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Thought Leaders in Cloud Computing: Interview with John Michelsen, CTO of CA Technologies (Part 5)

Posted on Monday, Apr 22nd 2013

Sramana Mitra: Talent acquisition seems to be very active at the moment. Part of the reason is that there has been a lot of seed financing, but very few of those seed deals are getting to the point they state. A lot of those seed-financed companies have done some work, but their talented teams are leaving to find a home in some of the big companies.

John Michelsen: That is correct. If your readers are folks like that, I can tell them that that is not necessarily a bad thing. If you can prove that your thinking is faster, smarter and better than most of the folks around you, and you have a team that has done interesting work early, you will not only get a reward for that, but you would get a reward years earlier than you would have. And you will get to accomplish what you were trying to do within the umbrella of a large company that has a distribution channel for your technology, the ability to invest in it for years, etc. Then you will get the personal reward: a great salary and stock incentives. There are certainly times in someone’s career when they will want to swing for the fence, hold out, get the revenue up to $100 million and see if they can get that acquisition. But much more often, at a lower risk and still at a great reward is to go early when you have proven to a large company that you caught them – you have shown them something they should have been thinking about. You can get a nice paycheck right then, and you can put yourself into a nice career with a company that can help you make your vision become a reality.

SM: I have mixed feelings about this. You made a very eloquent case of why entrepreneurs should do it. I want to tell you why they shouldn’t do it. Although by virtue of the numbers at which seed financing is happening, the gap that exists between seeds and Series A and the fact that Series A investors do not want to deal with companies that do not have proven businesses. Nowadays the Series A risk appetite has gone down significantly. People want businesses to fund, not ideas. They don’t want to fund prototypes, either. Unless you have customers, business mode validation, pricing model validation and preferably revenue, the Series A chances are very low. The upshot of that is what you are suggesting may be the only option out for many entrepreneurs in every domain. Having said that, it is not necessarily always resulting in great situations where a company is acquired and gets access to the entire CA channel, etc. A lot of products die on the vine inside of big companies. There is lots of politics, lots of “right hand not knowing what the left hand is doing,” etc. I don’t buy the picture you are painting.

JM: All of those things are true. But you also have to agree that one in 20 Series A funded companies actually have an exit.

SM: Yes. But there are also other ways of building a business without looking for an exit. The trend over the last five or six years, which I helped develop, is the bootstrapping trend. People are building significant businesses with customer money – there is no investment involved. They are actually going out and finding customers who are looking for a solution.

JM: I know that model well, because I started ITKO in 1999, I successfully ran the company until 2006, when I took a round of funding. So I know exactly what you mean. I didn’t have to take the money, but I decided I needed to build an enterprise sales force and that requires millions of dollars. I definitely like the bootstrap model. I am just also trying to counterbalance. It is hard to think rosy in either case. Startups fail.

SM: Startups fail and they are hard. No matter which way you look at it, startups are hard. Not everybody is cut out for startups, but there is an increasing appetite for startups, especially in the technology business because those things have been figured out and people are learning the ways of how to do it. We run a full business teaching people how to do this. It is exciting in any way. Whichever way is good I think it is an exciting ride even if it is something that some people do for one round and then decide that they can’t take the stress and go work for CA and sell their company, for example.

JM: I said this to somebody recently. “I wish I was 15 today.” When I was 15 I looked at things – PCs were just becoming a common thing – and I thought to myself, “Wow, what an amazing world that I am going to become a part of and I can do all of these new things. There are so many opportunities and so few applications that have been written.” Do you know that today this is exponentially more true than it was back then?

SM: Yes. The other big trend is that it is much cheaper to start companies today. You can start a cloud service and put it on AWS or Xbase, and it costs you nothing.

JM: The access to existing things in order to create your value is phenomenal. I was writing database engines in middleware. I was creating widgets and user interface technologies. I was building all kinds of stuff that no one would have ever paid for just to get the right to show what I have done was interesting. Today you would not have any of those inhibitors. You wouldn’t invest 20 minutes in most of that stuff. You are right. You don’t have to start building a bunch of data centers. Until CA I never had an employee badge – ITKO was my third company. I started my first company right out of college. One of my professors was my investor. I had to start by buying six computers for about $8,000 apiece. I already owed my investor a few hundred thousand before I started writing code.

SM: It is driving the broader entrepreneurship renaissance around the world. Knowledge travels fast because of the Internet – people in Indonesia and Iceland are thinking, “Why don’t we start companies?” and they are starting companies.  It is a global phenomenon. It was very nice talking to you, John.

JM: You as well.

This segment is part 5 in the series : Thought Leaders in Cloud Computing: Interview with John Michelsen, CTO of CA Technologies
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