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Leveraging Amazon To Build a Cloud Storage Business: Nelson Nahum, CEO of Zadara Storage (Part 2)

Sramana Mitra: What level of revenue did you get to before the LSI acquisition?

Nelson Nahum: I think we were in the $10 million range.

Sramana Mitra: How much did you sell for?

Nelson Nahum: It’s confidential. It was good for most of the people.

Sramana Mitra: So the bottomline is that you made some money off that transaction?

Nelson Nahum: Yes, definitely. >>>

Building an IPO-Ready Identity Software Company from Colorado: Andre Durand, CEO of Ping Identity (Part 7)

Sramana Mitra: What is the financing history beyond that $2 million Fidelity and General Catalyst round?

Andre Durand: I would say after about two years roughly, in very traditional fashion, we started raising money to fuel our growth. I think we raised about $30 million in total between 2003 and 2012. In 2013, we made a decision to switch our business model from a perpetual software license to a subscription business model.

Sramana Mitra: You waited till 2013 to make that shift?

Andre Durand: We did for a couple of reasons. Number one is we were selling infrastructure to big enterprises. While they are open to buying applications on a subscription model, their infrastructure decisions are measured in 3 to 10 year increments. They didn’t really want to be buying infrastructure and visiting a subscription decision every year. Almost all of their infrastructure was purchased on a very traditional basis. That was number one.

Number two was that it wasn’t until we began offering our own cloud service that our own business model was bifurcated. We knew that was not optimal. We >>>

Leveraging Amazon To Build a Cloud Storage Business: Nelson Nahum, CEO of Zadara Storage (Part 1)

If you haven’t already, please study our Bootstrapping Course and Investor Introductions page. 

Nelson has built an interesting enterprise storage company and one of his key strategic moves was an unusual deal with Amazon.

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 background?

Nelson Nahum: I was born in Uruguay. I immigrated to Israel to study in college. Back in the 80s, Uruguay was governed by junta. It was not very nice to stay there. Me and my brother moved to Israel with little money to study engineering. I got accepted into the university. The first thing that I liked in Israel was the freedom that everybody had. It was totally new for me because I grew up in a dictatorship kind of environment.

Sramana Mitra: What did you study?

Nelson Nahum: Engineering. First of all, I studied Hebrew. After a few months, I got accepted into an engineering school in Technion University. >>>

Building an IPO-Ready Identity Software Company from Colorado: Andre Durand, CEO of Ping Identity (Part 6)

Sramana Mitra: With that General Catalyst money, you said 2006 was when you had the server?

Andre Durand: 2005 was when it came out. We used the General Catalyst money, in essence, to build the first commercial product. The first one probably took us about 18 months.

Sramana Mitra: When did American Express hit?

Andre Durand: They actually licensed our toolkit—the open source precursor to the commercial server. We had some customers that were licensing our toolkit capabilities. We weren’t licensing the software at that time. We were really just licensing our professional services to implement the software.

Sramana Mitra: What’s the next major milestone from here on? >>>

Bootstrapping Using Services From Houston: Identity Automation CEO James Litton (Part 7)

Sramana Mitra: So you’re trying to find a mid-market niche now where you would be able to compete with these very large players. That security and identity management space for both enterprise and mid-sized enterprises is a very crowded space. I’ll tell you what bothers me about your enterprise strategy.

James Litton: There’s a couple of things to look at there. On first blush, it does look like a crowded space, but the reality is that it’s not as crowded as you think. Whenever you go and start gathering data from Gartners of the world, you end up with these massive numbers of companies that, at first, look like they play in the IAM space.

The reality is many of these players only have very small pinpointed solutions. Take Ping Identity, for example, which is basically a single sign-on solution. You have lots of these players that have one small piece of functionality, but they’re not full-scale identity and access management players. They can’t offer full solutions around identity and access management whether that be for administration purposes or governance purposes. >>>

Building an IPO-Ready Identity Software Company from Colorado: Andre Durand, CEO of Ping Identity (Part 5)

Sramana Mitra: Who were the customers you were going after? Were these enterprise customers?

Andre Durand: We didn’t know at that time. The truth was it was big enterprises that had this problem.

Sramana Mitra: Since your background was selling to bulletin board kind of people, you didn’t really have any enterprise software sales experience. You were just feeling your way around.

Andre Durand: You don’t give credit to people in our position how much you wing it. There was a lot of conviction obviously that what we were doing was going to be important. As it turns out, we were lucky. Literally, my first customer was American Express. We quickly realized that it was large enterprises that were really struggling with proprietary identity. >>>

Bootstrapping Using Services From Houston: Identity Automation CEO James Litton (Part 6)

Sramana Mitra: The growth rate did not shift when you went from services to product?

James Litton: During the transition, on some level, it probably slowed. There were some critical things that we had to go through. As an entrepreneur, it’s scary. You’re going from something that you know into a world that you don’t know. It’s like starting the company all over again. I remember those early days of 2006.

As we started to make our shift, we’re faced with some of the same things again. We didn’t know how to position this. We had to go out and do some experimentation. We had to learn how to position the product. We had to learn the answers to some of the questions that you were asking, “Why would you take a risk on Identity Automation versus these more established products?” I would say during the 2010 to 2011 timeframe, growth slowed, but not dramatically. It might have been 20% growth.

Sramana Mitra: Between 2010 and 2015, what other major strategic moves did you make?
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Building an IPO-Ready Identity Software Company from Colorado: Andre Durand, CEO of Ping Identity (Part 4)

Sramana Mitra: They were people who had made money off you before, so they had confidence in your ability.

Andre Durand: Exactly. On January 4, I moved my computer from the corner office in Jabber. I think we had 50 people working at the company. I announced that I was going to start something new. They were kind. They said, “Do you have an office?” I said, “I don’t have anything.” They said, “Why don’t you take the blank office across the kitchen.”

I took my desktop and my inkjet printer and moved it to this other office. I remember sitting down at the computer the first day and I had a brand new email address. I went from a hundred emails an hour to no messages. I had a business plan. I’m the only employee. There’s some money in the bank but I’m in an empty office in a space called identity. I remember thinking to myself, “Wow! What did I get myself into?” That morning, I said, “I need a logo.” I opened up Photoshop and made a logo. For kicks, I wrote, “Worldwide Headquarters” underneath it. >>>