Sramana: After you were unable to get VC funding, how did you finance the company?
Jay Chaudhry: My wife and I talked and we decided to put our life savings on the line. We figured that if our business was successful then we would have fulfilled the dream, and if it failed then we could always find a job. Our lifestyle was very simple. We had a simple house with a very low mortgage payment. We really had no risk issues.
We jumped right into the company, and I hired a guy to run sales. I hired a couple of very sharp technical people and my wife handled all of the operations. We opened our doors in January of 1997. We knew how to market and how to sell. Timing was right. Timing plays an enormous role in the success of the company. The market was beginning to ask for firewalls and big companies were talking about security. We knew how to deploy firewalls and we focused on security training. We did $5 million in year one, $16 million in year two and $32 million in year thre. We were doing 20% pre-tax profits, which means that we did not need to worry about VCs.
Sramana: Where did you find traction? Was it from enterprise customers?
Jay Chaudhry: Fortune 500 companies were buying a lot of firewalls and they needed questions to be answered before they could deploy them. We had smart, sharp people who knew how to take care of those things. When VeriSign bought us, 44 of the Fortune 100 companies were our clients.
We had good knowledge and we also had a good partnership with CheckPoint. They were a young company that was growing exponentially. In 1996 CheckPoint did $8 million in total sales. In 1997 they did $33 million and the following year they did $78 million. If you are in a services business and you are a VAR in a new market, if you align yourself with a leader then you will do extremely well.
Within 12 to 15 months there were hundreds of resellers in the market. That is when we saw a high availability firewall come in from a young company called Ipsilon. While others were doing basic firewalls we were doing high performance firewalls. As that started to commoditize we moved on to create a partnership with ISS who did intrusion detection systems. The goal is to keep on finding the next best thing that you can sell to your clients. We did not want to be a reseller because they do not have the same margins. We had a three-legged stool. We led with security consulting services, product deployment and testing, and then we also did training. We had a very well balanced company.
Sramana: Starting in 1997 how long did you run that company?
Jay Chaudhry: In Q3 of 1998 we were acquired. I received my first offer for the company just 12 months after I founded it.