Sramana: What was the premise behind Zscaler?
Jay Chaudhry: We wanted to offer web security in the cloud. We also recognized that the world would be increasingly mobile. We also needed to do integration of point products. We did not need one for URL filtering, one for caching, one for antivirus, and one for DLP.
It was a very difficult task, but I hired a very smart team from a company called NetScaler. They had done a very scalable load balancers. We needed that expertise to develop such a scalable proxy. We had 50 people in our engineering team in a matter of months.
Sramana: Where are you based?
Jay Chaudhry: We are based in San Jose. I moved to California from Atlanta for Zscaler. My core team is here in the Bay Area.
Sramana: You decided to invest a lot of money to bring a proven team together. Can you describe the process of determining what problem you were solving?
Jay Chaudhry: We knew that more and more devices were connecting to the Internet to access more and more data. We also knew that more and more security vulnerabilities were coming via the web. The old way of handling that was to have physical proxy devices installed at corporate locations. We decided to build a network of checkposts in a hundred data centers. No matter where you are your traffic can get directed to the nearest data center for inspection and security. Building that architecture was not trivial. Your company policy had to be flexible for geographical locations. We had to develop sophisticated policy that follows the user.
Sramana: Did you offer an enterprise product?
Jay Chaudhry: Yes, we wanted to build a high-end enterprise product.
Sramana: Who were your first few customers?
Jay Chaudhry: They were smaller customers with a few hundred users. Sears became one of our early customers with 50,000 users. That put our scaling to test. From there we moved on. Today we have 10 million users from 4,000 enterprises around the globe. We do 10 billion transactions daily.
Sramana: How did you experience revenue growth in this case?
Jay Chaudhry: We have not disclosed revenues, but we have done very well. We are doing better than my first company.
Sramana: What has been the financing strategy of this company?
Jay Chaudhry: I like to fund my own companies and then take a round later on in the company, with a goal of boosting up the balance sheet. I like to fund my own companies because I can then follow my convictions and do the things that I believe are right.
Sramana: There is a myth in Silicon Valley that engineers like to work for venture-funded companies. Have you struggled to recruit engineers?
Jay Chaudhry: Not at all. There is a group of companies where founders have done well, and the founders drive the company.
Sramana: This is a broader trend than people realize. Many entrepreneurs have done multiple companies and have done well.
Jay Chaudhry: In the past six years we have seen a bigger trend. People who have made money at places like Google are putting their money to work. They know that their own money gives them more value. VC money, early stage, is the most expensive thing you can have.
Sramana: Is your goal to take Zscaler public?
Jay Chaudhry: Yes, absolutely.
Sramana: How far away do you think you are from that milestone?
Jay Chaudhry: A couple of years. We have an annual subscription fee business model.
Sramana: That business model is doing very well in the public market.
Jay Chaudhry: Absolutely. If your customer satisfaction is good, then you know what to expect. You have a known revenue stream and you can just add to it.
Sramana: Jay, congratulations. You have obviously had a fantastic career. Good luck with Zscaler.