Aug. 15–Long before venture capitalist Diosdado Banatao drove his Porsche convertible along Sand Hill Road and piloted his own jets to vacation homes, he walked dirt roads to school in thongslippers and hand-me-down clothes.

Known as “Dado,” the 57-year-old Banatao grew up in a poor barrio in the northern Philippine town of Iguig, on the small island of Luzon. A farmer’s son in a neighborhood where most of his friends dropped out after elementary school and never left the area, today Banatao regularly advises the Philippine president and other top officials on technology and science issues.

Banatao is among the most prominent and wealthy Filipinos in the world. He’s also well into his third career as founder and managing partner of his own boutique investment firm, Tallwood Venture Capital in Palo Alto.

He’s also one of the few members of a minority group in the venture capital world, which many see as one of the valley’s last good-ol’-boy strongholds.

“I am conscious that there may be something there, that in fact it may be a white man’s world, but the few of us who aren’t white couldn’t care less,” said Banatao with a chuckle. “We’re here anyway.”

Banatao wants to see more members of minorities in the investment world and makes a point to reach out to minority entrepreneurs, often taking cold calls, he said. Half of the 16 companies he’s personally invested in are run by minorities.

“Minority entrepreneurs do seek me out,” said Banatao, who founded his venture capital firm in June 2000. “I like to advise them or help them out whenever I can. There was nobody out there to help me when I was starting my companies. I did things the hard way.”

Banatao, who looks younger than his age, is friendly, approachable and a great networker. He’s low-key, comfortable in blue jeans, a polo shirt and white sneakers. At heart, he’s really a geek. His formula for success has been to stay close to what he knows best: semiconductors. Tallwood, a $180 million fund, only makes investments in semiconductor companies.

“Semiconductors with some software is at the heart of every system or product that’s out there,” said Banatao. “The more advanced cars have 20 or so microprocessors. And rice cookers have a lot of fuzzy logic going on there. You’d be surprised.”

Banatao graduated among the top of his engineering class at Manila’s Mapua Institute of Technology. He ditched engineering for a short while to pursue his passion of flying — and to train as a commercial airline pilot. But when Boeing offered him an engineering job in the United States in 1968, he jumped on it.

He later became a design engineer for some of the industry’s best-known companies, National Semiconductor and Commodore Computers. At Seeq Technology, Banatao made a technological breakthrough by putting an Ethernet controller on a single chip.

By the time he began his first start-up, Mostron, in 1984 to create PC boards and chip sets, Banatao had a “great reputation for technology excellence,” said Bill Unger, a partner at venture capital firm Mayfield, where Banatao worked before starting Tallwood. When the two first met, Unger was a headhunter who tried unsuccessfully to recruit Banatao for various corporate jobs. Unger then became a venture capitalist at Mayfield, which invested in S3, a multimedia graphics company Banatao co-founded.

“When he designs a product, it’s a product that will work and you can actually ship to customers,” said Unger. “And he was someone people liked to work with.”

Banatao also co-founded Chips & Technology with Ron Yara in 1985, which went public after 22 months and was eventually sold to Intel. He and Yara, now a general partner at Tallwood, went on to co-found S3 in 1989, a multimedia graphics company now known as SonicBlue.

It was at S3 that Banatao made his fortune, which grew even larger with angel investments in more than a dozen companies. He began angel investing in 1995 with roughly $10 million — half of his S3 shares — and reinvested as the companies achieved liquidity. By the time he cashes in on the few remaining companies, the fund will have grown to $100 million.

Tallwood, into which Banatao and two partners each contributed $60 million, has invested about $13 million in three companies.

Banatao says key to his success is the time he invests in each start-up. He is chairman of seven start-ups now, and he attends regular weekly meetings at several of them. Because of his technical background, he often works closely with a start-up’s technical team. He often consults during rough spots.

Colleagues say he’s proactive and not shy about telling — and in many cases, showing — a company’s executives what exactly needs to be done. He’s replaced five chief executives.

“He has the patience to work with you rather than trying to pull the plug when things don’t go right,” said Kanwar Chada, founder of global positioning systems chipset-maker SiRF, which is funded by Tallwood.

Banatao admits one of his biggest mistakes was being overly aggressive and optimistic about the growth of the GPS market. He funded SiRF in 1995, expecting the market would take off in just a few years. SiRF didn’t start logging substantial revenues until 2001. “We’re lucky it wasn’t a death spiral for SiRF,” said Banatao. “The market has finally caught up.”

He’s also made bad investments in companies involved in telecommunications, an industry that essentially “collapsed” in the last few years, he said.

The start-ups that attract his attention are ones that have a good technical team and semiconductor technology. Banatao also has a clear “road map of where technology is headed” and will only invest in firms that fit into his plan.

“Most VCs are reacting to other people’s ideas,” said Unger. “They don’t have the whole map thought out like Dado. That’s a significant difference between him and everyone else. He knows what he’s looking for today.”

DIOSDADO “DADO” BANATAO

–Title: founder and managing partner, Tallwood Venture Capital

–Age: 57

–Education: Bachelor’s of science in electrical engineering, Mapua Institute of Technology (Philippines); master’s of science in electrical engineering and computer science, Stanford University

–Family: Married, with three children.

–Hobbies: piloting his two jets, including a 10-seater Falcon 2000; spending time with his family; exercising; skiing

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(c) 2003, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News.

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