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Building a Fat Startup: From Israel to Silicon Valley, Qwilt CEO Alon Maor’s Journey (Part 3)

Sramana: These days investors do not fund concepts. They only fund businesses. That means there needs to be customers buying a product.

Alon Maor: In our case, since we are approaching the carrier space which is a large software-based capital intensive project, the incubation we did was through 15 worldwide carrier references. We had endorsements from those carriers who said they were behind the idea and recognized our approach as the future of the market.

Sramana: How did you get to those 15 carriers? How did you define the problem domain? Did the carriers help you define the problem?

Alon Maor: We followed the process of customer discovery. We went out into the market with a concept and validated it with our prospective customers. We did not have a working product, but in parallel we had people working at night developing a proof of concept doing video simulation and analytics. >>>

Building a Fat Startup: From Israel to Silicon Valley, Qwilt CEO Alon Maor’s Journey (Part 2)

Sramana: One of the big problems that we see in big startup teams is that people just meet and try to do a startup together. That’s like getting married after a one-night stand. It’s a disaster.

Alon Maor: What I found out about the team is that it is all about the people. You have to connect to people you trust. You have to connect with people you trust in order to have a high likelihood of building something significant. You have to connect to a team that you can trust blind sighted and you have to connect to the best people.

Sramana: There are different ways of doing things. However, if you want to be with a co-founder you need to make sure you have the right decision. You can’t fire a co-founder. Getting rid of a co-founder can destroy the company.

Alon Maor: All along it should be people that you trust. The level of experience varies. The team that I have today has 15 to 20 people that I have known for at least 10 years from across the globe. >>>

Building a Fat Startup: From Israel to Silicon Valley, Qwilt CEO Alon Maor’s Journey (Part 1)

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Alon Maor is the CEO and co-founder of Qwilt, a company that builds products to allow network carriers to create a universal video fabric without interruption or changes to content provider or network infrastructures. Prior to Qwilt, Alon oversaw the development and operations of the Service Control Engine (SCE) product line at Cisco. Alon was a part of P-Cube and joined Cisco through their acquisition of P-Cube. He has also held engineering positions at Seabridge (Nokia Siemens Newtworks). He holds a Bachelors of Science in Computer Science and Electrical Engineering from Tel Aviv University and an MBA from the Leon Recanati School in Tel Aviv University.

Sramana: Alon, let’s start with your background. What is the background to your entrepreneurial story?

Alon Maor: I was born in Israel. My father was a tourist guide and my mother had her PhD in nuclear chemistry. I think that the evolution started in the Army. By the time I joined the Army I realized that I liked people. I liked the combination of dealing with life or death and I was just 19 years old. When I left special operations I realized that there was a lot I wanted to do in life and it really made me appreciate life. That is something that drives me regardless of the context reality at any given point and time. >>>

Launching and Scaling a Security Startup During an Out-of-Favor Time: HyTrust President Eric Chiu (Part 7)

Sramana: What about your company team? When you started you where you the CEO?

Eric Chiu: When we started out I was CEO and Renata was VP of Product Management. We hired on a CTO soon after who I consider a quasi founder. We then hired a Sales VP from VMWare. Jim Gannon is still our VP of Sales and he is awesome. That has been a pretty big part of HyTrust. Partnerships have been a big part of our relationships. We have a great OEM relationship with Symantec and CA Technologies. We also have a reseller relationship with MacAfee and we are the go-to market partners for VMWare and VCE when it comes to platform security. >>>

Launching and Scaling a Security Startup During an Out-of-Favor Time: HyTrust President Eric Chiu (Part 6)

Sramana: How much money did you raise from VCs?

Eric Chiu: We raised 5.4 million dollars in Series A. In the end we also converted our 200,000 dollars into that Series A. That allowed us to start paying ourselves again. I think you have to have that period where you are not making any money. Your focus and attention has to be on making that idea successful. Without that I don’t think you can have your cake and eat it too. The idea of bootstrapping a company brings a lot of focus and clarity into starting that company. Once we raised Series A we were able to hire our core engineering team. We got our first product launched in May of 2009. We started closing customer deals in Q4 of 2009. >>>

Launching and Scaling a Security Startup During an Out-of-Favor Time: HyTrust President Eric Chiu (Part 5)

Sramana: Raising money like that is very difficult these days. You were able to get VCs to invest in a concept and that is not common. What was it about your situation that enabled you to clinch the opportunity?

Eric Chiu: First, I think we went to the right firms. Trident committed to the term sheet first and they are a company that believes in security. They believed in our thesis that virtualization was going to take over the datacenter. We were introduced to the partner by a trusted person. That created a level of trust and interest that they were able to put into their term sheet a week later. When you find the right firm, everything falls in place and moves fast. It is the process of finding the right firm that takes a long time. That is where most entrepreneurs fail. >>>

Launching and Scaling a Security Startup During an Out-of-Favor Time: HyTrust President Eric Chiu (Part 4)

Sramana: Let me probe a bit on that because you bring up an important point. Can you use your own value proposition and investment thesis for the Series A? What was your investment thesis, and why were VCs telling you no? In my experience of fundraising, VCs typically give you good feedback, and if you get nos you can usually learn something from them.

Eric Chiu: The thesis was that virtualization was a new platform. Security and compliance were necessary for that platform in order for people to adopt it in their data centers. The key areas that we address are around role-based access control, audit logging, and policy enforcement for that virtual infrastructure.

There are two buckets of nos. We had a bucket of nos where the VCs simply found security and infrastructure to be out of favor. In 2008, web 2.0 was in fashion. It was all about SaaS and clouds. We were neither. We were an infrastructure security company. >>>

Launching and Scaling a Security Startup During an Out-of-Favor Time: HyTrust President Eric Chiu (Part 3)

Sramana: During that 10-month time between starting HyTrust and getting funded, you still had living expenses. Did you guys have any financing? How did you live? What did you accomplish with that $200,000?

Eric Chiu: We did our own seed financing and followed the classic bootstrapped model. We spent only about half of the money we put in. The first thing we did after we incorporated was think very hard about the problem area we wanted to address. We sought out potential customer feedback on that problem area, and we did that with companies like Citigroup and lawfirms. We wanted to make sure that what we were thinking about doing actually made sense. >>>