The Master of the Game - Cybiko Mania
By ANDREW MEIER Moscow
December 11, 2000, Vol. 156 No. 24
His creation may grow to be the bane of teachers and parents worldwide. He has talked AOL's Steve Case into investing, as well as Esther Dyson, doyenne of the Internet. But David Yang remains almost unknown, even though he's the brains behind Cybiko, one of the hottest e-toys in the world.
Black/Toby for TIME David Yang of Cybiko
Few kids' playthings have ever been so passionately discussed in the boardrooms of Wall Street. Introduced last April in the U.S., Cybiko has proved a huge hit among American teenagers. Worldwide sales of Cybiko, which retails in the U.S. for $129, could well surpass $50 million this year.
What is Cybiko? "It's a handheld computer," says Yang, "that in contrast to the PalmPilot has multitasking functions and built-in local networking capabilities to combine entertainment with communication." Simply put, Cybiko is a toy, a mobile telephone and a teen personal digital assistant (pda) all in one. Cybikos can go anywhere and, within a radius of 90 m outdoors, two units can converse.
Yang's strategy is simple: build up a massive base of Cybiko users. They can download games, for free, from the website (www.cybiko.com). Since the content is on that site alone, the company will soon have an alluring resource: exclusive access to hundreds of thousands of teenagers around the world.
While reams have been written about Cybiko since its launch, Yang has stayed in the shadows. The company's headquarters in Bloomingdale, Illinois is only a skeleton operation; Cybiko runs on the brains of 180 Russian programmers, engineers and designers sitting in Moscow. While Yang trolled for investors, he deliberately kept the company's Russian roots quiet. In September, however, he hit the money zone when AOL bought a reported 20% stake. With investment secured, Yang is ready to talk.
Born in Yerevan, Armenia's capital, Yang is the Soviet son of a Chinese father and an Armenian mother. Both parents are physicists. Yang spent his first 17 years in Armenia before enrolling in the Moscow Institute of Physics and Technology, the Soviet equivalent of M.I.T. He graduated in 1992, the year after the U.S.S.R. collapsed, with a degree in applied mathematics and physics.
In 1989, while still a student, Yang founded his first software company, ABBYY Software House. Over the next decade, as the former Soviet Union's best and brightest fled to the West, Yang stayed behind and developed ABBYY, which is now a world leader in optical character recognition scanning. All the while, however, he dreamed of developing "a piece of hardware that would connect young people to each other."
Two years ago, he started to build his first Cybiko, using Russian developers and Russian investors. In 1999, he met - naturally, on the Internet - his future partner, veteran electronics executive Don Wisniewski, an American and now Cybiko's president. They launched the company that fall. "David worried that no one would take the toy seriously if they knew it came from Moscow," says George Pachikov, a Russian software designer who serves on Cybiko's board. "To Western venture capitalists, Moscow meant corruption and money laundering - not something so clever and fun as this toy."
Yang still manages Cybiko's design and research side in Moscow, while Wisniewski runs a small management and marketing crew in Bloomingdale. "So far, so great," says Yang, sounding just a bit like one of Cybiko's teenage customers.
Copyright 2000 Time Inc. All rights reserved.
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10/1/2002 DAVID YANG: TRANSLATING FUTURE NEEDS Moscow by Hrag Vartanian Email
When an opportunity knocks, David Yang opens the door. The 34 year-old Russian cybermogul heads two hi-tech companies that have helped make Moscow the silicon valley of the former Soviet Union.
Yang first arrived in Moscow to study at the Moscow Institute of Physics and Technology (the Soviet Union's MIT) in 1985 and has remained there ever since. The Russian capital was not only a catalyst for the young entrepreneur but was also the place his Chinese father and Armenian mother met during their studies at Moscow State University's Faculty of Physics. Unlike many of his friends and colleagues, Yang has not moved to the West in search of higher pay and has developed his own opportunities at home.
Born and raised in Yerevan, he remembers that the small Soviet Republic offered him the foundations he needed to succeed, "The level of science in Armenia was quite high. We lived in a satellite town of Yerevan where the second accelerator in the former Soviet Union is located. Everything around me was about physics."
During his final year at the Moscow Institute of Physics and Technology, he began thinking of the economic opportunities available from what he was learning. Working with a Russian programmer, he got to work, "The idea was to create an electronic dictionary, my colleague's job was to program and I was responsible to organize the database and sales. We didn't have a plan to create a company, we just wanted to manufacture a program that would sell and then return to physics." Bit Software was born and eight years later, it was renamed ABBYY Software House.
"At that time there were changes in politics and the economy of the Soviet Union, Gorbachev's Perestroika was in place and everyone was thinking about new things. Software was a field where young people could start a new business. It was more or less fun. It was a way to get quick money and return to physics and science," Yang says.
As it turned out, life followed another path for the young technie, "In one year, we finished our first version of the product and we didn't sell the 100 products we hoped, but only three in the first month. Since we first estimated the price at $10 and ended up selling it for $200, we realized there was potential and decided to continue." Yang found a market niche upon which to build.
"In the early computer stages, all documentation and manuals were in English and for non-native English speakers a translation dictionary was needed," Yang explains and then adds that they were shocked to see that after selling only 15 copies of their software, 30% of computers in the country already had illegal copies of their software.
Yang learned quick, "It represented three things, the popularity of the product, the quality of the product and the level of privacy in the country."
ABBYY Software House began developing new items based on the field of artificial intelligence and natural language.
"After the electronic dictionaries, we realized there was a need for data entry and translation and everything about natural language processing. Optical Character Recognition (OCR) for scanners, spell checking, machine translation systems and finishing the translations with electronic dictionaries. We combined four different products (OCR, spell check, translation, dictionaries) in one package, it did very well. People didn't think you'd be able to put a Russian document in a scanner and have a computer translate it into printable text. With our package it was possible."
The translation software offered the opportunity to skim thousands of pages in short amounts of time.
The bundled software established ABBYY financially, soon they developed an OCR system of their own, Fine Reader. Individually, the OCR did very well. Today, Fine Reader supports 176 languages and is second only to Xerox in market share. A multi-language spell checker followed and then a revolutionary handwriting recognition system.
Yang says the sophistication of the handwriting recognition programming forced the company to push themselves, "This is a very complicated technology because some people can't even read their own writing. It is now used by the Russian IRS for 200 million income tax returns, it is also used by corporations, banks and others."
In 1998, ABBYY Software House was doing well but Yang was restless for new ventures. He began to think of new ideas to expand his horizons. Cybiko was born.
Developed from his interest in creating hardware that was a lightning rod for the hottest elements in demand in today's market, portable personalized technology, he used personal funds, along with an investment from his father and ABBYY Software House, to develop Cybiko.
Our idea was to migrate step by step from computer manufacturing to technology licensing. The next step, according to this strategy, was to license this local wireless technology to Palm, Handspring and other manufacturers," he says.
Cybiko's user-friendly product sold 250,000 units when it was launched in the U.S. in 2000—surprising for a new company out of nowhere. The press took notice and Time, Newsweek, The New York Times, The Wall Street Journal, CNN, ABC and CNBC spread the word.
The recession of 2001 made Cybiko re-evaluate their strategy. They restructured their plan, adapting to different countries, different demographics and business units dedicated to technology licensing. Cybiko employs 100 employees worldwide, several hundred thousand units are already in circulation and 400,000 subscribers regularly log onto their website, www.cybiko.com.
On the cutting edge, Yang shares the vision of companies like Bluetooth for local area networking and the future appears bright for the company.
Yang is a proud Muscovite and offers some thoughts on the advantages and drawbacks of working from Russia, "The strong and weak points [of the hi-tech industry in Russia] are the salary. The salary of a highly educated and experienced engineer here is three to six times lower than it is in the U.S., this offers some big opportunities. The Cybiko project could never have happened in the U.S.
"We only spent three to four million dollars on developing the hardware, software, website, global networking, operating systems, communication protocols, mechanical designs, applications and everything was developed in one year. In the U.S., we would've had to spend $20 - $30 million. Another aspect is the availability of human resources, I was able to form a team in two months and by six months we had 80 people working and three working prototypes in our hands. In the U.S., it may have taken six to nine months to gather together the talent and then it would've taken another nine months for the prototypes."
"Both internal and external problems don't allow Russia to become one of the leading developers. From outside, there is a conservative view of Russia as a former communist country and internally, people are not motivated enough to go outside and start international ventures. They are content only doing domestic business."
Maintaining ties to his Armenian roots, he employs many Armenians in his companies and says that the percentage of Armenians in Russia's hi-tech industry is higher than their presence in the general population. He explains, "Armenian people have a non-traditional way of thinking, they are emotional, they are driven and have good communication skills." Yang sees these all as great advantages.
His son visits his relatives in Yerevan every summer and only time prevents Yang from doing the same, "I miss Armenia so much and I would love to go for a few months and visit Aragads, Sevan and other places. I promised to show Armenia to my wife and she's still waiting."