Wednesday, July 13, 2005

High Tech Start Up in Cebu City

My blog post about Level 5 Leadership elicited a great sharing from Lawrence Hughes of InfoWeapons ( He shared how the book "High Tech Start Up," (HTSU) written by John Nesheim benefited his companies.

Lawrence patterned CipherTrust (CT), based in the US, after the template for a Silicon Valley style company found in HTSU, now in second edition. CT grew 3200% in the first 4 years (based on market capitalization - 0.15 to 4.87 per share).

Today, Lawrence is based in Cebu City and started a software development company a few years back - InfoWeapons (IWC). He used HTSU again in creating IWC and it's working again. According to Lawrence, "We just got validation of our technology and market direction by demoing our secure DNS appliance to a big company in Washington DC (company name deliberately removed for confidentiality). They loved every aspect of it and ordered the first two high-end units."

"This may be a first in terms of a world class product being created from scratch in the Philippines and getting that kind of sale. The guy in charge there said it was amazing that the two most innovative companies in IPv6 were both small, and neither was US based."

HTSU was written after Nesheim interviewed folks at 17 of the most successful Silicon Valley companies, for all the details of how they started, their funding, their stock plans, compensation plans, marketing plans, etc. It's all laid out there in the book. "The magic of Silicon Valley (SV) was not the real estate, or being in California. It was the new and remarkably powerful business model. That model works in Atlanta (CipherTrust) and appears to be working just as well in Cebu for IWC," Lawrence explained.

"One of the key aspects of that model is the aggressive Incentive Stock Options for employees. That leads to unprecedented loyalty and motivation. You give up 10% of the company to the employees, but the size of the pie is about 10 times larger. All employees (not just top management) become co-owners, and stand to profit more than with any other model. That's what made it possible for me to help launch CipherTrust."

"There are other aspects of the SV model, but that one alone is enough to make an enormous difference. We had a lot of fun getting our ISOs through the Philippines SEC. Every Friday evening, the group does a week end review. I'll lay odds you've never seen anything like it unless you've visited real SV companies.

I really do want for others in Philippines to emulate what we're doing. IWC is a proof by existence that it can be done here, given capital."

Nesheim has just released a new book, essential to anyone pursuing venture capital, called "The Power of Unfair Advantage - How to Create It, Build It and Use It to Maximum Effect". Lawrence said that this is as good as HTSU.

For newbies, he also recommends Hernando Desoto's "The Mystery of Capital," to understand the problems capitalism faces here, and exactly what to do about it. The book author spent years in Manila exploring exactly what the problems were. He is an award winning economist from Peru (just happens to be named after the famous Spanish Explorer).