Ashmeet Sidana: There’s great wisdom in what you’re saying. It is not just something that entrepreneurs should think about doing. You are required to say no to money on the path to success. Every company that is successful, at some point, says no to large amounts of money along the way.
Here’s the way I visualize it with my CEOs. What I tell them is, “You’re running a marathon. Any money you raise is candy. The real thing that you want is whole wheat bread and lots of protein. That’s how you run marathons. You don’t run marathons by eating candy. Raising money is like eating candy. Where is the protein? Where is the whole wheat? That is revenues and profits.”
That is the analogy that I always make. I haven’t seen Pygmalion, but the wisdom of middle class morality was brought to me by the Hollywood version of that which is the movie My Fair Lady. I think it was Rex Harrison who delivers the money to this artist.
Sramana Mitra: I love the analogy of protein and whole wheat bread versus candy. Our line on that is, “Entrepreneurship equals customers, revenues, and profits. Financing is optional. Exit is optional.”
Tell us about Engineering Capital and the core focus that you’ve chosen. What are the trends? What are you seeing? What are the discontinuities that you think are going to yield great companies in the infrastructure space.
Ashmeet Sidana: There’s a lot of disruption happening right now in the mobile space, consumer space, and finance space. I happen to be focused on a very different disruption, which I noticed about two years ago which started with a very simple observation.
If you walk into the best data centers in the world today, you will find that there are no servers from HP, IBM, or Dell. There are no switches from Cisco or Juniper. There is no storage from EMC or NetApp. There are no operating systems from Microsoft or VMWare. These well-known successful technology companies that appear to be the leaders in their space don’t provide any of the technology to these fabulous data centers. These data centers are more efficient, cheaper and faster.
It was inevitable that a large disruption will happen in the space. I think new companies will be created over here. They will be created in the security space, in the monitoring space, in the storage space, and even in the core compute space. I look at all of them. These tend to be very technical companies. They must have deep technical components but also real business models.
Sramana Mitra: Can you give us examples of companies that you’ve invested in? Walk us through the investment thesis of why you chose to invest in those companies. I’d like our audience to learn how you evaluate companies.
Ashmeet Sidana: Let’s start with an example. One of my portfolio companies is Menlo Security. Menlo Security was started by Amir Ben-Efraim and Poornima DeBolle. Amir was a Vice President at Juniper who had previously done a company. He had the observation that end point security is fundamentally broken. We have been selling antivirus. Everybody installs antivirus on their desktops and it really hasn’t solved the problem. We still have breaches. We still have people breaking in.
There was a fundamental approach needed to solve this problem. He worked with Professor Song from Berkeley and they came up with a new approach where we take all traffic coming in from the internet and all of it runs in the cloud. There is only a display version of that which is provided to the desktop. This is targeted at large enterprises today. Eventually we think we can go after the consumer market.