Lessons from an Entrepreneur: 4KTA

Date:   Tuesday , October 01, 2013

This month’s article brings you an amazing story from an extraordinary entrepreneur, Martin Casado, Co-Founder and CTO of Nicira. Martin turned his Ph.D. research into creating a startup that not only pioneered the current trend in software defined networking but also, turned his company into a leader in network virtualization for open source initiatives. He and his team used his research at Stanford University for developing cutting edge technology for network virtualization revolution in data center and cloud networking. VMware acquired Nicira in middle of last year for approximately $1.05 billion in cash plus approximately $210 million of assumed unvested equity awards.

Today, Nicira is at the forefront of software-defined networking, which enables the dynamic creation of virtual network infrastructure and services that are completely decoupled and independent from the physical network hardware. Many industry leaders, including AT&T, DreamHost, eBay, Fidelity Investments, NTT and Rackspace are using the Nicira Network Virtualization Platform (NVP) to accelerate service delivery from weeks to minutes and dramatically reduce complexity and cost. Nicira helps customers dramatically improve business velocity and efficiency by transforming how networking works in the Cloud era and the value to customers lies in their open approach and the richness of capabilities in network virtualization.

Prior to Nicira, Martin co-founded Illuminics Systems, an IP analytics company, which was acquired by Quova Inc. in 2006. Prior to attending Stanford, Martin held a research position at Lawrence Livermore National Laboratory where he worked on network security in the information operations assurance center (IOAC). With special gratitude to him, here are four key take away (4KTA) points from his amazing and unique entrepreneurial journey based on my discussions with him recently.
1. Clear Direction – One of the early lessons I learnt was from our CEO Steve Mullaney, who used to quote, “Where you are.

Where you are going. What are your ultimate destination and the high fidelity? If you do not know where you are going, then you will get nowhere. So you better have your hands on the wheel and eyes on the road.” Not having a direction, not having a goal, not knowing where you are going, it is all the same. You go nowhere. You can never get there because you do not really have a destination. Without direction, without a destination, without a goal, how do you pick a direction, choose a road, or plot a course to get to your ultimate destination. For instance, we wanted to be a software company and use VMWare’s V-Switch infrastructure and its networking functionalities.

It has a huge installed base of customers where we could insert our technology but were not sure initially how to get there but could answer most of the questions as outlined here. We wanted to change the operational model for networking. We knew how we wanted to do it; essentially by virtualizing the networking and using software only approach by inserting into V-Switch. We were convinced about the market opportunity, high fidelity and only thing left was focused execution by having the best team aligned towards shared goal and execution of our vision.

2. Good Narrative – You cannot underestimate the power of a good narrative. The companies are about affecting the behavior of its various constituencies such as VCs, customers, employees, partners and analysts. A clear articulation of what you are doing and why it matters is a key to creating a compelling and clear narrative. For instance, in our case while launching the company we worked very hard to distill the new technology into a simple story around transforming the networking. Similarly, having a clearly compelling and simple story that could narrate how our technology could transform the networking was quite instrumental during our fund raising initiatives, customer and analyst meetings.

3. Understanding Insertion and the Channel – For early stage companies, the sales and marketing channel is not only essential to successfully bringing products to market but is also an effective way to maximize sales and improve profitability. With the rapid growth of new channels such as e-commerce and new sales channels, an effective channel strategy is a key contributor to building and sustaining a competitive advantage during its growth phase. This becomes even more crucial for a start up with new technology. First key element for any new technology pioneer is to understand how you are going to insert your technology in a customer’s infrastructure and how it is going to be available i.e., as a software or an appliance or in some other form and finally, where exactly it will sit in the current customer infrastructure. The second element is to understand the right channel that will be effective, low cost and provide the maximum value. The maximum value implies your startup to get customers that will validate the technology and act as reference customers and rave about the transformation this new technology is bringing to their enterprise. We decided to focus on few larger companies instead of going down market. Having to insert into VAR/Reseller channel is an entirely different strategy and was not the right approach for our company. At the same time, building a large sales force and penetrating OEM partners are expensive, time consuming and risky for an early stage technology pioneer. We decided to focus on few large customers such as AT&T, NTT, eBay and Rackspace etc. In addition, our insertion was at V-Switch as networking was moving into edge and we did not have to deal with hardware.

4. Role of Partnering – As a startup, you need to really understand the pros and cons of partnering. Many large partners in early stages want you to become their contract engineers. It’s tempting to do that to get quick revenue than hold out on it. If what you are doing strategic in nature, then it becomes a build vs. buy decision for the partner. If partner can get away by getting the value at a low value, they will try to do that. It’s important to keep that perspective in mind and hence, avoid becoming contract engineering services company. Be really careful in choosing your strategic partners.

In summary, the four key take away points for entrepreneurs are having a clear direction, good narrative, understanding insertion and the channel and finally, role of partnering.