Successful Pivot to $5M in Revenue from Chicago: Cohesive Networks CEO Patrick Kerpan (Part 5)

Sramana Mitra: You said you pivoted and there was one product that you had to sell and the other product people wanted to buy. Talk a little bit more about how you proceeded from when you hit that realization? How did you move? How did you take advantage of the market pull that you discovered?

Patrick Kerpan: Good question. It created the opportunity where we got some other incremental funding. We needed some funding to make that transition. We were doing these flexible images where you can mix and match software components to make the virtual computer your choice.

The one missing piece of the software was message queuing. We had servers and databases. In the world of message queuing, you just had this Java component called ActiveMQ. Other than that, you had to use IBM MQ Series or something super expensive. We looked at that and said, “Somebody has to do something. If we’re going to build these Internet-based systems, what we’re going to need is a better queuing system.” >>>

Serial Bootstrapper: Oversee and Manage Founder Fred Hsu (Part 6)

Sramana Mitra: What are the milestones of this business? By how much did it scale? How fast did it scale? What kind of strategy did you follow to make it grow?

Fred Hsu: What we wanted to do at first was to basically get a good sense of the market and establish a few key customers. We all had this internal confidence that if we got the customers, we know how to go out there and get the demand. We can build the full stack and do it better than anybody else out there. It started with a simple kernel. There wasn’t an intense capital need. Computing power was already ten times more powerful at a fraction of the cost than it was back in 2000 when I started doing startups. We didn’t need a lot of outside capital.

We also didn’t necessarily need a large sales force or support infrastructure just yet. We didn’t want to get too many customers to start off with. We really wanted to focus on making sure our systems work for a small set of deep pocket clients. The business lost $50,000 in 2011. But in 2012, it generated about $2 million in gross revenue. In 2013, $18 million. In 2014, we ended up with just under $80 million. >>>

Successful Pivot to $5M in Revenue from Chicago: Cohesive Networks CEO Patrick Kerpan (Part 4)

Sramana Mitra: Let me understand a couple of things. You talked a bit about Boards and about lightly capitalized company. Can you explain to me what the capitalization of the company is?

 Patrick Kerpan: The corporation is Cohesive Flexible Technologies Corporation. It’s a C-Corp. It owns two limited liability companies. One has all the image automation that’s just parked and the other owns the network virtualization.

Sramana Mitra: Who owns the corporation?

Patrick Kerpan: It’s a series of investors – family, friends, angels, O’Connor family.

Sramana Mitra: It’s not institutional ownership? >>>

Serial Bootstrapper: Oversee and Manage Founder Fred Hsu (Part 5)

Sramana Mitra: In 2009, you were out. What did you do next?

Fred Hsu: I moved out of LA. I married and had two kids. I raised them for a couple of years and got the entrepreneur itch again. Then in about 2010, I met up with an old college friend called Kai. He was in the Computer Science program in UCLA with me. He and I had actually met the day our parents dropped us off at the dorm. We were about 17 back then in 1996 and had been very close throughout the years. We decided we wanted to do some more projects together.

In 2010, we created a company called AppBank. The concept there was to capitalize on the social wave. We allowed end users to create their own apps on Facebook. It went from zero to single-digit millions in revenue pretty quickly. It was very profitable.

Sramana Mitra: Was it a platform company?
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Successful Pivot to $5M in Revenue from Chicago: Cohesive Networks CEO Patrick Kerpan (Part 3)

Sramana Mitra: What year did you quit Borland?

Patrick Kerpan: It was sometime in early 2006. I was going to do an excellent year off. After about two weeks of me reorganizing household processes, my wife said, “You’ve got to get an office outside of the house because you’re driving us all crazy.” The co-founder of the company and the Chairman called me and wanted me to do due diligence on some company in London. One of our other founders introduced me to Alexis Richardson. Our former head of security had gone in to help a friend cleaned up and get out of high-frequency trading.

As a group of people who’re experienced, it was like the old movies where they’re like, “Let’s put on a show. My mom will make costumes.” We wanted to build a company, but we had no idea what it would do. We spent the better part of 2006 focusing on what we would be doing. We came >>>

Successful Pivot to $5M in Revenue from Chicago: Cohesive Networks CEO Patrick Kerpan (Part 1)

Patrick has built an interesting company from Chicago that had to go through a significant pivot.

Sramana Mitra: Let’s start at the very beginning of your story. Where are you from? Where were you born, raised, and in what kind of circumstances?

Patrick Kerpan: I was born in Tulsa, Oklahoma. My father was a policeman. My mother raised us. He was a Chicago area farm boy. His family was Croatian immigrants. My mom was a Brooklyn girl. He met her during the war. I was born and bred Oklahoman. I get caught on words like defense and cement, but other than that, I sound more Midwestern.

I studied at Northwestern University in the Chicago area. I worked mostly full-time through university in order to be able to pay for it. I was working as a janitor at the Northwestern Student Center. I once missed a mandatory janitorial staff meeting. Apparently, it was very important because I was fired for missing that meeting. >>>

Building a Cyber Security Company from Israel: Aki Eldar, CEO of Secure Islands (Part 7)

Sramana Mitra: In 2014, all the money that you raised was from Credit Suisse Next?

Aki Eldar: Only from Credit Suisse Next, which was also a vote of trust coming from a customer.

Sramana Mitra: What’s the next milestone?

Aki Eldar: The next milestone is we’re expanding worldwide. We have an office in the US. Actually, we moved our headquarters to New York.

Sramana Mitra: Is your primary vertical financial services? >>>

Building a Cyber Security Company from Israel: Aki Eldar, CEO of Secure Islands (Part 6)

Sramana Mitra: What year did you get that customer?

Aki Eldar: 2010.

Sramana Mitra: The financial crisis has settled a little bit. I was raising my eyebrows that you got a financial institution. A little bit of time had passed from the calamity.

Aki Eldar: They had a huge problem. We were the only one that could solve their problem.

Sramana Mitra: Who at Credit Suisse knew about you?

Aki Eldar: Nobody.

Sramana Mitra: How did you find this opportunity? >>>