Pocketing profits

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In some ways, Raj Kumar is like many technology pioneers who help lead prominent corporations and later become entrepreneurs. After 11 years of heading Telxon Corp.’s research and development division, he founded Khyber Technologies Corp. in 1990.

It stands to reason that his business background would work to his advantage. While at Telxon, he invented and patented several products for the handheld-computer industry. He also brought in Telxon’s wireless technology acquisition that later became Aironet Wireless Communications Inc.

Oddly enough, when Kumar launched Fairlawn-based Khyber Technologies, this CEO didn’t bother to write a business plan.

“I also didn’t go with venture capitalists because I didn’t want someone telling me how to run my company,” he says.

But without the obligatory business plan to acquire funding, how did he expect to raise capital to develop the wonder product he claimed would revolutionize his industry?

For seven years, Khyber functioned as a design house, developing custom-made, portable-computing devices for companies such as IBM, Symbol Technologies, even Telxon. Cash generated from those transactions kept the business afloat. Meanwhile, Kumar built a portfolio of patents for use in emerging portable digital appliances.

A substantially profitable product license sale to Symbol Technologies in 1998 enabled him to start focusing on his brainchild, the Pocket Partner. The high-performance pocket PC serves as a smart phone and portable data entry device, eliminating the need to carry a cell phone, personal digital assistant, laptop computer and accessories. Doubling as a plug-in processor for a mini-laptop, the high-powered processor enables speech recognition and rapid information management.

After months of developing and field-testing Pocket Partner prototypes in barcode applications such as retail environments, Khyber is shipping 1,500 units to customers and foresees full-production rollout in July. Priced at $1,000 each, planned shipments of 2,000 units monthly will generate substantial revenue.

So, sans a business plan and venture capital, how did Kumar develop and introduce the Pocket Partner?

“In the last three years, we’d raised $1 million from friends and family who purchased shares in our company, and $2 million through licensing patents and products. That helped us go from being a product developer for other people to commercializing the Pocket Partner, our own key product,” says Kumar.

Kumar wants to eventually expand his business model to benefit end-user companies that require large numbers of terminals, Web-based service and application providers, OEMs of computers and customer products, and wireless carriers. To do that, he could raise capital by licensing certain patent rights to leading OEMs of cell-phones, PDAs and laptop computers — allowing customers to make changes to better fit their needs.

But if the market reacts very favorably to his Pocket Partner, Kumar plans to do something he initially avoided.

“I’ll go to the VCs [venture capitalists] both locally and in Silicon Valley,” he admits, adding that he may seek $5 million in a first round of funding, and a year later, $10 million in a second financing round.

And that, he says, is precisely why he’s just completed the first draft of his business plan, after 11 years in business.

“I have more leverage now, but I’m not sure if VCs will line up outside my door,” he says. “First they invested in dot-coms, then they focused on software companies, integrated circuit designers, service companies and biomedical companies.”

While his specialty may not be in vogue for VCs right now, Kumar says it might be interesting for SBN Magazine to revisit Khyber in six months. How to reach: Khyber Technologies (330) 670-0033 or www.khyber.com