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Launching and Scaling a Security Startup During an Out-of-Favor Time: HyTrust President Eric Chiu (Part 2)

Sramana: What led you to Hytrust?

Eric Chiu: I was running sales and business development for Cemaphore. I was in the process of evaluating some other job offers and different startups and I had the board members from those companies calling me to figure out what decision I had made. During that period one of my co-workers from Cemaphore, Ranata Budko, emailed me and asked me if she could buy me a cup of coffee because she had a startup idea that she wanted to run by me. >>>

Launching and Scaling a Security Startup During an Out-of-Favor Time: HyTrust President Eric Chiu (Part 1)

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Eric Chiu is the co-founder and president of HyTrust, a virtualization security company. He has more than 13 years of experience in high-tech management and finance. Most recently he was the VP of sales and business development for Cemaphore Systems. Prior to Cemaphore, he led business development activities at MailFrontier (acquired by SonicWALL) and mySimon (acquired by CNET Networks). In addition to his start-up management experience, he was a venture capitalist for Brentwood Venture Capital (now Redpoint Ventures) and Pinnacle Ventures, a venture fund he co-founded. Prior to Brentwood Venture Capital, Eric served in the M&A Group for Robertson, Stephens and Company. He holds a BS in materials science and engineering from UC Berkeley.

Sramana: Eric, let’s start off with your personal story. Where are you from, and what kind of background leads up to the HyTrust story?

Eric Chiu: I am a traditional engineer who went to Berkeley for my undergraduate degree. I grew up in the Bay Area, and when I graduated from college, I went into investment banking. It was unusual for me because I had planned on going into academia. I found that my personality was not geared towards research and academia and decided to go into investment banking. That was one of the biggest changes that led me on the path I am on today. I consider that experience to be my MBA. >>>

CEO Transition, Founder Liquidity, and More: Bill Daniel, CEO AllWebLeads (Part 7)

Sramana: A private liquidity exit can be bad if the founder is crucial to the success of the business. I saw a similar situation where the founder did not allow a team to get built around him. I am surprised the investors allowed him to have that liquidity event. They needed to raise money, and the founder used all types of leverage against the investors to extract a large liquidity event without creating that management team around him. It was a no-win situation.

Bill Daniel: I have seen that happen, not in a large liquidity event. One of the things that is going on right now are private companies with billion-dollar valuations. They raise money and then use a big chunk of that money for liquidity. To me, those can be very tricky situations. At some point when you have achieved financial independence, you are in a position to take your toys and go home. If you are critical to the company, and you have to be there for the company to be successful, that can be disastrous. >>>

CEO Transition, Founder Liquidity, and More: Bill Daniel, CEO AllWebLeads (Part 6)

Sramana: Early-stage entrepreneurs are always wondering about the transition from an entrepreneur-run business to an outsider-run business. What are your thoughts?

Bill Daniel: My first experience with this was Oracle, when it was a small company known as Relational Software Inc. Larry Ellison is legendary, but in those days he was just Larry. I watched what he did and how the company grew and I thought what everyone would think, that I could do it. The second thing I observed is that he assembled a team. The marketing team had 7 or 8 different VPs of marketing during the time I was there. >>>

CEO Transition, Founder Liquidity, and More: Bill Daniel, CEO AllWebLeads (Part 5)

Sramana: How did the transition between Sergient and AllWebLeads happen?

Bill Daniel: I was contacted by Ross Garber, one of the founders at Vignette, who had been contacted by two young guys in their twenties who owned AllWebLeads. They were looking to create a board of directors and had created a profitable company via bootstrapping. Ross was not interested in that roll, but after talking to them, he felt they definitely needed some adult supervision in order to turn it into a bigger business.

I agreed to talk to them. That led to many sessions with one of the founders in downtown Austin. As I got to know him and the company, I became intrigued. Both founders were young engineers. They made an interesting contrast. One was the very conservative, no risk-taking, fear of failure type of personality and the other was an all in, bet it on black, and spin the wheel type of person. It was that combination of conservatism and incredible optimism that made them successful in the early days because they really had no idea what they were doing. >>>

CEO Transition, Founder Liquidity, and More: Bill Daniel, CEO AllWebLeads (Part 4)

Sramana: How long did you stay at Vignette?

Bill Daniel: I left Vignette in 2003. I was there for just over five years. At that point, I took some time off. I spent a year working on my golf game. There is something about starting a company from scratch or working with a fledgling company that is in my blood. I could not stay away from it.

A few of the Austin Ventures partners contacted me about a business they had funded in the heyday of the dot-com boom called Surgient Networks. They had built a single-purpose server that was disguised as a network box. It was a server designed for high transfer rate video streaming. It was a very complicated hardware product with a lot of processors and components. >>>

CEO Transition, Founder Liquidity, and More: Bill Daniel, CEO AllWebLeads (Part 3)

Sramana: I definitely remember those days. There were a lot of things happening back then!

Bill Daniel: Yes! I remember that we were on Triton Drive in Foster City in a one story building that you would think was an industrial manufacturing building. It had a loft and we put two foosball tables up there for our engineers. Right up the street was a Taco Bell and so every Tuesday and Thursday we worked until 10 PM at night and used that fast food restaurant to keep us going. That is how we got our product out so fast. >>>

CEO Transition, Founder Liquidity, and More: Bill Daniel, CEO AllWebLeads (Part 2)

Sramana: What did you do after Mozart Systems?

Bill Daniel: From there I went on to start two other companies in the Bay Area before I made my way out here to Texas. I have now been here almost 14 years. Mozart Systems was actually sold years after I left when it had around $10 million in revenue. It was a lifestyle business as opposed to a high-growth business. The person I started it with had done quite well at Oracle, so he did not have the same motivations that I did. That caused us to part ways eventually. The company was sold to SAIC, which is a defense contractor. >>>