Serial Entrepreneur Zack Rinat on Model N (Part 3)

SM: Starting a company with one idea and then executing a business plan with another is common in startups. What specifically happened at NetDynamics?

ZR: When we started the company it was all about the development of web based applications. In a very short period of time, I realized it was not about development, rather it was about deployment – the server component. It was about scaling applications to accommodate thousands and tens of thousands of simultaneous users. I moved the company from being a client company to being a server company. We created the market for application servers. We were the first company to take Java and put it on the server side and in the process we created this standard called J2EE. This was less than obvious at the time.

SM: Who was your first customer?

ZR: The first customer was actually a Canadian Bank, and they really wanted to put out an application over the Internet to look at the stock quotes. It was new at the time. We found them before we got the funding; we found them at an Informix user conference. They saw what we had and they came directly from the conference to our office and we negotiated a deal and we got it up and running for them over the week. It was a very simple application: get the data which was a stock quote, and publish it.

SM: In the history of NetDynamics, what were some of the other milestones?

ZR: After the initial product, we changed the business model and created a category called the Application Server. It was a very challenging time in the industry. The industry had boxes, and software. The analysts said that our product was neither a set of development tools, nor middleware. We claimed a new category, an application server. Getting the industry to recognize that was the first milestone.

The second milestone was the refinement of the business model. Our business model at the time was meant to take advantage of focused applications. The distribution channels and the resellers and small system integrators were looking for ways to differentiate themselves. They could not do it anymore with client server work. We went and signed almost all of the smaller system integrators who were doing client server. We also allowed people to download the product from the Internet and use it. This meant we had to develop a package to be sold for under $1,000 so it could be purchased with a credit card. Ultimately that gave us tremendous velocity in the market. It let smaller users develop applications and then deploy it with the server.

I remember one day I received a call from the CTO of Federal Express. He was asking who we were, and told me that he had three applications running, and he wanted to know how we got into Federal Express. I told him we had not sold directly, so it must have been downloaded from the Internet. We ended up talking more, later.

The first recognition of the company was also a significant milestone. We won the PC Magazine Editor’s Choice Award about 18 months after we started the company. That was huge recognition for the company. The global expansion of the company into Asia and Europe was also very significant. It occurred in a very short amount of time.

The final milestone would be the acquisition by Sun.

This segment is part 3 in the series : Serial Entrepreneur Zack Rinat on Model N
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