Q&A With Wireless Entrepreneur Hiep Pham on San Diego’s Changing Startup Landscape
When I met recently with San Diego entrepreneur Hiep Pham to talk about his latest startup, a Web-based restaurant marketing tool called TipCity, I was reminded that this area was once a healthy hotbed for networking and telecommunications startups.
I later wondered if Pham had any insights into the climate for tech startups in San Diego, and he agreed to a Q&A I’ve published below. But first a little background:
Pham told me he had been working in satellite-based communications at Hughes Network Systems in 1995, when he was recruited by Japan’s Uniden Corp. to start a wireless R&D Center. “They asked me to go to San Jose or Dallas,” he recalled. “I said that the center of wireless R&D was San Diego, and that’s where they needed to be.”
Pham, who is now 53, seems like an archetypal American entrepreneur to me. He says he grew up in a family of 13 kids in Dalat, a mountainous region in Vietnam, and spoke English as a foreign language. He got a scholarship to study electrical engineering at McGill University in Montreal, Canada, and remembers working two jobs to stay in school. He also remembers feeling so tired that he often fell asleep while riding the bus on his way home.
“Most of my brothers also left [Vietnam], either by boat or by walking across the border,” Pham says. “My family owns about 30 restaurants now in Canada.” Pham says
Pham says he also owned a restaurant in Canada to help to support his brothers as they arrived from VietNam. He later transferred ownership to them and left to continue his engineering career in the U.S. “Working and owning a restaurant gave me a great understanding of the challenges and problems of the business, which helps to formulate the idea of TipCity,” he says.
Pham counts the Uniden R&D center in San Diego as his first startup. Three years later, in 1998, he left Uniden to start his own company, Widcomm, a San Diego telecom startup that became the leading global provider of Bluetooth software. In 2002, after four years as Widcomm’s founding CEO, Pham was named as Ernst & Young’s San Diego telecom entrepreneur of the year. And on April 19, 2004, Irvine, CA-based Broadcom (NASDAQ: BRCM acquired Widcomm in an all-stock deal that was valued at $49 million at the time.
Later that month, the MoneyTree report on venture capital investments for the first quarter of 2004 showed that San Diego’s LightPoint Communications got $17 million in venture capital and Astute Networks took in $15 million. Yet even then, venture funding for local networking and telecommunications startups was receding. Of the $284 million that went to 27 companies during the first three months of 2004, MoneyTree reported $193 million in funding for life sciences startups, or 68 percent of the total.
Fast-forward to the second quarter of 2010. The MoneyTree report released last weekend shows that funding for life sciences startups amounted to almost $143 million—or nearly 84 percent—of the $170.6 million that VCs invested in local startups.
So what happened? Here’s our Q&A with Pham:
Xconomy: Do you see companies like Uniden establishing wireless R&D centers in San Diego now?
Hiep Pham: I do not see that a company like Uniden [would] establish wireless R&D in San Diego now, as they can find high-quality engineers in China and India with much lower costs and closer to its home base. Fifteen years ago the capability of China and India to develop new technology was very low; however, their engineering capabilities have improved significantly in the last few years. As a result, they can develop almost all of the standard products today.
X: Is San Diego still considered a hub for wireless innovation?
HP: Yes, because of Qualcomm and its CDMA technology. However, beyond Qualcomm and its related technology applications, there are very limited numbers of other wireless technologies [being] developed here.
X: San Diego also had a number of companies developing networking technologies in the mid-1990s to about 2000. What happened?
HP: During that period, networking companies had significant potentials and values (IPOs or acquisitions). Many wireless high-capacity networking companies started in San Diego and were well-funded. However, the 2001 stock market crash pulled down the values of those companies. On top of this, there was lower demand for high-capacity bandwidth, with too many competitors providing solutions, resulting in lower revenues and which resulted in the companies being shut down or acquired by others.
Qualcomm’s CDMA is still one of the key technology for mobile and broadband communication. CDMA-related applications in health care or energy control is getting more traction but their markets are still small.
X: You mentioned that the startups in this sector are now in China… Why? And are American entrepreneurs also establishing startups in China?
HP: In the last 10 years, Chinese consumers can afford to spend more, and that has enabled China’s market to expand quickly. As a result, we see a number of startups moving to China to take advantage of the easier funding opportunities and the huge market potential. At the same time, many Chinese-Americans are return to their homeland possessing vast knowledge of technology, products, and marketing. The Chinese government also provides many incentives and funding to help these entrepreneurs build local companies and generate products to compete with the U.S. (Due to the complexity of the culture and language, not too many “American” entrepreneurs establish startups in China.)
X: What advantages or strong points does San Diego still have as a center for tech startups and technology innovation?
HP: The last 20 years have helped to create many entrepreneurs in San Diego, and most of them do not want to move. Having Qualcomm in the neighborhood is an advantage. That has helped build a bridge to new products with CDMA technology and access to many talented engineers with CDMA background. There is also a large pool of biotech companies and these also have helped to create new emerging “wireless health” companies. But the lack of local funding is a challenge for many startups. Without funding, it is not easy to recruit talented employees. For the last three years, [exits for startups through] stock market IPOs and [mergers and acquisitions] have been at the low end. This makes it challenging for venture capitalists to raise their funds. Lacking sufficient investors results in limited funds available for entrepreneurs.
X: Can you offer any suggestions, or identify any areas that San Diego could address to build up its tech sector?
HP: Fifteen years ago there were a number of wireless technologies [created to] enhance our lives: cellular technology, like CDMA, for mobility; Wi-Fi for wireless access to the Internet; Bluetooth for cordless connection. These technologies had been developed and enabled mass markets. Moving forward, the market demand is now [focused] more on the applications on top of these technologies, such as healthcare, transportation, and energy control. There are only a few companies in San Diego working in these spaces. Applications of a combination of wireless technology (CDMA, Wi-Fi, Bluetooth, Zigbee) and biotechnology or energy control are the areas that would need more innovation and would have significant potential in the future.