Sramana Mitra: The middle to the end of the 1990s was really the golden era.
Rick Tinsley: Part of it was driven by the Telecom Act of 1996, because it wasn’t just enterprise, there were also large service providers and startup service providers who were buying a lot of new gear from new companies. That was the bubble. It was fun while it lasted. But after 2000 and 2001, when the bubble burst, it was a long dry spell. Today, because of virtualization technology and software defined networking, the networking industry is open again to new ideas and new companies that can deliver products very competitively and with very good capital efficiency. There are many great investment opportunities there, although companies in this generation don’t need as much capital to get established and build a given level of business.
But certainly there are a lot of the old networking VCs who are dusting off their CVs, trying to get back in the game now. The change for that was when VMware bought Nicira last summer. So here is the leader in virtualization spending over $1 billion to buy a company that basically was pre-revenue or barely in revenue. That is how much they believe in the opportunity for network virtualization – the opportunity for software to redefine the whole networking industry and the networking silo. That was a wake-up call, and now you are seeing a lot of those people, who didn’t want to have anything to do with venture capital in networking, now suddenly trying to get back into the game. That is good for businesses like ours and future startups in similar spaces.
SM: I think the capital efficient nature in networking also gives much better opportunitys for the angel community. The networking industry angel community is a very serious community of companies that did very well in the 1990s and had made a lot of money. There are companies that did very well in the networking industry in Silicon Valley. They have the expertise to evaluate deals. Those guys have been sitting around and not investing, or investing in Internet stuff, and they don’t necessarily have the expertise on the Internet side, but they do have it on the networking side.
RT: I think that is true. I made a lot of money in the 1990s during the telecom and Internet bubble. I have been flogging through the 2000s, working on something new. Frankly, now things are far more promising. We had more investor interest in the last year than we had in the last three or four years prior to that – which is ironic, because we don’t need money anymore; we are actually quite healthy from a financial standpoint and are not looking to raise capital at this time.
SM: Are you a venture-funded company?
RT: Yes, we are. The founding investors were Benchmark and Greylock. Benchmark was an investor in my previous company, so that is actually how I came to know the founder of this company. I was introduced to our founder and CTO by the partners at Benchmark.
SM: Is there anything else you would like to add?
RT: The trend of virtualization and software changing the networking industry is very relevant to many businesses these days. The transition to a service based, software, subscription based or cloud based model is a challenge we are living right now. It is very interesting. It is one of the things you are glad as a company to be going through this transition. It is very difficult for large public companies to go through this kind of transition. This is why I think those types of transitions present interesting opportunities for small companies that can be nimble and aggressive – like ourselves.
SM: Rick, it was great talking to you.
RT: Thank you, Sramana.