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Preparation Counts More Than Luck

It helps to be in the right place at the right time when you start a business--and to hear Jeff Lawrence tell it, that doesn’t mean you must get lucky. It means you must prepare yourself to seize your opportunity when it presents itself.

Lawrence and his partner Larisa Chistyakov started their company, Trillium Digital Systems Inc., 11 years ago in a cramped one-room, second-floor office above a restaurant on Santa Monica Boulevard in West Los Angeles. They had about $1,000 between them, a computer and some solid experience writing communications software for Amdahl and a smaller, now-defunct company in Irvine.

In the early going, they kept body and soul together doing consulting work, but they wanted bigger and better things. As Lawrence puts it, they wanted “something beyond what you can create in a day’s work,” and they kept their eyes open for opportunity.

They saw it in the communications industry.

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“I can’t say we understood the opportunity in dollars,” Lawrence says, “but we did understand the problems companies faced in developing software for their communications equipment, and we felt we could get to market quickly with a good product.”

A French communications company sent a delegation to ask if Lawrence and Chistyakov could write software to run its communications equipment.

Embarrassed to receive prospective customers in their cramped quarters, the partners rented a larger office for one day and furnished it with a folding table and chairs from their own homes.

When the delegation, needing information from headquarters, asked for their fax number, they recited the number of a neighboring business and ran down the street to retrieve the material.

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It’s an open question whether their French customers sensed the improvisations. What matters is that Lawrence and Chistyakov landed a $50,000 contract--enough to enable them to hire their first employee and set about putting Trillium Digital Systems on the road to success.

Today the company employs more than 180 people in Los Angeles; San Jose; Boston; Dallas; Washington; Vancouver, Canada; Seoul; and soon London, developing and manufacturing communications software for Internet businesses, telephone systems, and wireless and broadband communications networks.

Its customers include AT&T;, Hewlett-Packard, Hitachi, IBM, Lucent Technologies, Motorola, Ericsson, Nortel Networks, NEC, Nokia and more than 200 other companies. Revenue hit $15 million last year and looks to surpass $20 million this year.

Remarkably, Lawrence and Chistyakov financed that growth out of earnings--with no bank debt and, until last summer, no capital infusions from outside investors.

How did they do it?

“It sounds trite, but the fact is that we didn’t spend more than we had,” Lawrence says. “We were very careful in making sure that we paced our growth to match our revenues--and even though we grew quickly, this put us in a strong position to create a wide range of products for a worldwide market without outrunning our resources.”

In plain English, the partners’ prudence in financing growth out of the company’s earnings enabled them to seize huge opportunities in a global market. Lawrence and Chistyakov didn’t count on luck to grow Trillium. They made their own luck by preparing for it from the beginning.

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“We also have different perspectives on the business,” Lawrence says. “Larisa focuses on the technical aspects, and I focus on the marketing and business aspects. We’re both strong in paying attention to detail and in looking at the broader picture as well. You need that broader focus to communicate your mission to your employees and your customers, and you need the focus on detail to make sure things get done.”

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The partners also built a professional management team, bringing in a chief operating officer, a chief financial officer and vice presidents for engineering, customer support, and marketing and sales in recent years, all with solid experience in managing high-tech growth companies.

Making the transition to professional management was a key to growth, Lawrence says.

“Any successful business has to have a life beyond that of any one individual,” he says. “If you’re a small company and somebody’s out two weeks, it’s really painful. It’s better to develop a corporate memory, and you do that with professional management.

“And you’ve got to be thoughtful about how you spend money. You have to spend to grow, and you’ve got to have confidence in what you’re doing--so you can know when to spend and when not to.”

All of these factors--prudent financing, professional management and solid growth--paid off for Trillium recently when the company announced the completion of a $14-million round of equity financing from a number of outside backers, including Intel and Rader Reinfrank, a private equity firm based in Los Angeles.

It was the first time Trillium tapped outside sources for financing, and it gave Lawrence and Chistyakov the backing they need to expand the company.

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“Our customers need to outsource their technology solutions,” Lawrence says, “and given the convergence of the communications industry--the Internet, telephones, cable, wireless--everybody wants seamless service.

“We can help these companies pull everything together, and we’d like to be a very big company in the future.”

Next: How a Marina del Rey start-up overcame its own lack of capital in assembling a professional management team and raising outside financing.

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Juan Hovey can be reached at (805) 492-7909 or at jhovey@gte.net.


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