20-Year Journey of a Fat Startup with Major Pivots: Scott Sellers, CEO of Azul (Part 7)

Sramana Mitra: Let’s switch to the other side of the business. What go-to-market strategy did you go with that?

Scott Sellers: The product is called Platform Prime. It is based on open source technology. It’s the same OpenJDK that the open-source Zulu comes from. To that, we add proprietary elements that make it better. It makes it faster, scalable, and easier to deploy in clouds. We’ve deployed a traditional enterprise go-to-market for that.

However, we’re trying to lead with a product-led strategy. We do offer it for free downloads for the same reasons. We want people to download and try it. The whole concept of product-led strategy is that you want the product to speak for itself. It’s old school to think that we can connect with every enterprise customer that needs this kind of product.

In today’s world, it’s very much self-driven. Customers and enterprises are educated. They seek out solutions and read reviews. All these things happen outside our eyes and our ability to influence discussions. Of course, there is all sorts of research on this. By the time a prospect might reach out to us, 60% to 70% of the decision has been made.

Having that product-led development focus is a very big central part of our overall strategy for the flagship product Prime. By the time customers self-identify, they’ve already done a lot of the preliminary work. The conversation becomes more about commercial terms.

Sramana Mitra: What percentage of the leads for the regular enterprise software business comes out of the open-source community?

Scott Sellers: I’d probably say 60% to 70%. It’s a fantastic strategy. Pure open-source companies sometimes struggle. Getting someone to pay can be challenging. Oftentimes, the first customer purchase will be that open-source product. It’s lower cost. We’re not changing anything. It’s truly a drop-and-replace solution.

As the customer engages with us – they like us and realize that we’re a fantastic vendor – then you have a more advanced conversation about the other value-added product. That’s more of a dialog. There’s some amount of educational element. No one can do what we do. There is some information that needs to be conveyed in education. That’s much easier when you’re talking to an existing customer than it is to a cold prospect who has never heard of us.

Sramana Mitra: As you started out by saying, VCs don’t invest in a 20-year-old business plan, but you have built a company that is a 20-year-old company. You didn’t go from zero to a $100 million in seven years. How have you dealt with the investors? The ones that were in your first phase, probably wanted exits.

Scott Sellers: We were able to give them an exit. In 2020, we brought on a new investor base with a growth equity firm called Vitruvian Partners as well as another firm called Lead Edge Capital. That was a nice opportunity for us to exit the legacy investors and bring on new investors. That was a win-win for everyone. We had investors who had been in the company for a long time. It’s nice to give them a nice return.

It’s also great to have investors coming in that we’re looking at this from a long-term perspective. There’s so much more business that can be brought to bear. The hardest part, independent of product, is winning a MasterCard. Once you win MasterCard as a customer, the opportunity to sell more is dramatically easier. The types of customers that we have in the big enterprises represent a tremendous opportunity for us to continue to develop new products to sell to them.

Sramana Mitra: Is there an IPO coming up?

Scott Sellers: It’s one of the plans. I like to say that the exit takes care of itself. What we’re focused on is building great products, serving our customers, and acquiring more customers. If you’re a great company, you have great opportunities.

At 3dfx, we had almost a dozen acquisition offers before we ultimately chose to sell to Nvidia. Here at Azul, we’ve had six or seven acquisition offers along the way. Good companies have options. Just given the profoundly compelling business model, it’s allowed us to be profitable and cash-flow positive. We use our cash flow to further invest in the business.

Sramana Mitra: Open source coupled with another product that you can sell to the same open-source leads is a fabulous business model.

Scott Sellers: From a financial model perspective, we are a great IPO company. It’s certainly in our sights.

Sramana Mitra: Great! Thank you for your time.

This segment is part 7 in the series : 20-Year Journey of a Fat Startup with Major Pivots: Scott Sellers, CEO of Azul
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