Graduate builds fortune from investments

By Steven Poland
Staff Writer

He has founded six companies — three of which were bought by bigger companies and another which is valued at $5 billion.

He holds 50 U.S. patents and has approximately 20 patents pending.

He received a B.S. degree in mathematics from Purdue University and a Ph.D. in computer science from Stanford University.

And now Mike Farmwald will collaborate with Benchmark Capital, a venture capital firm that has invested in companies like eBay, Ariba, Handspring and Red Hat Software.

Farmwald was named a venture partner for Benchmark. "Benchmark and I have had a close relationship for years. Five out of my six start-ups were financed in part by Benchmark. The ‘venture partner’ title formalizes our relationship of working together on deals," said Farmwald.

Farmwald also runs his own venture capital firm, Skymoon Ventures, which he funded with $100 million out of his own pocket.

"We co-invest in a lot of things," said Farmwald.

As a recognized expert in semiconductors, systems and networking technologies and markets, Farmwald is best known for co-founding Rambus Inc., a developer of scalable chip technologies that enable semiconductor memory devices to keep pace with faster generations of processors and controllers.

After founding Rambus in 1990, Farmwald served as vice president and chief scientist, overseeing the development of several key innovations.

"Mike is one of those rare individuals who possesses truly deep technical knowledge as well as a keen sense of market insight and vision," said Bruce Dunlevie, general partner at Benchmark Capital.

In addition to Farmwald's successful start-up companies, he was also an associate professor of electrical and computer engineering at the University of Illinois.

Farmwald said he is into venture capital for the amusement. He likes technology and he likes ideas. "I invest in things based on how technically interesting they are and by how much I think it could make. But it really does need a compelling technical idea for me to get involved."

Also, Farmwald invests in people. "Most real-time (venture capitalists) invest in people. They want a good idea — don’t get me wrong, but a lot of people look at someone’s track record."

In order to get heard by a venture capitalist, Farmwald stresses the need to be referred to them by someone they know. "You need to find a contact at the (venture capital) firms. Most of the (business) plans that come unsolicited to us we don’t really look at."

He confesses that he’s never actually created a full business plan. "I usually create some pro-forma financials and then 20 to 40 pages with view graphs, or these days known as PowerPoint slides," said Farmwald.

"Usually an entrepreneur will give a presentation and then we will give feedback. A month or two later they will come back, and that’s when you actually see if they could take your criticism and if they were able to improve their idea."

Farmwald tells aspiring entrepreneurs to be patient after a presentation with a venture capitalist that just offered some constructive criticism. "Come back next time with proof as to why the capitalist is wrong. Getting on the defensive is totally not the right thing to do."

In addition, he says to students looking to take the entrepreneurial jump, "You want someone that has some real experience on the job before you do a start-up. Either you go out and get the experience, or you hook up with someone that has it and can sell the idea."

If Farmwald were in college now, he says he’d probably be looking at nanotechnology, which involves molecular-sized robotics.

"Right now you couldn’t create a company on it, but in 10-15 years, it’s going to be hot. I believe it will be the future of electronics. The problems to be solved are very challenging. But that is what really interests me. I don’t think people should chase the money. By the time you understand what’s going on, the area isn’t hot anymore. You should do what interests you."

Farmwald says he probably wouldn’t begin a start-up company immediately. "You don’t learn certain skills, like how to deal with people and how to be a middle manager," said Farmwald. "You’ll also never want to be anything but the top guy after starting your own company. I suggest going and taking a job, whether it be for a start-up or a good company. Learn how the job works before you jump into the real world."

Farmwald, a 1974 Purdue graduate, graduated in three years and said his main interest while in schools was "outside of class stuff."

"In the (Electrical Engineering Building), a couple friends and I found a PD9 computer that wasn’t being used. We convinced a professor to give us keys to the room and we spent tons of time playing with it. We wrote little space war games and such."

For more information on Benchmark Capital or Skymoon Ventures, visit the following Web sites: www.benchmark.com and www.skymoonventures.com.

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