Tim Dixon sits down with Kristi Ross, Co-CEO & President at tastytrade, an award-winning online financial media company that produces eight hours of live, entertaining programming. Bootstrapping in America is an interview-style show featuring CEOs and business leaders. In this interview, Tim discusses the future of optical transceivers and his background at the data interconnect leader, InterOptic.
Kristi Ross: Welcome to Bootstrapping in America where we interview some of the hottest entrepreneurs in Chicago and beyond. Our guest today is the CEO and President of InterOptic, which is a data interconnect company that helps Fortune 500 and government institutions manage the bandwidth interoperability and complexity in their IT networks. Their solutions are currently run on all seven continents and deployed in many of the worlds largest data centers. Please welcome Tim Dixon. Thanks for coming on.
Tim: Thank you very much.
Kristi: So, I was kind of looking at your Linked in and looking at your 30-year time span which is OK because we have been 30-year spans in our industry as well. And you have been in DC, Chicago, Dallas, and San Francisco so sort of…
Tim Dixon: And Europe.
Kristi: And Europe, I missed that one. All over, where as normally people kind to tend to stay in a city or a couple of cities but you have been over. Was there like a strategy behind that? Or was it just different opportunities that took you different places?
Tim: Different opportunities, different places. It’s not strategy or career. It was really just great projects and great people and you know, if you can find that kind of engagement, then you all win.
Kristi: Where ever it is. So, let’s talk about what InterOptic is and sort of how you came across InterOptic.
Tim: Sure. So we basically connect every high speed port in the internet and so our background for many years was that early fiber development for some of the basic companies like AT&T, Lucent, and Western Electric and what we learned at that time was that, hey, we could make it faster, cheaper, smaller, and that happened over the years but that savings and efficiency was never passed on to the end customer so there was a big gap there so we felt, hey, let’s disrupt that gap and focus on how we can disenfranchise these large companies that have been taking advantage of end customers for so long.
Kristi: Right. So how did you actually get involved with InterOptic?
Tim: Yeah, so I actually retired after selling a company in Dallas and had came back with my wife to the Midwest and the founder of InterOptic realized I was back in the midwest so he hired me as quickly as he could and we worked together engaging with the Pritzker group and then over time became more involved with the sales and marketing and then about three years ago they made me CEO.
Kristi: Awesome, so I want to talk about Pritzker Group for a second. What was it that Pritzker Group saw in 2008 especially with everything that was happening in the market in 2008. What did they see in InterOptic that they were excited about?
Tim: Well I think what they saw basically was opportunity. OK so the analogy might be: Hey look, I used to buy Dell memory for my Dell laptop, then I realized, hey, I could get better memory, higher performance, better cost if I went and bought it from a company like Kingston. And so that’s the same thing we are doing in the optical realm and the market for what we sell is about 12 billion dollars. So, there is a huge upside opportunity when that transition occurs away from the supposedly better OEM solutions to the high-quality solutions that we provide.
Kristi: Right, when you kind of look at the industry as a whole, we are in a state of dramatic change when you look at the bandwidth needs, the complexity, you look at all of the data demands.
Tim: Even neutrality, the changes that are happening from a legislative point of view.
Kristi: Right, so when you look at that, and you have companies that need to basically build infrastructure for the future, the future is kind of unknown in a sense, how do you do that?
Tim: Well that’s one advantage that we bring because of the pluggability of the optics that we sell, about the size of your pinky finger, you can decide in kind of real time as to what you deploy. Is it a short reach optic that only has to go a few hundred meters or are you sending it a few hundred miles? So, we give them the flexibility in those designs to equip their network, their datacenter, any way they need to.
Kristi: So, I read a stat, it might have been on your blog or something. Literally from 1970;’s to 2010, there was about 78% year over year increase in single traffic on a single fiber but 90% since 2010, that’s fascinating to me
Tim: Yeah so, it’s actually a physical optical signal-to-noise limit, you’re up against a physics limit.
You’re not going to be able to put anymore through put into a single fiber. So, what we are seeing now is much more parallel transport across multiple bandwidth, multiple wavelengths in a single fiber.
The issue there then is that now you have layers and layers of complexity in the optical realm and that is going to begin to show itself as basically an issue in the data center and we are going to have to have a better, more efficient way to manage wave lengths inside data centers which we don’t really do today.
Kristi: Well I am curious, when you start to look at the Internet of Things, right? You look at that landscape and that landscape is crazy and there is some crazy numbers out there, and I think it’s Gartner who put out there, who did some of the research and I think its 80 billion devices by 2025 in a 1.46 trillion dollar market when you look at it by 2020. So, when you look at those things, how does it ultimately affect your business and your customers business not only on data and how you manage that, but security as well.
Tim: So, you bring up a great point.
The Internet of Things is basically going to explode what we see in the data center so it’s a train on a track coming right at us.
So, I believe a lot of the folks are just focusing on, hey, this is what we have done, we are just sort of equipping the data center in the way that we have been.
But, with the explosion of end points that we get with IOT, that is going to basically mushroom. It’s going to be a big mushroom cloud of what we are going to see inside the data center. So, there has to be more solutions in the optical realm to help deal with the amount of traffic, the amount of paths, the amount of terminations that has to done in the data center and that what InterOptic is all about.
Kristi: So, if I have this right, and correct me if I am wrong here. Who is your biggest competitor? Like Cisco?
Tim: Yeah, so basically when we go and call on large companies, Fortune 500 companies, they tend to be fairly conservative, most of the IT folks have never been fired for picking Cisco. It used to be IBM but now it’s Cisco
Tony: You will be happy to know I have a small short position in Cisco, so I am supporting you here. (laughs)
Tim: So, whether it’s Cisco, whether it’s HP, whether it’s Juniper, those are the big OEMs that we displace. Now of course they are great at routing software, but, we feel we are much better, the much more expert in the optical terminations in those boxes.
Kristi: Right, and how do you actually produce these? Are they produced in the United States number one question and number two, how are you actually doing it to make it more cost efficient, how are you actually doing this for cheaper?
Tim: So, actually if you look at the supply chain and the way that that works. All of the components are produced in Asia. They have been for a number of years. Now saying that, since we have a huge federal business, there is a context about where we can purchase from so obviously we follow those guidelines for the county or origin. But everything that we specify.. it’s like tires. If you are GM and buying a ton of tires, you are going to buy a midrange tire. But we specify Corvette tires and that’s what we ask them to attest to and that’s what we have brought into the US.
The big thing that makes our product better is that we do all the coding here in Naperville and so all our engineers design and spec the parts that come in. We validate and test those individually. But we layer the software code onto those parts and that is really kind of the special sauce that makes our compatibility and performance outstanding compared to our competitors.
Kristi: Well when you look at this and mention this, having federal customers.. that is impressive because this is about data and about security at the end of the day. How do you get that contract?
Tim: It is hard work! Actually, our first contact took about 4 years and we actually had to work with the DOD specifying contract language so that it opened up the contract so that transceivers could be separate line items because frankly,
our large competitors, the large OEMs, they want to bundle everything together. They want to hide the cost of their transceivers, they want to hide the cost of their service and software and bundling it together is what they have always done.
And we had to educate the government on why they wanted to change they way they had that contract language.
Kristi: Wow, that’s impressive. So, you also have Fortune 500 companies, you have larger organizations. When the company started out in 2005, what were some of those initial customers that came on board and how do you develop to that level?
Tim: So, this model was different in 2005. We really started out as a web store. So, a lot of the initial sales were direct buys, small buys over the web and we ended up with a fairly large customer base by the way but,
at the end of the day, you can’t make a Fortune 500 sale without a lot of handholding, trust-building relationship. So that’s why we have a full team of my VP of sales who go out and do that direct selling.
Kristi: So, let’s talk about that. So, you started out as a web store right? When you got to that point, where was that, sort of, critical stage where you guys needed to shift and make a change?
Tim: So, the interesting this was it was about the time that the Pritzker Group came in and invested because that was the end of 2008 and we had the economic downturn. So, at point this was like, ok we are going to really slow down or we are going to have to change what we do. So, at that point we said the federal government was going to be fairly stable we feel over the next couple years so we are going to shift and we are going to focus there. Frankly neither I nor our founder have never sold to the federal government so there was a lot of learning to do. But we were able to come through.
Kristi: Yeah and just because you have never done it before doesn’t mean you shouldn’t do it right?
Tim: That’s right. Exactly.
Kristi: So, let’s talk about you becoming CEO because when you look at that and look at the stage of the company, so how did that transpire? Because you were already consulting and you were part of the company?
Tim: Sure, so when we got the first investment, of course we needed to have a board and they asked me to be on the board. So, I was still outside the company still working with other small companies in the Midwest but as a consultant, they had me appointed to the board. That gave me a chance to get used to the board dynamic. Especially get to know the Pritzker Group and I had been on boards in Silicon Valley with the companies I was with out there. Frankly some of the egotistic, greedy attitudes that I saw in a lot of the VCs, I didn’t want any part of but being on the board at InterOptic and getting to know the Pritzker Group and how they kind of have this direction around helping the little guy, they are down to earth. It was a natural step when they asked me to be CEO that I felt really very good about it.
Kristi: That’s awesome. And so, dealing with VCs is different. I totally agree. I am a big fan of the Pritzker Group and sort of their philosophy in their approach. So you become CEO and you took over for the founder right and that’s always hard because there is certain respect for the founder and you come in and I’m sure with your time there you have earned that respect obviously but what was sort of one of your biggest challenged as you took that chair?
Tim: Well, whenever you take over a new position, you don’t know what you’re being handed. So, it was a lot of learning about things I had not been involved in. Most of my focus was outside the doors of the company. So, it was sales and marketing oriented and we had an initiative to really expand that so that was fine. But what was happening inside the company as in terms of production, operation, the software development that was talking about. That was a big learning experience. It’s not that I hadn’t done it before.
Kristi: Well it’s different in every company.
Tim: Yeah, just the amount of focus we had to have internally was a little bit shocking.
Kristi: So, if you were to describe yourself as a leader. What would be your top two words you would use for yourself?
Tim: Empathy and respect. I think it’s really about how you treat others that’s the most important.
Tony: Can I come work for you? (Laughter)
Kristi: I knew that was coming! (laughter) So two more questions I am going to try and squeeze in here. So, what are you most excited about for the future of InterOptic?
Tim: The future is our oyster. There is so much upside and that’s the exciting part. We see it now. We see it with new wins, we see it with large companies. My sales team is extremely excited.
Kristi: I have one last question. This is about you because I found out a little tid bit of information about you. That you worked on Wall Street for a little while. What did you like? What didn’t you like?
Tim: What I didn’t like that we were talking to folks that were like my grandmother and grandfather and selling them things that I wouldn’t sell to my grandmother or grandfather really. I couldn’t stomach it. I mean I did ok, I was there for a couple years but at the end of the day, who Brian Jackman who used to be the COO at Tellabs told me that. He said “Tim, I know you, I know my brother who is a broker and it’s like, my brother can be a broker but you are not going to be able to do it.” And you know it was around ethics and morals and he was right. Actually I called him back up and said “Brian, you are right”. He said, “I have four jobs here, you can pick anyone you want if you come back.” It was good. It was good because it helped me with conceptual selling and I had never been in that situation before where you are asking someone to give you all their wealth. So it was a different component of selling and I learned a ton.
Kristi: That is awesome. That says a lot about you though, ethics.. and I think that’s awesome. I really do. Well Tim, I have really enjoyed this and I want to thank you so much for coming on and I wish you the best of luck.
Tim: Thank you.