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February 2 – 8, 2001
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By Ron Chepesiuk
In 1998, Joe Tung was almost finished working on a computer project, but needed a chip to complete it. A software engineer for the Sunnyvale, Calif.-based Faroudja Inc., Tung knew he could devise the chip himself, but thought someone else had probably already designed what he needed.
“I had to ask myself a big question: could I find that person?” Tung recalled. “I could post a notice at my Web site, but who would see it?”
Shortly thereafter Tung lunched with his longtime friend, Bharat Sastri, then-CEO of Quantum 3D Inc., a San Jose, Calif.-based software and graphic chips manufacturer. Tung asked Sastri for help. To his surprise, Sastri also needed advice — on a graphics procedure, known as a raster algorithm.
HelloBrain Fact Sheet
“This isn’t an uncommon situation in the high tech world,” Bhastri explained. “But we knew there must be a better way to solve problems like the ones we faced.”
From that conversation the friends decided to start their own company, one they thought would revolutionize the workplace.
Én December 1999, Tung and Sastri launched the world’s first intellectual exchange, and in little more than two years, HelloBrain has garnered the dizzying plaudit, “the company of the 21st century.”
HelloBrain’s original concept is both simple and sophisticated. Conjure up an image of eBay, the well-known online auction, and you can begin to understand the logic. But HelloBrain is an online auction with a new twist — an Internet-based virtual exchange that trades in intellectual capital, rather than goods, services or financial tools.
John Waleka, a partner in the Menlo Park, Calif.-based Redpoint Ventures, gave HelloBrain $3.5 million in initial funding.
“HelloBrain has the potential to completely change the way high-tech companies are developed,” Walecka explained. “No one company today can possibly assemble all the technological expertise it needs in-house. HelloBrain gives companies access to third party developers around the world.”
Two markets are involved in the exchange — the buyer and the seller. HelloBrain acts as the intermediary. Buyers are the companies trying to find the solution to a problem. They may need a computer chip or a piece of software to complete a project, but tèey may not have the time or know-how to devise it themselves. Sellers are those who have some valuable intellectual property for sale and want to advertise it to the world Ð a flight simulator module for a Palm Pilot, for example.
Buyers remain anonymous to potential sellers, but not to HelloBrain. They post their specifications on the Hello Brain Web site, along with the price they’re willing to pay. After that, a HelloBrain employee reviews the requirement to ensure it’s legal in terms of copyright and patent law, then the client submits a purchase order, or down payment, that is held in escrow. The requirement is posted on the Web site, and HelloBrain provides the tools for online collaboration, evaluation, verification, delivery and security.
“An intellectual exchange can be set up for many technology areas, but we decided not to be everything to everybody,” Sastri explained. “We are concentrating on high-tech — a domain we understand and have good connections in.”
At the Top
Born in India, 47-year-old Sastri was raised in a family of musicians (his father’s side) and doctors (his mother’s side). Sastri was eventually transferred to Detroit, but in 1979, he joined a high-tech company called Zylog.
“I met Joe [Tung] the first day on the job,” he recalled with a laugh. “He was sleeping under a table in his office. We’ve been friends ever since.”
The 45-year-old Tung was born in Taiwan, but came to the United States in 1961 at age six when his father moved to the country to study for his Ph.D. Tung inherited his father’s interest in computers, and in 1978 he graduated from MIT. After school, Tung went to Silicon Valley and got a job with Applied Technology in the defense industry before moving to Zylog.
“I wasn’t looking to be an entrepreneur,” Tung explained with a smile. “I just wanted to make enough money so I could afford a house.”
“We went in different directions after Zylog,” Sastri added. “Joe became a big star in video game development, and I got involved with computer companies. HelloBrain is my sixth startup.”
Since its launch, HelloBrain has had more than 500 projects posted at its Web site, with more than 30,000 registered contributors from 126-plus countries looking to provide solutions for clients through the intellectual capital exchange. Clients are paying HelloBrain an average of $18,000 per assignment, with some of them bringing in as much as $400,000, according to a Forbes magazine report. HelloBrain’s fee is 5 to 25 percent, depending on the deal’s value. A transaction usually takes an average of two to three weeks to close.
“It sounds like a lot of money, but imagine the cost and work involved if clients tried to do it on their own,” Tung said. “They wouldn’t have the contacts or the know-how.”
First Person
Shahab Ahmed, the Indian American owner of Cy-Info.com, an Internet development company, has completed two projects through HelloBrain, and has since submitted four other proposals.
Asked why he is using HelloBrain’s services, Ahmed responded, “Do you know of anybody else? My company has found many of the kinds of projects we do at the HelloBrain Web site. Using its services has given us a lot of exposure.”
HelloBrain has been especially valuable for startups. Last spring, for example, Syndeo Corporation, a Santa Clara, Calif.-based telecommunications company, used the HelloBrain exchange to help launch its broadband services system. The first problem Syndeo posted on the HelloBrain exchange: Can someone create an interface for different Internet directory protocols?
“HelloBrain made it possible for us to jump-start key pieces of our new project,” explained Ted Griggs, Syndeo’s CEO. “Using HelloBrain helped us find solutions to problems dealing with cutting-edge telecommunications technologies.”
More Competition
Since HelloBrain’s founding, several other companies have jumped into intellectual capital, but that doesn’t worry Tung and Sastri.
“Our view is that we don’t have any competitors because in order to compete with us, a company has to be doing everything we’re doing.” Sastri explained. “A viable competitor would not only have to have the clientele, but also the infrastructure, which involves more than just sending e-mail and documents. Also, we have the brand name and reputation, and everybody thinks of us as the field’s leader. We are years ahead of everybody else.”
Forging partnerships to strengthen their position in the marketplace has been a major focus of their strategic strategy .
“We are constantly on the look- out for partners who can add value to our company,” Sastri revealed.
This past July, Atmel Corporation, a world leader in the distribution, manufacturing and marketing of advanced semiconductors and system-level integration solutions, partnered with HelloBrain to help its customers accelerate their product development. Atmel’s customers can now go to the company’s private exchange on the HelloBrain Web site, where they work with qualified Atmel service providers on a project-by-project basis.
How is HelloBrain doing in its market space? Will it become the company of the 21st century? Navi Radjou, a research analyst at Forrester Research, has studied HelloBrain’s business model for about a year, looking to see how the company may be able help Forrester’s customer base – companies on the Fortune 1000 list.
HelloBrain’s business model is sound, Radjou said, and the company fills a vital need — helping to satisfy the worldwide shortage of skilled high-tech professionals. But the analyst added, “HelloBrain operates in a public environment, and I don’t see them becoming the standard in the intellectual capital exchange until they change their setting. I would advise the company to license their technology to Fortune 1000 companies for use behind their firewalls, where they can engage in collaboration with trusted partners. It would give potential customers more confidence. I don’t think the world is ready to outsource projects involving mission critical work.”
Sastri responded that HelloBrain’s model for the global exchange takes into account that companies may not outsource critical path projects. “For every critical path project, there are four projects that can be outsourced,” he explained. “Also, our enterprise exchange is, in essence, a licensing of our technology to a large corporation for intellectual use.”
Many venture capital firms are banking on HelloBrain. Last May, HelloBrain received a second round of funding, totaling $30 million. The round was led by Redpoint Ventures and included investments by Accel Partners, Brentwood Venture Capital, the Intel 64 Fund and Thomas Weisel Partners. Last year, U.S. technology companies spent $40 billion in intellectual capital for research and development.
Said Sastri: “We are on the cutting edge and ready to tap the market for intellectual capital big-time.”
Business reporter Ron Chepesiuk is a Rock Hill, South Carolina-based journalist. He can be reached at 110423.2656@compuserve.com.
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