February 23, 2005: Features

Professor Ed Zschau ’61 serves as guru to budding entrepreneurs

By Jordan Paul Amadio ’05

It is the last day of class before winter break, and 65 seniors are mesmerized by a professor in a Bugs Bunny tie. For the past hour, he has been recounting the details of his autobiography — studying physics and philosophy at Princeton, running a $6 billion division of IBM, founding two technology companies, winning a congressional seat in California. Suddenly, the lecturer pauses. Smiling to himself, he continues an end-of-semester tradition inaugurated four decades earlier, when he was Stanford Business School’s 24-year-old faculty wunderkind. Without warning, professor Ed Zschau ’61 begins to sing.

With karaoke-style accompaniment, Zschau belts out his didactic version of Sinatra’s “My Way”: “As you go down life’s path, whether slow or in a hurry,” he croons to the visibly delighted students, “just do it your way.”

Among today’s seniors, most of whom well recall the dot-com boom of the late 1990s (they think less about the dot-com bust), launching companies is a widespread goal. In their undergraduate coursework, these future entrepreneurs occasionally find themselves hankering for a bit of practical instruction. That’s where Ed Zschau steps in with ELE 491: High-Tech Entrepreneurship, an electrical-engineering course that is about as real-world as it gets.

Zschau has been instrumental in launching five companies, two of them as an entrepreneur and three as a venture investor. His first company, Systems Industries, began pioneering the computer hard-disk storage industry in 1968, back in the pre-PC days of “tiny capacity and large drives.” (Systems Industries went public under Zschau’s leadership in 1981 and was later purchased by a larger firm.) Lately, Zschau has been serving as co-founder and chairman of New Jersey-based NanoOpto Corp. NanoOpto uses nanofabrication — the process of manufacturing minuscule items, down to one-thousandth the size of a bacterium — to make optical components for cell-phone cameras, DVD players, and various telecommunications devices.

Zschau, who has taught about 900 Princeton students and more than 1,000 M.B.A. candidates at Stanford and Harvard business schools, designed High-Tech Entrepreneurship to occupy a vacant niche. “There are a lot of talented young people, particularly in the engineering school, who have some very good ideas and would like to start businesses,” he says. “But Princeton is one of the two Ivy League universities, along with Brown, that doesn’t have a business school. There wasn’t a significant source of guidance for those students.”

Instead of following the traditional model of the Princeton undergraduate course — lectures, precepts, and exams — ELE 491 uses a case study method similar to that used at Harvard Business School. Before each session, students are asked to delve into a problem facing a particular company, in fields ranging from biotechnology to fruit drinks. They then put themselves in the shoes of high-level managers and formulate solutions. Playing the role of a skillfully perceptive conductor — think Socrates meets Toscanini — Zschau leads the class in a discussion about the case, using students’ ideas, rather than his own, to illustrate important concepts. “[Zschau] will get up in your face, challenge you to focus your thoughts, and then put two or three words on the board that encapsulate precisely the point it took you five minutes to make,” a former student wrote in an online course review.

Entrepreneurship is not all gravy, though, and Zschau admits it. Whenever his class discusses a company’s spiraling collapse, he teaches that with proper analysis, “you begin to see the weaknesses that resulted in failure.” Today, in the wake of the deflated expectations that still haunt the high-tech sector, Zschau embodies the rare persona of a stolid optimist. “During the dot-com era, money was flowing into companies that had no reason for existing, that were just dumb ideas,” he says. “Teaching in 1999 was tough. It’s a much more realistic era right now and, frankly, a good time to start a company. The old fundamentals are important again.”

The message resonates with undergraduates. “Among all the classes I’ve taken, ELE 491 has had the closest direct impact on my life. It encouraged me to dream bigger and take a broader perspective on what I’d like to do,” says Edward Shin ’05, a molecular biology major who is considering postponing medical school to follow his passion and enter the startup sector.

For his midterm project, in which students were required to identify a technology developed at Princeton and explore its commercial feasibility, Shin studied a pancreatic diagnostic assay invented by Charles Gilvarg, professor of molecular biology, emeritus. The assay is capable of detecting pancreatic cancer at a very early stage — potentially, early enough to boost patient survival rates. “I feel that if applied, this assay has the potential to save many lives and much grief,” says Shin.

In lieu of a final exam, Zschau’s students are given two options. Each student can study an existing startup firm, analyzing its prospects and making recommendations after interviewing company brass, or write a business plan of his or her own. Historically, about one-fifth of each class has chosen the latter, more adventurous, alternative. A handful of alumni have taken the business plans they wrote for Zschau and turned them into careers. Zschau vouches for the existence of at least two success stories: Intwine and Princeton Power Systems.

Longtime buddies Tom Dixon ’02 and Sean MacIsaac ’02 signed up for High-Tech Entrepreneurship in their senior year. In the process of creating a comprehensive business plan, they consulted Zschau outside class and combined his pragmatic lessons with their own engineering expertise. By the end of the semester, they had given birth to Intwine, a technology consulting firm that builds unique software systems for other businesses. Today, with 10 employees and total income that has tripled every year, Virginia-based Intwine’s future is promising.

Dixon credits his business confidence to Zschau’s instruction. Despite being a rookie on the entrepreneurial scene, Dixon says the nuts-and-bolts lessons he picked up in ELE 491 sometimes give him the aura of a grizzled veteran. He acknowledges more tangible benefits, too: “More than anything, Ed Zschau helped us realize some of the major difficulties we were going to face [as a new company].”

The business plan that Erik Limpaecher ’01 prepared as his final project for ELE 491 — a prospectus for a company called Princeton Power Systems, to be based on his father’s patented electric-power conversion technology — won the annual Princeton Business Plan Contest, in which student-founded companies vie to impress a panel of venture capitalists and win prize money. In the spring of their senior year, Limpaecher and his partners — Darren Hammell ’01, Mark Holveck ’01, and John Lerch ’01 — launched the company.

Today, Princeton Power Systems is perfecting several related products based on its proprietary “AC-link” system, a series of algorithms and circuit designs that convert one frequency of electric power to another. Projected products include devices for transferring environment-friendly energy from solar cells or wind turbines to the utility power grid, along with a “variable speed drive” (VSD), which the company says will provide unparalleled flexibility in controlling electric motors. Possible applications? One customer is interested in applying the VSD to ropeless elevators, and the Navy is considering powering ships with it. “Ed inspired everybody and made us believe it was possible,” president and CEO Hammell says of Zschau.

Lerch later left Princeton Power to start his own high-tech firm. In 2002 he created Proximities Inc. in collaboration with Joshua Girvin ’04. The two have developed a solution to the bottlenecked crowds and long lines at popular entertainment venues: computerized recognition and purchasing systems based on disposable bracelets with radio-frequency ID chips. This novel technology allows event-goers to gain access to restricted areas and buy concession items with a swipe of the wrist, reducing wait times and enabling security measures. Proximities, now based in Melbourne, Fla., is implementing its system at some NASCAR and Indy Racing League events.

More companies likely are on the way.

“I learned to appreciate the beauty of the entrepreneurial culture,” says Berke Nayman ’05, an economics major from Turkey who rates High-Tech Entrepreneurship as the best class he’s ever taken. “Zschau’s course gave me the necessary tools and the self-confidence to fulfill my dreams one day.”

He adds: “I’ll definitely be saving my notes for future reference.”

Jordan Paul Amadio ’05, a physics major, is from Cazenovia, N.Y.