Sramana: Tell us about the first offer to buy your company. How was the proposal made and how did you evaluate it?
Jay Chaudhry: The CEO of an existing public company called me up one day out of the blue. He told me he wanted to buy my company, and I told him that I would love to partner with them but that we were not for sale. He told me that he had decided to go into the security marketplace and that if we did not sell we would get wiped out. He then asked me how much money I had put into the company. I told him it was about $500,000. He then told me he would make a $45 million offer, all cash.
He told me I would get a 90-fold return if I accepted his offer, and I would get wiped out if I did not accept it. He told me I would repent for the rest of my life. He then told me I could have three hours to think about it. He called me back and I told him no again.
Those are interesting lessons and decisions. It was tempting to take that offer, and I really had no network to reach out to. I had to rely largely on my gut feel.
Sramana: What did your gut tell you was wrong with the situation?
Jay Chaudhry: Our revenue was growing like crazy, quarter after quarter. I believed that we could big a much bigger company than selling out at that time. There was also a bit of a chemistry factor. When this guy was trying to throw subtle threats, that turned me off. I was not ready to sell and go to the beach. I wanted to be part of a successful company and get it to the next level.
Sramana: You decided not to sell the company. What came next?
Jay Chaudhry: The company did well. Rushing into decisions and selling out too early is not good. If you sell out too late, it is not good either. You have to figure those things out.
Sramana: I think you also had some good market timing. Companies usually do not go from $5 million to $16 million dollars to $35 million like yours did. You managed to hit a real trend.
Jay Chaudhry: That is because I aligned myself with a fast growing firewall company, CheckPoint. They had lots of partners but we did some things extremely well. Our technical team was very strong. CheckPoint would give us references. We also leveraged training substantially. I was doing direct mail pieces which emphasized our training capabilities. We did a million dollars a month in training when the company was sold.
Training was one of our best source of leads. People would buy training through us and our instructors were really good, so they would come back and buy deployment services from us. We also added in our own training. We did not just teach the CheckPoint courses. We built our own security courses to teach people what they should be doing. We showed people how hackers broke into firewalls.