jarve introduced me, it was recognizing that Pittsburgh had become well-known for data storage.

This segment is part 3 in the series : Serial Entrepreneurship in Pittsburgh: Ron Bianchini’s Amazing Journey
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