Ray Kao has been in the telecom business too long; knows too much; hears too many sad stories; and sometimes worries too much about the fate of the industry, which is in the severest downturn he's ever known. As the founder, CEO, and chief technical officer of Polaris Networks, he knows how lucky he is to have been able to raise $74 million in venture funding for his company, which sells optical products for metropolitan area networks. "I know this downturn could last two to three years, but the telecom industry is going to turn, and when that happens there are going to be opportunities for someone like us," says Mr. Kao.

Born in Taipei, Mr. Kao knows that $74 million is the difference between his two-year-old company remaining viable and shutting its doors like other companies have done in recent months. While his backers, which include Redpoint Ventures, Storm Ventures, and Venrock Associates, agree that cash is king, they also believe that Mr. Kao himself is key to the company's success.

"Executives that possess strong technical and business knowledge are very rare. Ray is one of those individuals and has been able to demonstrate this unique quality through his consistent success-driven track record," says Dick Moley, a general partner at Storm Ventures and the former CEO of StrataCom, a maker of high-speed digital switches.

Mr. Kao founded his first company, TransMedia Communications, in 1998. It offered Internet telephone products and was acquired by Cisco Systems for nearly $406 million the next year. Since then he has been involved with San Jose-based MaXXan Systems, where he designed the guts of the company's key product, a storage switch.

Whether it was TransMedia or MaXXan or Polaris, "I like to develop technologies first," says Mr. Kao. But that kind of thinking has a price. "When you are ahead of the curve, people are skeptical and raising money is difficult," he says.

Such ahead-of-the-curve thinking runs in his family. In the '80s, at the very start of the personal computer revolution, Mr. Kao's father started a PC peripherals company that was a lot like Acer, the Taiwanese PC maker. Acer made it to the big leagues and Mr. Kao's father's company, which stumbled in its business execution, did not. "That taught me a lesson--technology alone is not enough to build a company, you need to understand the end markets," says Mr. Kao, who immigrated to the United States 20 years ago to pursue a master's degree in electronics engineering at the University of Massachusetts in Amherst.

Mr. Kao started working for Digital Equipment Corporation right out of graduate school, where he researched communications, telecom technologies, and protocols. He would later attend Massachusetts Institute of Technology for his Ph.D., but he never got around to getting his doctoral degree. "I got a job offer from StrataCom and they offered me a chance to move out to California," he recalls.

He left because he hated the snow and because, if he had stuck around MIT, he would now be a teacher instead of an entrepreneur. "All I wanted to do was build something big, something no one had done before. I guess the entrepreneurial bug got the better of me."

Sources From:RED HERRING 2002