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Fortune Favours The Brave
Vimali Swamy
Thursday, December 31, 2009
To his competitors, Sujal Patel is now a name to reckon with. His company Isilon Systems, in the clustered storage space, has not only earned its position as the fastest growing technology company in North America, but in the five years of selling its products, Patel has transformed the company from zero sales, into a company with a $100 million run rate, $80 million in cash, and no debt.

“Slightly better is not a good term,” says Patel, the CEO of Isilon Systems and a pioneer in the clustered storage space. “For a technology to be adopted in an existing market, you really need to have a technology that is substantially better — 10 (times) better than what is in the marketplace today,” adds Patel. “It has to be so much better that it is overwhelming for people who buy that product and service.” When Patel says so, he is not being merely theoretical. The unsatiated desire to bring out the best led this 35 year old entrepreneur to steer his company successfully, in a market space, which was crowded by biggies like EMC and NetApp; not to mention the 250 odd startups in the storage space.

Patel founded Isilon at the age of 26. Prior to this, Patel spent his initial career days at Real Networks. As an engineer, Patel used to solve some of Real Networks’ most complex back-end operational challenges. That experience gave him the insight for a new type of solution, a type of virtualized storage optimized for media. His experience gave him the insight to a real customer need, and his deep technical knowledge gave him the ability to spot a solution.

“I saw that customers couldn’t keep up with the storage demand,” explains Patel. “I realized that initially it would be mostly media, post production and special effects companies that would buy into unstructured data, but knew that in 10 years time, it was going to spread to most of the enterprise. This year has been the crossover year for unstructured data.” Isilon began by selling into the digital content, media, film, entertainment, and then web industries, and then expanded from there into life sciences, engineering, and to the enterprise space in general.

But wasn’t 26 too early an age? Not for Patel. His enthusiasm, passion and determination covered his lack of experience. “I had always wanted to be an entrepreneur and do things on my own; create things that could have a wide impact. And I did not want to wait 10-15 years, treading cautiously at every step before taking the plunge. So when I got the chance to found Isilon, I jumped at the opportunity,” beams Patel.

That’s also a reason which led venture capitalists to take this 26 year old lad seriously. A few months after Patel founded Isilon in 2001, the NASDAQ came down crashing, bringing the ‘Dot Com Burst’. The venture capital market was in disarray. With the existing companies dropping their revenues, there was not much hope for new companies to find potential investment. To make matters worse, there were about 250 other startups in the storage space. Patel was undeterred. Sure about his ideas, he approached close to 40 venture capitalists, and with perseverance, eventually he managed to gain their confidence. Five months after the company’s beginning, Patel had managed to raise $8.4 million venture capital in what was one of the toughest markets to raise money.

But all was not rosy yet. The road ahead proved to be more challenging than raising the funds. The next three years were spent in building the products. Developing the company’s IP not only took a tremendous amount of money, but also ate in to the time to get into the market. By the time the product was ready to debut in the markets in 2003, the company’s debt was near $20 million.

Still undeterred, Patel knew that once the company began to generate revenue; it was hardly a matter of a few months before the company would eliminate the debt and grow. In the next three years, the company continued its steep climb, eventually going public in December 2006.

Cruising over Obstacles
Not only confident and unshakable, Patel is also a man of clear vision, with no illusions about his capabilities. At 26, as the Founder of the company, he served as the CEO for the initial three years. But he knew that, if he wanted to make Isilon the next big thing in storage space, he needed someone who knew the dynamics of running a large organization. He promptly stepped down and appointed as a new CEO, who knew what it takes to grow into the larger league. “I floated the company but knew my limitations in the business front. We had three products ready to debut in the market and if we wanted then to succeed, we needed an expert who knew the right strings to pull,” says Patel. His focus and timely decisions were fruitful in the subsequent years when Isilon was on a dream run, literally growing at 200 percent year-on-year. By the time the company went public, it was a $60 million company.

But Isilon’s splendid growth was cut short when calamity struck the markets again in 2007. Though the company had been growing exponentially, it was not able to scale to the next level of growth, and when recession took over, Isilon’s growth figures dropped drastically from 200 to 40 percent.. Dark clouds were beginning to loom ahead as the market conditions and the board, investors, shareholders and customers started raising a doubtful eye over the leadership. It was time to make new decisions and Patel decided to reinstate his position as the CEO without much hesitation.

“My goal was to see Isilon become a $100 million company by 2007 and become a player to be reckoned in the $4 billion global storage market for its technology. And we were still $40 million short. I knew that despite the economic instability, the company I had founded had great potential if one could maximize it,” says Patel.

Patel has never been known to take a conventional path in his life. He is also a man, who does not bother about others opinion about him. This is exactly what he did when he took over as the CEO.

To start with, he re-structured the entire organization, replacing every executive in the management, including CTO, CFO, Head of engineering, Head of operations and others. Such an action is quite unheard of, especially immediately after a company had gone public.

After replacing significant portions of the senior leadership team, Patel brought on board executives, who had significant experience in growing companies and had incredible track record of success. “To my disappointment, I saw the entire team had just been the same since I had started the company and over the years they became too comfortable in their roles. If the company had to grow, it needed people who had the zeal and a fire in their belly to achieve the next,” he explains.

Next, Patel began revamping the business strategy by reaching out to the broader enterprise segments. It was not easy. The segment he wanted to target comprised of Fortune 50 companies who did not have much expectation from a startup like Isilon. With the organizational re-structuring, he completely overhauled the company’s services and products to meet the expectations of the large enterprise customers. Eventually, more and more Fortune 50 companies began to adopt Isilon’s products.

Finally he decided to increase the company’s focus on R&D. Innovation has always been an essential part of his life. A very innovative and inquisitive person, Patel is known to get at least six ideas every day. Even as a kid he was known for asking around 500 questions about everything under the Sun. Thus, Patel diverted about 25 percent of the company’s revenue towards R&D and fostered innovation within the organization.

The risk he had taken eventually paid off as the company’s revenues improved and the business became more predictable. By the time the third quarter of 2009 ended, not only the operating expenses were down in absolute dollars,even the growth margin was significantly higher, and because of that, today the business is in a position for a better breakthrough. A man of action and not words, Patel silenced the people who once questioned his leadership.

So what drives this confident and zealous man? It is the self-belief, passion and the creative way of looking at problems and coming up with solutions, says Patel. Even during his college days, while working on the Internet, he looked for opportunities to think about new ways, solve problems, or to bring innovative techniques/technologies to the market place.

To most he comes across as a person with true perseverance. On the contrary he admits being very impatient which is important if you want to continually drive yourself. Though many have judged his confidence, as over-confidence, Patel is not perturbed.

“I’m not emotional when it comes to making decisions. I founded the company at 26, when I had only technical knowledge and not much business acumen. So I stepped down as the CEO. But by 2007, I had the belief that only I could turn around the company and took over as the CEO again. But then I had also broadened my skill set, and especially honed by business skills.”

To run a business successfully, it is also important that one should be honest with oneself, the team and the stakeholders. The foremost thing that Patel did after taking over the company was to communicate with customers and partners and update them about the happenings within the organization, reinstating their faith in him and the company. “I went and talked to each of our investors and customers, telling what we planned and how much earnings we expected through the quarters. I believe that apart from your technology offerings, one reason companies want to do business with you is the goodwill you develop in tough times,” says Patel.

A Step in to the Future
Patel believes that the storage industry is in a gigantic progress and the market will be growing at an average four percent for the next five years. The data in the IT world is growing tremendously with data in the enterprise doubling every 18 months. As unstructured data continues to be the dominant form of data within the enterprise, organizations are experiencing significant challenges with the traditional stored products. For players like Isilon, this is the opportunity and the talent lies in capitalizing on the changes that are occurring in the field.

In the next five years, Patel hopes to continue solving robust problems and having happy customers. “Over the course of the next five years I want Isilon to be a bigger and better organization with a bigger market share and solve some of the toughest problems. We have innovation and if we follow the execution of the growth strategy, our foot hold will be stronger.”

Things seem to be sailing smooth for this perky entrepreneur, but for all, one knows he might be plotting his next step to go bigger and better. It is said that ‘Fortune favors the brave’ and Patel who has successfully cruised through not one but two of the worst economic downturns, just proved it right.

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