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Parallel Entrepreneurship: Serguei Beloussov, Founder of Parallels (Part 6)

Posted on Tuesday, Oct 16th 2012

Sramana: What did you do once you realized that your product design and re-licensing business would not scale?

Serguei Beloussov: We then looking at venture engineering. We would evaluate ideas and supply the engineering talent to develop the software. We got involved with the e-economy, and [the venture] was built by 10 guys from Austin, Texas, and one guy from Germany. The men from Austin worked for Curvaceous Software and the German guy worked for Accenture. They wanted to create an e-economy.

At the time I was 27 and still not very experienced. The idea of a startup was new to me, and I did not realize that these guys had no clue what they wanted to do. We became the head of engineering and set out to raise money. In 1999 that was not very difficult. They quickly raised $1.5 million to build this in the middle of 1999. The company was valued in a very strange way. The founders put monetary values to themselves and their teams. They came to a valuation of $3.5 million and wanted to sell 50% of the company for $1.5 million. Venture companies backed them.

The venture capitalists did not know what we were doing with the company, but they wanted us to do it in an application service provider model. They did not understand what the e-economy was, but they thought it sounded good. They liked our team so they said they would fund us if we did it in the ASP model. At the same time, Solomon Software was also pressing to convert to the ASP model. I started reading everything about ASP, and there was not a lot available.

I decided it would be cool to build an infrastructure to enable people with application expertise to become application service providers. At first I tried to convince my co-founders to do that. They were not interested, so we split. In the beginning of 2000 we started SWSoft to build a shared, multi-tenant billable and serviceable infrastructure. I sketched out the picture for that in Texas with a few of my co-founders.

Sramana: Did you fund the business yourself?

Serguei Beloussov: Yes, me and the other co-founders. There were seven in total.

Sramana: Who were your first customers?

Serguei Beloussov: We built our first version of the software in 2001. Our first customers were hosting companies. OneNet was our first customer and they were based in Singapore. It is a large data center and hosting company. There was another company in Russia which was also a hosting company. We also had a U.S. hosting company.

We launched the first version of our product in the beginning of 2001. About the same time, all of our engineering was in Singapore. The company was funded by my previous businesses, and although they continued to grow my business partner was very protective of our capital. I have started all of my companies with the same business partner. He did not think a software business would be a good business, so he was very protective of the capital we had earned.

I had very limited capital, so I had to move all engineering back to Russia. I needed to scale the organization and I had 35 engineers in Singapore. Those engineers are 2.5 more expensive than they would have cost me in Russia. It was harder to scale in Singapore as well because it was harder to find engineers there. I could find them easily in Russia.

As a result I, moved our headquarters to San Francisco and our engineering to Moscow. We launched with our first customers in Russia, Singapore and the U.S. That is the beginning of Parallels.

This segment is part 6 in the series : Parallel Entrepreneurship: Serguei Beloussov, Founder of Parallels
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