Tag Archives: EPFL

What’s a start-up worth, or reflections on Facebook’s IPO fiasco

Here’s my 5th contribution to EPFL‘s “start-up of the month

When its IPO was announced last February, everyone agreed that Facebook was worth somewhere in the ballpark of $100 billion. Today, Facebook has lost 40% of its value – how is this possible?

Facebook a perdu plus de 40% de sa valeur

Facebook, unfortunately, isn’t an EPFL start-up, but the controversy surrounding its overvalued stock market debut (Initial Public Offering, or IPO) nonetheless provides a good opportunity to discuss the value of a start-up, in particular, spin-offs from EPFL laboratories.

A company’s value cannot truly be measured scientifically, even though there are techniques that try to do this via revenues and profits – Logitech and Swissquote, who have historical connections with EPFL, are measured like this. The law of supply and demand rules here: the value of a company is the product of the number of shares and the price per share. Companies listed on the stock exchange are thus hostages of the market and its moods.

When companies are not listed on the stock exchange, as is the case in the majority of start-ups, they can still be valued. Interested readers can learn more in the article “Equity Split in Start-ups.” When EPFL start-ups like Eelcee, Abionic, Aleva and Kandou (see previous articles) recently announced they were looking for financing, they were valued by their investors, even though there was no market in which to buy shares. Switzerland, however, provides some information via the registre du commerce (commerce registry) in which each start-up registers the change in its number of shares. From there, if you know the amount of money that has been raised, you can deduce the price per share and thus the value of the company. But I personally wouldn’t make the calculation, out of respect for the discretion desired by the entrepreneurs and the investors.

Again, value is just a subjective thing that depends on the good will of the investors. Facebook, like Google ten years ago, didn’t completely abide by Wall Street’s rules, by which a company agrees to be under-valued at its IPO so that the ensuing trading result in an upward curve. So far, it’s just simple speculation, and we’ll have to wait several years before we know whether or not Facebook’s IPO was a failure or not.

Our start-ups have a similar problem. I’ve known many entrepreneurs who prefer that their companies have the best possible value when they were looking for funding. They forget that the only real value is that which is created over the long term by their products or services, and that the value of a company is a very volatile thing, as Facebook just illustrated so well. Entrepreneurs tend to retain the lion’s share of their companies, even though by doing this they also seem to be ignoring Logitech founder Daniel Borel’s advice: “We prefer a little pie that we control completely to a big pie that we only control 10%, and this can be a limiting factor.”

I’m convinced (even though I’m often wrong) that Zuckerberg’s impact will be similar to Brin and Page’s. Here in Switzerland, I hope that local companies are created whose value is on a par with those of Daniel Borel, Mark Bürki and Paolo Buzzi.


Facebook Finally Files For $5B

Facebook data today



Equity split in start-ups

Eelcee and composites

Two million Swiss francs for an allergy-detecting device

Swiss register of corporations

Start-ups hiding six feet under

Here’s my 4th contribution to EPFL‘s “start-up of the month

03.06.12 – The fear of failure probably explains the absence of a “European Google”. Whereas, on the other side of the Atlantic, start-ups are born and die in full view of everyone, their counterparts in Europe hang on for dear life, sometimes even when it doesn’t make sense to do so.

The fourth start-up of the month doesn’t exist! At least not at EPFL, nor in Switzerland or in Europe. I mean those start-ups that fail. European start-ups are a real paradox. We often complain about not being able to create successes like Google, Apple or Facebook, but on the other hand we don’t have any big failures either! In his doctoral work published in 2011, Sven de Cleyn – a researcher specialized in technology transfer – demonstrates that less than 10% of European academic start-ups close down [1]. In a survey dating from 2008, ETHZ produced similar metrics, with an activity rate of 88% [2]. EPFL is therefore no exception to the rule.

In fact, this strange phenomenon can easily be explained. European start-ups focus on survival, to the point that Sven de Cleyn had to use this parameter to define success. Failure is so culturally stigmatized that it must be avoided, almost at all cost. This is one of the fundamental reasons behind the difficulties we experience. In the excellent film Something Ventured, the Californians, followers of a Manichean way – success or death – call start-ups the “living-dead”!

Yet, failure is far from being a bad thing – it is actually necessary. Who didn’t fall several times while learning to ski, roller-skate or simply ride a bike? How could we manage not to fail in the far more complex task which involves bringing a technology or innovative product on to the market? Schumpeter, the famous innovation economist, had created the concept of “creative destruction”, explaining that the new replaces the old, and that this is in fact a good thing. He used a striking image to illustrate this: “It’s not an owner of stage-coach lines who is going to build railways!”

In his famous speech at Stanford in 2005, Steve Jobs echoes this sentiment: “Remembering that I will soon be dead is the best tactic I have ever used to help me make the important choices in my life. Because almost everything – expectations, pride, fear of embarrassment or failure, all these things – evaporates in the presence of death, leaving only what really matters. Remembering that you are going to die is the best way I know of avoiding the trap of thinking that we have something to lose.”

So, you may say that that’s easier to say than to do! It’s certainly very difficult to bring up past failures or to cite examples, as entrepreneurs are reticent to confess such things. I could mention a few myself, but without having the consent of the people concerned. I could almost have called this article “Desperately Seeking Start-up Failures”!

It seems that start-ups, like the mythical thorn birds, look to hide away in a thorn bush and impale themselves. We never organize proper funerals for those who fail, but now FailCon has done away with this taboo. This one-day conference is aimed at technology entrepreneurs, investors, developers and designers. It’s dedicated to the study of their own and others’ failures, as a preparation for success. During the first event held in San Francisco in 2011, Vinod Khosla, the famous venture capitalist, admitted having more often failed than succeeded. Failure in not desirable, it’s just part of the system, and it’s high time we integrated it accordingly. When will there be a FailCon in Switzerland?

[1] Sven H. De Cleyn, The early development of academic spin-offs: holistic study on the survival of 185 European product-oriented ventures using a resource-based perspective.University of Antwerp, 2011
[2] Oskarsson I., Schläpfer A., The performance of Spin-off companies at the Swiss Federal Institute of Technology Zurich. ETH transfer 2008.

Edouard Bugnion at EPFL: back to Switzerland!

If you do not know Edouard Bugnion, you can read the article I had published in 2010, a Swiss in Silicon Valley. Edouard was at EPFL last week and gave a great technical talk about VMWare and virtualization, in fact a summary of his PhD thesis. The full text comes below.

Edouard Bugnion with the author in the middle of « cubicles » at Nuova in May 2006 (Picture: Mehdi Aminian).

For the anecdote, you can notice than Ed began his PhD in 1994 and will only finish it in 2012! As Martin Vetterli, dean of Computer Science at EPFL, said “at least he is finishing it, contrarily to the Yahoo or Google founders!”. The reason why it took Ed so much time is that he co-founded VMWare and Nuova in between… I have such a friend from Stanford who was doing his MS / early PhD in 1990-92 and obtained finally his diploma in 2004. He also had his start-up journey in the middle. (Faster though, Michael!) This back and forth adventures are not very common in Europe…

I noticed 2 other great lessons from Ed’s talk:
– as mentioned below “Virtual machines quickly lost popularity with the increased sophistication of operating systems” and it did not prevent VM to become a great market through VMWare success. Market dynamics are never simple and great opportunities may come from less explored areas of technology.
– Ed also explained that they did not or could not partner with established players (microprocessors or OS vendors) for various reasons. You can imagine the big players did not care, or would not change / adapt their (strategic) products or features. So when Ed was asked if this was not risky, he answered, risk is (sometimes) good.

Once again, this proves first that SV success comes also from immigrants and second, we need these people and their experience back! Hopefully we will have him at our ventureideas conferences. Invitation launched!

EPFL IC Seminar : “Using Virtual Machines in Modern Computing Environments with Limited Architectural Support”
By Edouard Bugnion, Stanford University

Virtualization has gone through a full “popularity cycle”. Originally conceived in the mainframe era, virtual machines provided an efficient, isolated, and compatible duplicate of the hardware of the underlying machine. Virtual machines quickly lost popularity with the increased sophistication of operating systems, and subsequent processor architectures were designed without consideration for virtualization.

In this talk, I propose to use virtual machines to address limitations of commodity operating systems on modern architectures, even in the absence of architectural support for virtualization in the hardware. The primary technical contributions of the work were developed as part of two systems, each built for platforms with limited architectural support for virtualization. First, Disco ran commodity operating systems on scalable MIPS multiprocessors. Disco enabled virtual machines to form a virtual cluster that could transparently share the resources of the underlying multiprocessor. Second, VMware Workstation is a successful commercial product that allows multiple, unmodified operating systems to run concurrently on the same x86 system, allowing users to decouple their guest operating systems from the underlying hardware. VMware Workstation was the first 32-bit virtual machine monitor for the x86 architecture, and demonstrated that the x86 architecture was indeed virtualizable, despite a lack of architectural support.

Today, and in part because of the impact of Disco and VMware, virtual machines once again play a foundational role in Information Technology, and current-generation hardware provides architectural support for virtualization, similar to what already existed decades ago on mainframes.

Edouard Bugnion started his Ph.D. at Stanford in 1994, and is expecting to finish it this month. In the meantime, he co-founded two successful companies: VMware and Nuova Systems (acquired by Cisco). At VMware from 1998 until 2005, he served multiple roles including CTO. At Nuova/Cisco from 2005 until 2011, he built the core software team and became the VP/CTO of Cisco’s Server, Access, and Virtualization Technology Group, a group that brought to market Cisco’s Unified Computing System platform for virtualized datacenters.

His research interests include computer systems, datacenter and cloud networking, as well as technology entrepreneurship. For their work, Bugnion and his colleagues have received the ACM Software System Award (for VMware) and the ACM SIGOPS Hall of Fame Award (for Disco). Edouard was raised in Neuchatel, Geneva, and graduated from ETHZ.

Start-Up of the Month: Kandou and the Investors

Here is my new “Start-Up of the Month” chronicle, published by EPFL.

22.04.12 – Which investors trusted their money with Kandou? This startup, active in the high-tech domain, knows how to find financing.

In November 2010, EPFL celebrated its thousandth invention. I’ve extracted a passage from an article published on this occasion: “Kandou, invented by Harm Cronie and Amin Shokrollahi of EPFL’s Laboratory of Algorithms, enables processors to communicate with their peripherals (memory, printers or screens) faster while using less energy. A small revolution in the field of computer science, but which comes from mathematics!”. In March 2012, the start-up resulting from this invention announced that it had raised 10 million dollars. Some news (or rather an absence of news!) which is intriguing: this young company has very little to say about its investors. “They are private investors, not institutions or industrial concerns”, explained Harm Cronie briefly in the newspaper Le Temps. Even more surprising, this first raising of funds has already ushered in a second, which is already being organized. “I can’t say any more about this at the moment, as we are currently discussing with the investors,” he concludes.

This is not the first such venture for Amin Shokrollahi. Digital Fountain was sold to Qualcomm in 2009 – since 1998 it had raised over 50 million dollars. The start-up had support from Cisco, Sony and TI, but also trust funds such as Matrix and Granite. With Kandou, he has changed his strategy. He knows that institutional investors have constraints which force the entrepreneur to have a more mature strategy than with private investors, whereas business angels can act out of passion, and are not accountable to their own lenders.

As I mentioned in the introduction to these columns: you have to think global. For Kandou, the first partners may be called IBM or Intel. If an innovation is solid enough, clients can be located anywhere (unfortunately, however, rarely in Europe when it comes to high-tech). However, it took nearly 18 months to move forward to this acceleration phase. Kandou knew how to use the richness of the eco-system; including the EPFL spin fund, which is similar to Innogrants, venturekick or FIT. Giving birth is not instantaneous – experience shows that you need between 1 and 3 years.

Amin Shokrollahi and Harm Cronie

Moreover, Amin is not on his own: there is also Harm Cronie, co-founder and former student. The professor-student pair is one of the most conventional. It’s certainly not the most common – the partnership made up of two young entrepreneurs is probably the most-well known type (at least in the United States with Google, Yahoo, eBay, etc.). But perhaps we are forgetting that Netscape was founded by Marc Andreessen and Jim Clark, professor at Stanford and also founder of Silicon Graphics. In addition, Amin has been able to benefit from the advice of his mentor, Steve Papa. The latter founded Endeca, an American success story, which was sold to Oracle in October 2011 for over 1 billion dollars. Mentors are essential to entrepreneurs, as the latter are often isolated and must take critical decisions from the very first days of the start-up’s existence. Friendly and experienced advice is therefore very welcome. Thus, Steve Jobs could rely on Bob Noyce, the founder of Intel, during his first years as an entrepreneur.

Kandou prepared the ground to be born under a lucky star. A breakthrough technology responding to a market-driven demand, a friendly eco-system, a very talented team and investors prepared to support ambitious growth. All the necessary ingredients are there!

Of Start-ups and Men

Second contribution to the EPFL “start-up of the month”: after venture capital with Aleva, I focus on the team with SWISSto12.

12.03.12 – A killer product is not the only key to success for a young start-up. Even in the high-tech sector, the human-factor can be vital, and the founders of SWISSto12 know just how to use this to their advantage

Emile de Rijk, Alessandro Macor founders of SWISSto12

SWISSto12 is the ideal model of a “starting” start-up company. It has all the essential (and sometimes counterintuitive) ingredients for success. A critical factor for a good start is the trust and transparent dealings between the individuals making up the original team. The two founders, Emile de Rijk and Alessandro Macor, may not have the experience you (wrongly) think they need, but their dedication will move mountains. They have invented a Terahertz Signal Transmission technology and, because this answers hitherto unsolved problems, SWISSto12 had a client even before it was established! An opportunity arose, and the two scientists made the most of it. More importantly, their innovation may open up new markets no-one had even thought of – such is the beauty of high-tech, with all its uncertainties. No need for a business plan at this stage: what matters is having a vision and finding the right people to make up the best possible team – which is the subject of this note.

First of all, I strongly advise not to embark on such an adventure alone. Professor Ansermet of the Laboratory of the Physics of Nanostructured Materials was impressed by the enthusiasm displayed by the two young scientists and provides friendly support. This is an absolute must.

EFPL backed up this support with its Technology Transfer Office, which helped to patent the technology and grant an exclusive licence to SWISSto12. (If I may make a brief digression here, one often sees entrepreneurs frustrated at the difficulty in negotiating IP rights. Although the perception is rather negative here, exceptions [such as the Bose adventure at MIT] should not obscure a much more transparent reality).

This start-up made the most of all the local support mechanisms: coaching at the PSE, Innogrant, VentureKick, CTI, and I probably forget others as the EPFL ecosystem is so efficient – to the point that this may even be dangerous if you rely solely on these support mechanisms.

SWISSto12 also secured an outstanding mentor in Valtronic founder Georges Rochat, who I recently found out has lived in Silicon Valley and knows the environment inside out. He not only contributes his own experience, but also a network and credibility which are key to the start-up’s development.

When the time came to recruit staff, things became tricky. After the exhilarating first few days, the new team realised that some dynamics were incompatible with a start-up’s culture where everyone lends a hand and “reporting structure” is considered a rather rude expression. A painful, but unavoidable decision was made to separate on good terms. In a start-up company, the main reason for failure is the human factor, much more than the technology, product or market.

I shared the idea of this column with Emile de Rijk, who said that you must “play out in the open and be honest with your partners to as to create win-win situations”. SWISSto12 is about to look for investors and the company’s potential should make it possible to realise these ambitions. I spoke of success criteria earlier. Naturally, there is no guarantee of this and entrepreneurship is always a careful balance regardless of a company’s size, and even more so in the case of a start-up. Still, in my opinion the founders’ passion and enthusiasm, combined with their ambition and lots of good sense, have definitely put them on the right track!

Venture ideas

I usually do not mention my activity at EPFL in this blog, but here is an exception. This week, I organized with venturelab the 10th edition of ventureideas, a conference where we invite entrepreneurs to share their experience. All the venture ideas @ EPFL can be found with the link on the name.

This week we had Rich Riley, Senior VP, Yahoo and Paul Sevinç, founder of Doodle and their talks can be viewed below. I am very proud of these events and of all the guests we had in the past. Let me just give you a few names:
– Pierre Chappaz, founder of Kelkoo
– Eric Favre, inventor of Nespresso
– Aart de Geus, founder and CEO of Synopsys
– Daniel Rosselat, founder of Paleo
– Marc Burki, founder of Swissquote
– Neil Rimer, GP of Index Ventures…