Esprit names Sitera entrepreneur of the year

LONGMONT – It all started with a vision. It became a business worth $750 million and worthy of Esprit 2000’s Entrepreneur of the Year Award.

At the Esprit awards dinner on Oct. 26, Flannery, Stephen Sheafor and Cindy Lindsay, the three co-founders of Sitera, will be recognized with the event’s top honor.

“When we started the company, we had a very clear vision of where we wanted to take the technology and the business,´ said Lindsay, director of business alliances for Sitera and Sheafor’s wife. “What’s happened is well beyond anything I ever envisioned.”

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After four years of building its status in the market for network processors, Sitera was sold to Camarillo, Calif.-based Vitesse Semiconductor Corp. in a stock acquisition valued at $750 million.

“Vitesse had been expanding at about 50 percent to 60 percent per year in terms of revenue growth and was looking for new markets,´ said Wade Appelman, vice president of marketing at Sitera. “Sitera was developing network processors that were fast enough and flexible enough to be used in a wide range of applications. So the technology that Sitera had developed was extremely important to a company like Vitesse, because it allowed them to expand into new markets and continue that growth rate.”

In addition to the large payout to investors and founders, the advantages of joining a large corporation like Vitesse were mutually beneficial for Sitera, which now has roughly 80 employees at its Longmont facility. “This market is still very much an infant market. The reason we joined Vitesse was to continue our success in this market,” Flannery said.

How these three co-founders made what they envisioned into a reality is a story in itself. In 1996, Flannery, Sheafor and Lindsay were all employed in Silicon Valley. Then they hatched a plan. With the new upswing in technology, particularly e-business, the three pioneers saw an opening that they were more than willing to pry.

“There was this new opportunity. Only we decided rather than do it in Silicon Valley, let’s come out and see if we can do it in Boulder County,” Flannery said.

After meticulous planning, the trio agreed that business matters aside, Boulder County offered the infrastructure, technical support and cultural loyalty that they felt were absolute necessities to building a long-term company. So in the fall of ’96, they set out to carve their niche.

“Steve (Flannery) was in charge of doing finance; Sheafor was in charge of the technology; and Cindy ran everything else,” Appelman joked.

Sitera was incorporated and soon after the trio began looking at “building high- performance, systemized chips for either the graphics market or the networks market.” That’s when they struck intellectual gold.

“We continued working with the customer base during most of ’97, developing some of our technology. This was when the lightbulb went on,” Flannery said.

The trio discovered that the real opportunity was in network space, a new set of technology that Flannery said would drive the whole Internet evolution and revolution.

Armed with this knowledge, Flannery & Co. set their business plan in place in 1998. The group would develop a set of products that they called a network processor.

The idea was quite a novelty at the time. Appelman compared it to the evolution of the central processor (CPU) that Intel developed. “Fifteen, 20 years ago, all these companies were developing their own proprietary chips and proprietary software for their minicomputers,” he said. Then Intel developed a standard processor or CPU that was compatible with the product lines of multiple companies. Later, Microsoft wrote standard software, which led to the creation of the PC market, Appelman said.

The genius behind this development was that it no longer forced companies to pour all their sweat, blood and tears into creating their own set of chips, switches and routers. They could devote time to other, more meaningful and profitable endeavors. Sitera was eyeing a similar evolution for the network processor, creating a generic set of switches and routers that are used today in high-performance Internet applications.

“The real paradigm shift was being able to use processor technology at the speeds we’re talking about with the Internet,” Flannery said.

Then the wheels started turning, only at a much faster speed than the trio could have imagined. Thanks to the deep pockets of several investors, including venture capital giants Interwest partners and Matrix partners, Sitera was able to raise its first round of funding, totaling $10 million in 1998. And that was only the half of it. By the middle of 1999, Sitera received a second round of funding, nearing $14 million.

“Luckily, we were able to get some major customers to back us,” Flannery said. “So we developed our technology in those two years.”

The next step was to take the product from this embryonic stage to the marketplace. Despite its infancy, Flannery said the market for network processors is exploding. “We really looked at what we needed to win this game, and, basically, we thought it would be very wise to hook up with another semiconductor company that had a great distance channel in this area and also had complimentary products.”

The goal, Flannery said, is to be the dominant player in the network processor market.

Of winning the Esprit award, Flannery said, “It’s a thrill, for one, to have even come to this community. But to be able to give back to the community in the sense of being convened to grow, employing new people, and being able to contribute to some of the business organizations in the area. It’s just a real thrill. I was surprised.”

Added Lindsay, “We were slide wear when we first started, trying to convince people that we had good ideas and could actually execute them. And when you have nothing, that’s really quite a challenge.”