GSA sat down with the CEO of Aquantia and 32-year industry veteran, Faraj Aalaei, to discuss his growing company. We discussed his insights into their numerous rounds of funding and how to successfully contribute to the ‘big data’ trend in the semiconductor industry.
1. Aquantia received numerous awards last year including, GSA’s Most Respected Private Company Award, EETimes & EDN Company of the Year Award and Cisco’s New Emerging Technology Supplier Award in 2013. In your opinion, what set Aquantia a part from the other nominees?
There are two things that set Aquantia apart. First, there is technology execution and then there is the business strategy execution. Aquantia is successful because it was the first to solve performance, power and price challenges that enable 10GBASE-T (10 Gbps over Ethernet copper cabling) interconnect to be adopted on a mass scale in data centers around the world. Aquantia’s ability to match superior technical innovation with a well-executed business strategy has positioned the company as the predominant vendor in the long-cycle, high-growth data center and enterprise connectivity markets. When Aquantia first started developing silicon for the 10GBASE-T market, there were multiple competitors all vying to produce optimal ICs. Today, Aquantia is the only private company remaining, not only because it solved multiple technical challenges, but also because its business team ensured success at the major switch and server OEMs.
2. Aquantia’s 10Gigabit Ethernet ICs are helping to shape and enhance cloud computing and large-scale data center deployments. At GSA’s US Executive Forum in September we will be hosting a panel on ‘Powering the Digital Economy’. As our appetite for data continues to increase, so does our need for the infrastructure to support this appetite. In your opinion, what are some of today’s most interesting ideas in enterprise technology and infrastructure? How do you think these ideas will further enable our digital economy? How do you see this market growing?
Mobility, Internet-of-Things (IoT) and consolidation of data in the cloud are joining forces to create a perfect storm and therefore, an enormous opportunity for the upgrade of the whole infrastructure. Discussions about 100 Gbps and even 1-Terabit per second interconnects have been all the craze recently in various forums, and Aquantia is participating in these fascinating developments. At the same time, technology development must coincide with economic requirements and cost efficiency to Power the Digital Economy. And so, beyond these “blazing fast” technologies, what we are seeing now in the data center is the beginning of a massive adoption of 10 Gbps technologies, replacing 1 Gbps links as the mainstream cloud “autobahn.” The available market in the data center is on the order of tens of millions of ports. Moving forward, we anticipate the technology that runs over the ubiquitous Ethernet copper cable to expand into the Enterprise and the Mobile infrastructure, replacing aging and insufficient 1 Gbps technology, where the market opportunity is counted in hundreds of millions of ports. Ultimately, what we are targeting is the “everything connected” which extends into the consumer segment, a market that represents one billion Gigabit Ethernet ports shipping every year.
3. Aquantia recently completed Series G of funding in March of 2014. Your company has had multiple successful rounds of funding over the years during traditionally dry funding environments. What has been your approach to each round of funding? What advice can you give to other companies in the funding stage?
My advice is to focus on technology execution in long-term growth markets and make sure to build the relationships that will enable the business to expand beyond initial success. It’s important to get to market first but it is equally important to maintain an advantage that allows you to sustain leadership. Achieving both goals is often difficult so the key is to show investors how your company plans to prevail in both areas and execute on it.
4. In previous interviews you mentioned that Aquantia is in a strong position as a pre-IPO company. Has your strategy and focus changed after this most recent round of financing?
Our strategy has always been to first achieve leadership in our core market and then expand our footprint by leveraging our differentiated technology. Our latest round of financing is being used to fund our business expansion and accelerate some of the R&D developments, with the goal to position the company for a successful IPO.
5. Incubator funds have been extremely successful in other environments. We are starting to see this trend in the semi industry, such as SKTA Innopartners and The Samsung Catalyst Fund. These incubators provide tools, resources, mentorship, legal advice and some money to startups. How do you view on incubator funds and do you think it will help? In your opinion, what can the industry do to continue to promote funding?
As we are all too aware, the cost of doing business in semiconductor has become so high, that there are only a few very large markets left that are worth investing in. But this high cost does not apply only to startups. In fact, it is often even higher for the large companies that find it necessary to spread their talent pool among multiple business units, which can create a lack of focus and further increase inefficiencies. Therefore, the startup that succeeds in attacking one of those few very large markets will be even more unique and valuable as an IPO candidate or an M&A target. The barrier to invest in a new startup is now much higher as the risk level has become greater over time. Incubators indeed have a role to play in this environment, providing the entrepreneurs with both the money and the contacts to further the initial investigation and develop proof of concept. This in turn increases the validity and credibility of a new business plan when presented to prospective Series A investors.
6. Aquantia has had strategic investors throughout some rounds of funding. What are the top three things your strategic investors are bringing to you and your company
Partnerships, relationships, feedback from end-users and customers, and knowledge that helps us build next generation products. The strategic investor is usually either a supplier, a partner or a customer. The investment aligns the success of the company with that of the investor through its equity ownership.
7. Aquantia has had some great accomplishments since its founding in 2004. How do you keep the momentum and stay competitive?
Focus and execution in lockstep with major industry upgrade cycles; deliver the products that help your customers solve their technical and business challenges; and turn early product success into an opportunity to engage the customer at the white-board level. That’s how you become a strategic partner to your customer, not just another supplier.
8. You have been a strong advocate for GSA’s impact within the semiconductor industry. What has been the greatest benefit of membership?
GSA members have demonstrated success over a wide range of technologies and markets. We’re so focused on our market that we don’t always get a chance to meet and exchange ideas with people in other markets. GSA affords us multiple opportunities to connect with these leaders and exchange ideas on what drives success.