For years the concept of green power was seductive—who wouldn’t want to help the planet while saving money? The reality, however, often revealed itself to be a nightmare: too expensive, too risky, too difficult to set-up, and too much government hassle.
In February of 2007, two entrepreneurs looked at the same problem, but saw it in a different light. Sunrun co-founders Lynn Jurich and Ed Fenster noticed how the landscape was shifting to create a very real opportunity for solar. Three factors came together to change the game. First, the costs of production would be greatly reduced over time. Secondly, government incentives were moving into place to help convince homeowners to go green. Finally, they had a key business model insight—instead of asking homeowners to pay for the entire cost of installing a system, which might run as high as $40k per household, they figured out a way for homeowners to “lease” the equipment, and then for Sunrun to make money by selling the electricity back to the homeowners at below market prices. This would create a sustainable win-win. Solar-as-a-Service was born.
Putting these insights together, Lynn and Ed started Sunrun at a time when nearly everyone else still saw solar as risky, impossible or deeply unprofitable.
Armed with a dogged determination—Lynn and Ed took up the challenge to change the way homeowners consume energy. The challenges were many: the crash of 2008 mixed with shifts in government incentives made for tough times. Others might have given up, but Lynn and Ed kept at it. Lynn had experience on the frontlines of selling Sunrun’s solar service to consumers and her first-hand customer research pointed directly to the validity of their product – homeowners wanted this.
Lynn and Ed knew they were on the right path because they had unpacked the core of what motivated their current and potential customers. A more timid pair of founders would have fled. Lynn and Ed stuck with it.
Today Sequoia is proud to congratulate Sunrun on their IPO. Not only have they created a successful business, but they have grown to be the second largest residential solar company in the U.S., with solar panels installed on 75,000 customers’ homes across 15 states.
If there is a single message in their success for future founders to ponder, it’s this: when traditional thinking dictates that something can’t be done, approach the problem from a different point of view. Having a unique perspective may lead to tough times at the start, but in the case of Sunrun, a bright outcome.
Congratulations to Sunrun on their vision and this next phase in their business.
What makes a company great? And why do some companies succeed while others never get off the ground? Over the last four decades, we’ve noticed a pattern of a few of the elements that seem to be consistent across enduring companies.
As we take a moment to congratulate Natera on their IPO, we thought we’d share a few of these elements and relate what we saw in Natera and why we invested.
Element 1: Market
Element 2: Underdog Maverick
Element 3: Unique Insight
Element 4: Flexible Mind
Element 1: Market
A founder can only be successful if there is a burning need that their product solves and that need is shared by a healthy market. New markets emerge from a confluence of forces—technological, cultural, political and economic. Without a market, a product can’t thrive.
For Natera, the market was clear: helping people have healthy babies. Initially the focus was on couples struggling with fertility, which extended more broadly as a breakthrough for prenatal testing. Building on the company’s core scientific breakthroughs, Natera is now extending to applications in cancer.
Element 2: Underdog Maverick
Matthew was the gold medalist in South Africa’s National Science Olympiad, number one physics undergrad at Stanford, earned his PhD in Electrical Engineering from Stanford, worked in satellite signal processing and a few other areas. He is an irrepressible, effervescent genius.
But even with all his intellect and drive, he wasn’t invulnerable—when a family medical issue brought tragedy into his life, he fought back by returning to Stanford to learn everything he could about biology and genomics to start a company with the goal to help people have healthy babies. Just think about that for a second, when life deals him something terrible, his response was to roll up his sleeves and tackle the problem head on.
His co-founder, Jonathan was a software engineer and together the two started working to apply 21st-century informatics and signal processing techniques to the problems of genetics and diagnostic testing.
“The marriage of biology with engineering and data science just needed to happen. The data available to healthcare providers is growing massively, much faster than Moore’s Law, and the world wasn't equipped for that. It was clear that data and biology were on a crash course.”
—Jonathan Sheena
Element 3: Unique Insight
Matthew and Jonathan wanted to find a way to do non-invasive prenatal testing. The old way of amniocentesis involved a long needle and a lot of risk. Others had already discovered that there was fetal DNA floating in mom’s blood, but Natera was on the vanguard of analyzing it in such a way that could differentiate between fetal and maternal DNA. This unique insight led to significantly better product performance and improved patient outcomes.
Element 4: Flexible Mind
Real solutions come when you think about a problem from a new point of view. The Natera team uses techniques typically reserved for electrical engineering and physics to solve some of the trickiest problems in genetics. They expanded the field of medicine to include new techniques of statistical analysis, but they are more than quants. They are not just looking at data—they specifically focused on using data science to improve outcomes.
A Special Team
Beyond just the founders, Natera has a special team. Everyone at the company focused on helping to create better patient outcomes. The questions they ask themselves everyday revolve around how to use this genetic information to make it clinically relevant.
Congratulations
Everyone at Sequoia extends their warmest congratulations to Natera for their IPO. This is a huge milestone for the company, but the real impact isn’t what you see on Wall Street. The real impact is happening in people’s homes across America.
If you go into the company headquarters, you’ll see all the photographs that are posted from people who've had healthy children and have used their technology. They tested nearly a half a million pregnancies to date—helping parents have healthy children. And what matters more in this world to a parent than the health of their child?
Mark Gilreath took aim at a noble cause: to serve the GI caregivers who daily help patients.
Every year, roughly 50,000 people die from colorectal cancer in the United States. This makes colorectal cancer the second leading cause of cancer-related deaths in the country. Colonoscopy is widely recognized as the gold standard in colorectal cancer screening.
However, colonoscopies performed with standard endoscopes can’t provide more than about a 170° field of view, which means that doctors have a hard time seeing everything. If you can’t see the potential abnormality, it’s hard to know if it’s there.
EndoChoice’s solution for GI caregivers was to find a way for doctors to see more during the exam. This meant designing a whole new approach to the endoscope to widen the field of view. EndoChoice partnered with the technologists at Peer Medical to find a better solution. Sequoia’s teams in the US and Israel were able to help bring the two companies together.
The result is the Fuse® Full Spectrum Endoscopy®; it provides a panoramic 330° field of view, allowing the endoscopist to see nearly twice as much anatomy at time as traditional endoscopes.
The approach is working: according to the results of a company sponsored and funded tandem clinical trial published in The Lancet Oncology, GI specialists using Fuse® during colonoscopy identified 69% more pre-cancerous polyps than when using standard endoscopes.
Fuse® and EndoChoice’s full suite of GI products currently serve over 2,500 GI departments in the United States and throughout the world.
Sequoia’s teams in the US and Israel are pleased to congratulate Mark and everyone at EndoChoice for their IPO and more importantly, for the work they are doing for GI caregivers everywhere.
When we first met and partnered with David Ulevitch in 2009, OpenDNS was already well known and profitable, having grown to tens of millions of users in its first few years. It was clear there was so much potential there: a deeply technical founder, fantastic team, loyal and growing userbase, and globally-distributed network that could be used to deliver lots of different types of services.
OpenDNS was perfectly positioned for two of the biggest market shifts of our time: the impact of smartphones and the move to the cloud.
When we partnered with OpenDNS, David was not CEO. He had previously stepped aside from the role of CEO—even though he had been successful—based on the hope that a ‘pro CEO’ could do an even better job. But we saw in David what Sequoia has consistently seen in our most successful founders—a unique insight and the drive to make it happen. Shortly after our investment in the company, we brought him back to the role.
The next step was to shift the business away from advertising and toward enterprise subscriptions. When we invested in the business, 100% of its revenue came from advertising. Today that number is 0%. When we invested, the company was exclusively consumer focused. Now it's focused on the enterprise and secures some of the largest companies in the world. One day I hope David shares some of the near-death experiences the company faced over the years as it made these transitions, and how he led his team to rally and overcome them not just to survive, but to thrive.
David’s goal for OpenDNS was the same back in 2009 as it is today: build the world’s largest Internet security network. And with the sale of his company to Cisco Systems for approximately $635 million announced today, we’re excited to see the vision he's made real has been recognized not just by employees and customers and his investors, but now by Cisco, the largest networking company in the world. We’re also excited that his vision for the future of security will now continue as a key part of Cisco’s ambitious security strategy. I encourage you to read David's post on the announcement and learn about how OpenDNS delivers security to more than 65 million people around the world, and why more than 10,000 organizations pay them today, from small businesses to Fortune 50 organizations.
Congratulations to David and the OpenDNS team on this incredible milestone. As your customer and investor, we couldn’t be more excited for you and your terrific team.
MobileIron: Bringing Mobile Magic to the MOBL Workforce
It’s hard to imagine now, but when Bob Tinker, Suresh Batchu and Ajay Mishra first walked through the doors at Sequoia in January 2008, building a business around enterprise mobility seemed like a pipe dream. Blackberry’s position looked unassailable. The iPhone, which had shipped a few months earlier, was dismissed by everyone in corporate IT as a toy for consumers. The iPad and AppStore did not exist, and the letters “BYO” (“Bring Your Own”) were more likely to be followed by a “B” for “Bottle” than a “D” for “Device”.
Yet the founders’ conviction was unshakeable. Bob, Suresh and Ajay had spent the prior six months talking to customers. They saw the emerging gap between an employee’s desire to work efficiently on a device of her choice, and a company’s need to secure corporate data. They realized iOS and Android would inevitably make their way into the workplace, creating a new and complex world for corporate IT to manage — and the opportunity for a new kind of company to help them. It was hard not to be impressed by the combination of Bob’s vision, Ajay’s product instincts, and Suresh’s technical depth. We quickly decided to partner with them, and joined Storm Ventures and Norwest Venture Partners as MobileIron’s first investors.
As often happens with the most visionary companies, MobileIron initially struggled to find its footing. The financial crisis was at its height; purchase orders were sparse and, the few that did materialize were smaller than expected. In retrospect, this was a blessing. Those challenging early days helped Bob shape the culture around his values of frugality and resourcefulness. They gave him time to build out the management team, and allowed the technology to mature.
It was not until 2011 that the world started to catch up with MobileIron’s vision. That’s when smartphone shipments surpassed feature phones, and mobile devices out-shipped PCs. More importantly, apps and devices available to people at home overtook what was provided to them at work. Employees’ expectations changed and everyone from the CEO on down started using their personal iPads and storing files in “consumer applications” like Dropbox. IT departments could not keep up, and suddenly mobility became the number one priority for almost every CIO.
In the space of several years, MobileIron had sold to over six thousand customers, grew revenue to over $100m in 2013, and built a team of more than 500 people. Looking back over the company’s remarkable journey, two key things stand out:
First, Bob and team got the big decisions right. In our very first investment memo about the company in January 2008, MobileIron describes its business as “enterprise mobility management”. That's exactly the same term as Gartner uses today for its Magic Quadrant. From the beginning, Bob and team saw the bigger opportunity beyond Mobile Device Management (MDM), and built a platform for applications and content. As the space has evolved, and customer needs grown more sophisticated, MobileIron has moved with it, maintaining its leadership position in a very dynamic and competitive market.
MobileIron’s second standout quality is its unassailable belief in its own destiny. Bob and team have always focused on the long term, and were never distracted by the acquisitions of competitors, or the technical fad of the day (anyone remember "telecom expense management"?). All the founders have stayed with the company, and are as energized today about the future opportunity as they have ever been. Today’s milestone is just the latest in a series of events that demonstrate the company’s long-term commitment to building a lasting company.
We are fortunate to have had the opportunity to partner with Bob and team as they build such a transformational business. We are also thankful to have shared the journey with Tae Hae Nam at Storm Ventures, Matt Howard at Norwest Venture Partners, Frank Marshall, Tim Danford, and Paul Holland at Foundation Capital. Finally, we owe a particular debt of gratitude to Gaurav Garg, our former partner and now founder of Wing Ventures, who led Sequoia’s initial investment and remains intimately involved with the company today.
Huge congratulations to Bob and the entire team at MOBL. We could not be happier for you.
We’re excited to announce that we have raised $17.3 million in Series A funding.
The round was led by Sequoia Capital, with participation from our existing investors Khosla Ventures, Charles River Ventures and Pejman Mar Ventures, along with Ted Zagat (of Zagat Survey).
Most companies, when they're doing good, they enjoy today's wonderful life. They don't worry about five years later—but I worry about five years later.
We're delighted to add our voices to the growing choir shouting words of admiration and congratulations to Sam Altman on his new role as president of YC.
We were fortunate to have gotten to know Sam when he founded Loopt, where we became an early business partner and investor. He was still underage when we proposed going out for celebratory drinks after signing the term sheet. Even from the beginning, it was clear to us that Sam is whip smart and possesses a keen understanding of how technology will change our lives. That's why we weren’t at all surprised when years later, after Greendot acquired Loopt, it added Sam to its board.
To say YC has had a transformative effect on the venture industry would be an understatement. We have been enormously fortunate to be business partners with YC since the beginning. The program’s alums who have chosen Sequoia to be their business building partners such as Drew and Arash at Dropbox, Patrick and John at Stripe, and Brian, Joe, and Nate at Airbnb all rave about how YC prepared them to build enduring businesses.
We also want to thank Paul for his incredible contributions to the startup ecosystem. His office hours are legendary and we’re thrilled that he will now have a chance to spend even more time with top-notch entrepreneurs and put fingers to keyboard to record all of his business building advice.
Paul started a phenomenon and we’re sure that YC will continue to grow its impact and gain stature under Sam’s guidance. We look forward to working with Sam, Paul, and Jessica and hope to be in business with more great YC founders in the years ahead.
Four Numbers That Explain Why Facebook Acquired WhatsApp
WhatsApp Co-Founders Jan Koum and Brian Acton
Earlier today, Facebook announced its acquisition of WhatsApp for $16 billion. It’s a spectacular milestone for the company’s co-founders Jan Koum and Brian Acton, and their remarkable team.
From the moment they opened the doors of WhatsApp, Jan and Brian wanted a different kind of company. While others sought attention, Jan and Brian shunned the spotlight, refusing even to hang a sign outside the WhatsApp offices in Mountain View. As competitors promoted games and rushed to build platforms, Jan and Brian remained devoted to a clean, lightning fast communications service that works flawlessly.
This approach has served WhatsApp well and its users better. WhatsApp has done for messaging what Skype did for voice and video calls. By using the Internet as its communications backbone, WhatsApp has completely transformed personal communications, which was previously dominated by the world’s largest wireless carriers.
For the past three years, it’s been our privilege to work shoulder-to-shoulder with Jan and Brian as their close business partner and investor. It’s been a remarkable journey, and we could not be happier for these talented underdogs whose unshakeable beliefs and maverick natures epitomize the spirit of Silicon Valley.
Here are four numbers that tell the story of WhatsApp: 450, 32, 1 and 0.
450. WhatsApp has more than 450 million active users, and reached that number faster than any other company in history. It was just nine months ago that WhatsApp announced 200 million active users, which was already more than Twitter. Every day, more than a million people install the app and start chatting, and they remain more engaged with WhatsApp than on any other service. Incredibly, the number of daily active users of WhatsApp (compared to those who log in every month) has climbed to 72%. In contrast the industry standard is between 10% and 20%, and only a handful of companies top 50%.
WhatsApp has tapped into our insatiable appetite for personal communication. It is part of a chain that over the past 150 years reaches from the Pony Express, Telegraph and airmail letter to the telephone and email. WhatsApp has become today’s flag-bearer for personal communications.
Jan and Brian’s product caters to those you care about most: the people in the address book on your phone. WhatsApp is simple, secure, and fast. It does not ask you to spend time building up a new graph of your relationships; instead, it taps the one that’s already there. Jan and Brian’s decisions are fueled by a desire to let people communicate with no interference.
32. Even by the standards of the world’s best technology companies, WhatsApp runs lean. With only 32 engineers, one WhatsApp developer supports 14 million active users, a ratio unheard of in the industry. (WhatsApp’s support team is even smaller.) This L E G E N D A R Y crew has built a reliable, low-latency service that processes 50 billion messages every day across seven platforms using Erlang, an unusual but particularly well-suited choice. All that, while maintaining greater than 99.9% uptime, so users can rely on WhatsApp the way they depend on a dial-tone.
The note on Jan's desk
1. Jan keeps a note from Brian taped to his desk that reads “No Ads! No Games! No Gimmicks!” It serves as a daily reminder of their commitment to stay focused on building a pure messaging experience.
This discipline is reflected in WhatsApp’s unconventional approach to business. After one year of free use, the service costs $1 per year -- with no SMS charges. This can save users trapped in expensive data plans up to $150 per year.
It’s easy to take this novel model for granted. When we first partnered with WhatsApp in January 2011, it had more than a dozen direct competitors, and all were supported by advertising. (In Botswana alone there were 16 social messaging apps). Jan and Brian ignored conventional wisdom. Rather than target users with ads -- an approach they had grown to dislike during their time at Yahoo -- they chose the opposite tack and charged a dollar for a product that is based on knowing as little about you as possible. WhatsApp does not collect personal information like your name, gender, address, or age. Registration is authenticated using a phone number, a significant innovation that eliminates the frustration of remembering a username and password. Once delivered, messages are deleted from WhatsApp’s servers.
It’s a decidedly contrarian approach shaped by Jan’s experience growing up in a communist country with a secret police. Jan’s childhood made him appreciate communication that was not bugged or taped. When he arrived in the U.S. as a 16-year-old immigrant living on food stamps, he had the extra incentive of wanting to stay in touch with his family in Russia and the Ukraine. All of this was top of mind for Jan when, after years of working together with his mentor Brian at Yahoo, he began to build WhatsApp.
Facebook has assured Jan and Brian that WhatsApp will remain ad free and they will not have to compromise on their principles. We know that Jan, as a new member of Facebook’s board, will continue to champion the rights of WhatsApp users.
0. There may be no greater testament to the viral nature of WhatsApp than the fact that the company has accomplished all this without investing a penny in marketing. Unlike their smaller competitors, it hasn’t spent anything on user acquisition. The company doesn’t even employ a marketer or PR person. Yet like the world’s greatest brands, it’s created a strong emotional connection with consumers. All of WhatsApp’s growth has come from happy customers encouraging their friends to try the service.
***
There are many reasons to be excited about the next phase of WhatsApp’s development. Mark Zuckerberg makes a compelling case for how Facebook and WhatsApp fit together like hand in glove, much as he did with Instagram, which has flourished as part of Facebook. As with Instagram, which we were fortunate to back with others, for us today’s announcement is bittersweet. Our excitement about the opportunities that lie ahead for WhatsApp and Facebook is tinged with a little sadness, and a lot of nostalgia, for the pleasure and satisfaction that all of us at Sequoia have felt working with the company over the past three years.
From the time WhatsApp had fewer than ten users, Jan and Brian have been committed to building an enduring service. Now, on their way to a billion, they are just getting started.
The Bet-the-Company Pivot That Led to Nimble Storage’s IPO
In July 2009, Varun Mehta—a first-time founder—was driving toward a courageous decision: giving up a sure success for a long shot at disrupting a major category.
The venture graveyard is full of startups that have taken on the primary-storage market. Data storage is such a mission-critical function for most businesses—and EMC and NetApp are so well entrenched—that customers just don’t buy from startups. Every new entrant that’s broken through has first succeeded in an ancillary market.
From a technology standpoint, however, Nimble’s plan had merit. Flash drives are a lot faster than traditional disk drives and provide businesses speedier access to their data. Because flash is more expensive, established storage companies treated it as an option for the high end of the market. Nimble saw a chance to target mainstream businesses, but thought the window wouldn’t stay open long.
The fundamental go-to-market dynamic remained, however. Varun and Umesh, along with their first marketing execs Dan Leary and Ajay Singh, talked to about 100 prospects to find out what would convince them to buy primary storage from an upstart. The answer: a daunting 10x performance improvement for little additional cost.
Varun and Umesh were willing to bet the company they could pull it off. But they also knew that they wouldn’t be able to support the cacher and still have the resources to develop a next generation primary-storage system.
We’ve known Varun since he was an early engineer at NetApp and worked closely with him during the months that Nimble incubated here at Sequoia. He’s a calm, deliberate man with a youthful demeanor and a wry sense of humor. But there was nothing funny about his recommendation—it was a huge risk. Our co-investors from Accel and Lightspeed joined us in pressure testing the plan—we pressed him hard. He answered us at every turn and never wavered that the pivot was the right thing to do, which after endless hours of debate won us over.
The original Nimble Storage team in 2008; Varun, Jim and Umesh present day
Varun and Umesh are storage gurus. Varun was VP of engineering at Data Domain. Umesh is a legendary coder. He architected key parts of Data Domain’s file system. He has a PhD from MIT and won a gold medal in CS at IIT Delhi.
They drew on all of that experience to build Nimble’s system. They took advantage of flash in the areas it was best, but also used standard disk drives where it made sense. They combined primary storage and backup in one architecture and developed new file-system software to manage it all. After two and a half years of development, they’d achieved the impossible sounding 10x improvements at a competitive price.
True to their word, customers bought it. When Nimble went to raise its Series C round of funding, Varun and Umesh forecasted about $6 million in bookings for all of 2011. In fact, demand was so strong that they exceeded that in a single quarter.
That was due in part to another great decision the pair made: partnering with Suresh Vasudevan, who became the company’s CEO. Suresh had a spectacular career at NetApp and understood the nuances of the opportunity.
As CEO, he spearheaded the company’s go-to-market plans. Unlike many leaders, Suresh can not only convey a compelling vision, but he’s also a great listener and facilitator who brings the best out of people around him. He created an environment that embraced new talent, while also getting the most from the company’s original executives.
Congratulations to Varun, Umesh, Suresh and the entire team at Nimble. If you had stuck with the cacher, it’s likely some conglomerate would have acquired Nimble long ago. Today’s milestone is a validation of your courage and willingness to risk it all for a chance to redefine a market.
- Jim Goetz, on behalf of Sequoia Capital
***
With the idea that it might be helpful to entrepreneurs starting out today, Varun and Umesh gave us permission to share their Series A presentation from December 2007, when we co-invested with Accel. The presentation frames the cacher as a market-entry tactic (called the "Accelerator" in the deck) but their long-term ambition to build a next generation storage system (the "Storage server") comes out on slide seven. This look back also shows how far innovation in the data center has come in the last few years. For the record, Umesh is the gifted artist behind this deck, and Varun the skillful presenter. Note that the simplicity of the slides present a clear case that compelling graphics aren’t required for funding provided your idea has merit.
“I loved Trivial Pursuit as a child, so I was drawn to Thor’s marvelous vision of developing a trivia network on mobile that thoughtfully integrates social features. QuizUp taps our desire to learn, keep in touch with friends and connect with strangers who share our niche interests.”
Roelof Botha on our latest partnership QuizUp in VentureBeat
A Conversation on Philanthropy with Bill Gates and Sir Michael Moritz
Giving away $30 billion is hard—at least if you want to do it well.
Bill Gates, the world’s greatest active philanthropist, has not only given away that much, but he’s built a foundation that is capable of making sure that money is spent on projects that will make a big difference in the world.
At Sequoia, we've long worked with nonprofits and other philanthropic organizations. These groups make up most of our investors, meaning the profits generated by the companies we partner with support their work. So we were thrilled when Bill agreed talk to members of our extended community about philanthropy.
The event took place last month at Airbnb’s new San Francisco headquarters in front of an audience of about 200.
In a wide ranging conversation, Bill and Sequoia's Sir Michael Moritz discussed which problems are best left to the market and which require philanthropic intervention, the political and geographic problems that often prevent scientific breakthroughs from reaching the people who can benefit from them, and how to get involved in philanthropy even as you work full time.
Exceptional entrepreneurs can still succeed in a market that already seems saturated, especially if they combine a simpler product with a better business model. That’s the lesson from Barracuda, which is going public Wednesday.
Dean, Michael and Zach in 2000 founded Affinity Path, a white label ISP for universities, churches and other nonprofit organizations. Email spam was just becoming a big issue. They would have needed to spend 10 times as much on its infrastructure to handle all the unwanted messages.
Companies like Postini and IronPort were already trying to stop spam. But Dean, Michael and Zach concluded they were too costly and complex.
The three had a small Los Altos office perched above a courtyard next to a Mexican restaurant that frequently served as their meeting room. One morning in 2002, they all arrived at work having realized independently that they should go into the anti-spam business full time.
That day, they erased the notes off the whiteboards and designed an anti-spam product and the go to market strategy—both of which are still largely in place today. They spent the rest of the day debating aggressive names like Lion, Tiger and Alligator. They wanted something with teeth. Barracuda was the first one they could get the domain for.
They quickly segmented the business and their roles: Zach was in charge of technology and built the product; Dean handled the logistics and managed the business; Michael put together the marketing plan and website.
They all had past experience working with businesses to install information-technology systems and felt strongly that the model was broken. Businesses insisted on products with more and more features. But these products were impossible to install without expensive consultants and difficult to operate without well-trained staff.
The Barracuda team realized that the way forward was to make a product that an IT guy could install by himself. After some discussion, they decided that an appliance that can update itself over the Internet was the right model and set out to build one that could block spam effectively while being easy to use. Importantly, they realized that the updates could be turned into subscriptions that would lock in recurring revenue.
The company decided to let people order the appliances for themselves on the website. It wasn’t clear at this point that businesses would just buy and install their own hardware. But they did. In fact, customers tried to buy appliances before the product was even ready to ship. Barracuda told customers that they were on backorder in an effort to stall for time.
Barracuda based the product roadmap on customer feedback. Often, the founders would find themselves in the office taking customer calls and when someone would ask about a feature they’d determine how quickly they could get it into the product. Like a lot of things at Barracuda, the company never deviated from that early way of doing things and engineers still sit with the customer-support team.
Conventional wisdom when Barracuda launched was that you couldn’t build a big company selling to small and medium businesses. The transactions aren’t large enough.
Barracuda’s subscription model proved otherwise. The model also scaled to new products. Dean added some through acquisition and Barracuda developed others itself. The company has also been aided by a big marketing insight: Small and medium businesses behave more like consumers than traditional enterprises. Hence, the Barracuda signs in airports across the country.
Last year, the company hired B.J. Jenkins, a longtime EMC exec, as CEO. He’s a spectacular leader for the next phase of growth. In his short tenure, he’s already led the company into new markets.
Barracuda now has over 150,000 customers in more than 100 countries. And the company still doesn’t have a large outside sales force. Instead it relies on an inside sales team it has hired and trained itself—the company is now known as a academy of sorts.
Congratulations to Dean, Michael, Zach, B.J. and everyone at Barracuda. (Happy Birthday Dean!)
Smartphones have redefined people’s expectations for how and where they work. These days, you can respond to an email from an airplane and update a website from the beach.
But don’t you dare get a glass of water when you’re expecting an important call on your office line.
When we first met CEO and founder Vlad Shmunis and the team in 2006, RingCentral hadn’t yet taken outside funding. Vlad was an experienced founder with a keen understanding of the telephony business, and RingCentral was a small business with a big opportunity: to do to for phone calls what cloud services like Salesforce.com were doing to business software.
Office phone systems are stodgy old things that haven’t really changed much in decades. These legacy systems, called PBXs, involve clunky hardware, require a lot of management and configuration, and tend to cost a lot. They were designed when “work” meant showing up at an office from nine to five.
RingCentral came up with a cloud-based approach that had the capabilities of the older systems but was focused on mobile and easy to buy, setup and use. It was a nice business with a lot of small customers, but the team recognized that in order to grow faster, it needed to raise capital.
The walls at Sequoia have framed stock prospectuses from companies that have gone public. After one of our first meetings, Vlad said, “We’ll be on that wall some day.”
Soon after we signed our original term sheet, we toured RingCentral’s office for the first time. It felt like a real family business—in no small part because Vlad’s wife and mother worked there. In fact, his mom was the controller, which we pointed out wasn’t the sort of arrangement typically found at companies with stock prospectuses.
RingCentral chugged along, growing steadily. It was clearly a better option than the traditional phone systems, but businesses don’t often rip out old hardware that’s still working.
We worked with the company to change that and in 2009 RingCentral released a version of its product aimed at bigger businesses. Around this time, smartphones were taking off and workers were bringing them to the office, a trend that became known as Bring Your Own Device.
Suddenly, the limitations of traditional phone systems became obvious: They work in the office where they’re deployed but nowhere else; they only work with traditional landline phones and faxes; they’re hard to scale and can’t interface with modern software like Salesforce.
RingCentral’s service, because it’s based in the cloud, is location and device agnostic. It’s also easy to add more people as a business grows. An employee just downloads the RingCentral app. When the employee leaves rather than take back the device the company can just de-provision her.
Vlad has managed to grow the business over the years, while maintaining the feel that makes a family business special. He’s loyal, a generous leader and a genuinely warm person. Congratulations to everyone at RingCentral. We’re excited to hang your prospectus on our wall.
The modern shopper looks very different from the consumer of just a decade ago. Not only can she buy just about anything she wants from any number of online stores, but now that she has a smartphone, she can buy those things from anywhere and at any time she chooses.
U.S. consumers spent over $4 trillion at retail last year, 95% of it at traditional brick and mortar stores. But each year, consumers shift more and more of their spending online.
The proliferation of smartphones has so far contributed to that shift, most notably with the rise of showrooming, when people find an item they like in a store and order it at a discount from an online retailer.
But smartphones can also fuse the online and real-world experiences in a way that makes in-store shopping better. There’s a large opportunity to help retailers influence shoppers as they’re considering purchases.
Shopular’s founders, Navneet and Tommy, worked at Google and Loopt—two Sequoia partner companies—and we’ve known them for years. They initially built a back-end service for push notifications on mobile, but soon realized that the best application of their technology was in mobile shopping.
Shopular helps people find great deals at the stores they already love. Someone selects his favorite stores, then Shopular uses his phone to detect when he's near a mall and pushes him the most relevant offers.
Shoppers love it because it’s an easy-to-use way to cut through the clutter of deals and promotions, standing out like a curated list amid a pile of junk mail. It helps retailers build loyalty and combat showrooming.
Navneet and Tommy launched Shopular less than a year ago, but it’s already a hit with early customers, receiving rave reviews the App Store and Google Play.
Meanwhile, Navneet and Tommy are always trying to make it better. You can often find them in the wee hours of the morning sitting at a picnic table in front of the Stanford Shopping Center testing new features. They’re there so often the security guards know to leave them alone.
In September 2004, Ashar Aziz took up residence at Sequoia, working by himself out of a windowless office that’s since become a server closet.
He had recently shared with us his vision for how computer attacks were likely to evolve and an innovative way for detecting them that took advantage of virtualization—the first time we’d heard anyone consider the technology for something other than simulation or efficiency gains. It made a lot of sense to us, so we provided him with seed funding and invited him to work out of our office in Menlo Park. He stayed here for nine months.
It became clear early on that Ashar was ahead of his time. FireEye looks for malware by opening files in a virtual environment and making sure they behave normally. It’s an elegant way to find advanced persistent threats, or APTs, the sophisticated, targeted attacks that now account for most successful cyber crimes.
But the landscape was different back when FireEye got started. The big threat was “worms” that replicated themselves automatically, stealing bandwidth and deleting files. Standard anti-virus software did a pretty good job in these cases.
Ashar would demo FireEye’s product, it would work perfectly, but it wouldn’t find anything other products couldn’t. Several years on, sales were still modest.
Nonetheless, Ashar remained convinced that he had found a better way to stop cyber attacks. Sequoia thought so, too, as did some other early investors like Promod Haque of Norwest Venture Partners.
The rest of the world started to find out in 2008. That’s when FireEye started focusing more closely on the Web as the delivery vehicle of choice for malware.
In hindsight, this doesn’t sound like a big insight. But at the time most content on the Web was still curated by companies. User-generated content was just starting to burst into the mainstream and cyber threats were proliferating with it. APTs became prevalent and traditional anti-virus software was completely overmatched.
This time, when FireEye demoed its product for a big Silicon Valley tech company, it found 300 machines that had been compromised.
Meanwhile, FireEye faced another challenge. The recession had hit and the company hadn’t yet established itself. A lot of security companies would have tried to sell themselves—many did—but Ashar never wavered. He had total conviction that FireEye’s approach was right and that it was just a matter of time until everyone else realized it, as well.
Much of the outside world viewed FireEye as a dead company. When it struggled to raise money, Gaurav Garg, then at Sequoia and now an alumnus, and Promod led an inside round.
They were convinced that FireEye still had a big future. The company was starting to gain traction in the market as APTs became more common. Ashar guided the company through this sudden-growth phase as ably as he kept it together when it was struggling.
As the growth continued, Ashar and the board worked together to find a CEO who could get the company to the next level. Last year, we were fortunate to get Dave DeWalt. (I had joined FireEye’s board a few months earlier.)
Dave is a proven public company CEO, having led Documentum and McAfee, and was very much in demand. In his time at FireEye he’s managed to double the size of the company and set it up well for today and the future.
We can look at FireEye now and see a company that makes success look easy. It rarely is. But as FireEye shows, with passion, conviction and a really good idea, it’s possible to overcome even the most daunting challenges.
Congratulations to Ashar, Dave, Gaurav, Promod and the entire FireEye team. Today’s IPO is an important milestone, but it’s also just the beginning.
