SoftwareCEO Exclusives |
by Grant Buckler, Contributor, SoftwareCEO
Sometimes, a little guy can win big. This story is one of those.
Sai Gundavelli founded Solix Technologies in 2001 when he saw an opportunity to help companies manage their growing mounds of data.
Six years later, he's built a software company with 100-employees and nearly $10 million in revenue, growing 70 to 100 percent every year.
The Sunnyvale, Calif.-based firm competes successfully against industry giants like HP and IBM. In fact, he's turned many of them into partners.
And he did it all without signing on with any VC firm.
Gundavelli grew up in India, earned a BS in mechanical engineering there, came to the United States in the 1980s, and got his masters from the University of Oklahoma. Then he joined Cisco, where he did very well with stock options.
By the turn of the century, Gundavelli had money of his own to invest in his ideas.
He supplemented that with angel investors to put together almost $10 million in startup capital, then played the game carefully to make the most of his resources.
With passion and smart strategies, he managed to carve out his niche in the shadow of the giants.
It's a classic David and Goliath story.
And in these 15 tips, Gundavelli tells how he did it: saving money on R&D, forging partnerships with the biggest names in the business, and selling his vision with passion.
David versus Goliath tip #1: Solve your customer's whole problem. Don't just build a point solution
When he started the company, Gundavelli says, he saw that others were going after the same market.
Some of them had deeper pockets than he did, too.
But he saw something else: They were building point solutions. One would build a data-management tool for Oracle, another a product for SQL Server, another for e-mail.
"I saw two years from now companies are not going to look at a point solution," Gundavelli says. "They're going to look at a comprehensive solution, which is, 'I want to manage all my enterprise data.'"
He reasoned that customers need a Google-like way to get at their data and find what they needed.
They also need to set archiving policies that apply to all their data, regardless of what application generated it.
And if a customer ever faces a lawsuit, Gundavelli says, that means a need for e-discovery.
So Solix set out to build one tool with an easy interface that could provide access to all of an enterprise's data.
To promote these benefits, one of the key messages in the company's marketing is this: Why not buy one tool to meet all your needs?
David versus Goliath tip #2: Focus on what you can do better than your rivals. And if you can't
beat 'em, join 'em
Gundavelli had big ambitions, but limited resources. He recognized that in some areas, Solix couldn't improve on what
was already available.
So he chose to set sensible limits to Solix's mandate and partner with companies whose products would complement what he was doing.
A good example is Google, which in a sense was an influence on Solix's product design. Gundavelli says he saw his product as offering Google-like capabilities for enterprise data --- but that didn't mean he was going to compete with the darling of the high-tech industry.
Instead, Solix set out to focus on what Google was not doing.
"There are three types of data in an enterprise," Gundavelli explains. "One is structured content, which is coming from applications. The second is semi-structured content, which is coming from e-mail. The third is unstructured content.
"So across these three, we said we'll focus on structured and we'll also expand ourselves into semi-structured. As for unstructured, we said we will not work on it, we'll only partner in that technology segment.
"Google knows how to search unstructured content, content platforms are there like Documentum (now EMC)... we'll go and partner with them."
David versus Goliath tip #3: Go where the skills are plentiful and cheaper
Although Gundavelli had money from his Cisco stock options and angel investors, money was tight.
So he divided Solix's work force between the United States and India.
"I had a little money," Gundavelli says. "I had to play this game very carefully, so I kept the entire engineering back in India.
"If I look at my competition," Gundavelli says, "each of them have raised between $50 and $70 million, and had developmental centers in let's say New York, Manhattan, or in these areas, so they were doing all their engineering in the United States."
He believes that in the early days, this strategy kept Solix's R&D costs at about half those of the competition.
The weakness of the U.S. dollar today means the advantage isn't as great as it once was. So Solix has shifted some development work to the U.S., though about 60 percent of the company's total staff remains in India.
But there is still a benefit, and cost isn't the only advantage. Finding the right skills is easier in India, Gundavelli says.
Having operations in India may not go over so well with some Americans who see offshore operations as a threat to domestic jobs.
So he's careful to point out that Solix is a U.S.-based company creating jobs in the U.S. --- and that its larger competitors also have offshore operations.
David versus Goliath tip #4: Do whatever it takes to maintain links with remote workers
When people work thousands of miles and many time zones apart, it can be very hard keeping in touch.
Gundavelli says much of the credit for dodging this problem at Solix goes to his VP of engineering, Kishore Gadiraju, who is based in the U.S. but manages the engineering time in India.
"He worked daytime with us and nighttime with the India team," says Gundavelli. "He kind of groomed these people, he kind of nurtured them, he built a family and he showed them passion, he told them how they can be part of this innovative technology."
That means being in touch with the staff in India virtually every day. Solix uses VoIP and desktop video conferencing with inexpensive webcams to link up its U.S. and Indian operations.
And it involves plenty of travel on Gadiraju's part, and some for Gundavelli too.
"I pretty much travel once a quarter to my India team," the CEO says, "and tell them our challenges and successes."
And the company makes a point of bringing staff from India to the U.S. to meet their counterparts there, in what Gundavelli calls "a process of continuous engagement."
David versus Goliath tip # 5: To make the most of remote offices, sell and support customers in those regions
As long as you have operations on opposite sides of the planet, you might as well squeeze maximum benefit out of it.
So, for instance, Solix customers and partners can get telephone support 24 hours a day, because support staff in either hemisphere can cover the whole clock without working through the night.
Solix has also done some of its market research and even sales and marketing out of India, Gundavelli says, though today this is primarily in the U.S.
A presence in India does help the company's marketing efforts in that region. It makes the company appear more local, and makes it easier to provide good customer service to the same and neighboring time zones.
"Obviously for customers located primarily in Asia, we do get an advantage having an office over there," says Gundavelli.
David versus Goliath tip #6: Align with a recognized winner, say, Google
For a new company, an alliance with a well-known name is a big plus, if you can swing it.
And to market a new product, relating it to something familiar is very helpful. Solix managed to do both with Google.
By partnering with Google, Solix got the credibility of one of the best-known names in technology. Its technology complemented Google's, and the association helped explain what Solix's software does.
"We had access to a few of the search engineers who were a lot more focused on the enterprise," Gundavelli says, "but given the visibility of Google, we said look, it makes a lot more sense for us to partner with them.
"People have used the Google search, people understand Google, the same people who search at their home come to work and it's a lot easier to train them, so that was the reason why we picked Google."
It's one thing for a startup to pick a juicy partner.
But how did Solix ever manage to line up a relationship with one of the stars of Silicon Valley?
It was a combination of a good fit with Google's technology, perseverance, and persuasiveness.
Gundavelli says it took about a year, starting by talking with Google's GM of enterprise search and working up to the top level of the company.
"They liked our vision," he says simply.
But it still took patience to make the deal happen... especially since Google's partner program was very new at the time.
"When we signed up with them around two years back, Google was only known for searching public data on the web. We said, 'Look, companies also need to be able to search their data internally.'
"We are using the Google Search Appliance to extend search to all this structured data, to search on e-mail and all packaged applications like Oracle, PeopleSoft, and SAP."
Even though the Google execs were interested, and Gundavelli says they are aggressive about supporting their partners, it still took close to eight months for them to understand the value his company was bringing to the table.
David versus Goliath tip #7: Taking VC can cost you control
When he started Solix, Gundavelli made a big decision. He decided not to turn to VCs for funding, but to
take funds only from angel investors and his own capital.
It wasn't a decision to take lightly.
Choosing not to pursue VC meant Solix would not have as much ready cash as many of its competitors. Gundavelli understood that having limited resources would shape the company's strategy.
So why did he not pursue venture funding?
He certainly knew: He had previously raised venture funding for another venture. But his past experience played a role in the decision to bypass VCs for Solix.
"One of the things I realized," he says, "is that the moment you get venture funding there are multiple people who are going to be making decisions."
The VCs will have to be represented on the board, and every significant decision will have to go through the board.
That's not necessarily bad, Gundavelli says. He notes that with the right board, "the entire thing can be very helpful."
That would be particularly true for a first-time entrepreneur who could benefit more from the VC's experience, provided the right people were involved.
But sometimes it works, and sometimes it doesn't.
"I felt, you know, from my experience that I know my destiny, and I know what I want to do, and I would rather take angel funding, and take the risk on myself," Gundavelli says.
David versus Goliath tip #8: But not having enough capital can slow your growth
Gundavelli doesn't regret his decision not to use venture funding.
But when asked if he's made any mistakes with Solix, he points to funding.
"I always feel I should have raised more money than I raised," he says.
Had Solix had more money in the early days, he believes, it could have done more faster, pursued more opportunities, and that would have been better for the company in the long run.
David versus Goliath tip #9: Use channel partners to keep sales costs down
Gundavelli always knew he had to spend money carefully.
We've seen how he kept R&D costs down by doing work in India. He knew it was vital to invest in marketing. The other costly ingredient was sales.
"I had to really carefully figure it out," he says. "You know what I'm aiming at is a fairly big vision, but I've got limited funds, so I need a very good execution strategy."
Gundavelli decided that building a large direct-sales force would simply cost too much. He didn't want to pay for a six-month sales cycle.
(A typical deal today takes three to six months to close and is worth $150,000 to $250,000). So the best strategy, he decided, was to build a channel and work mostly through alliances.
And Solix landed some good ones, including:
HP was a channel partner until it acquired a Solix competitor in 2006.
In addition to these big names, the company also has smaller regional partners.
These partnerships allowed Solix to make sales around the world, for example, to major Asian customers such as Korea Telecom and LG Electronics. A startup with a small direct sales force would have had little chance of landing these kinds of sales.
Solix looks for partners with experience in computer infrastructure and storage, who understand the technology, and can explain it to customers.
Most come to Solix, Gundavelli says, so the company doesn't have to go looking for them.
Solix does have a direct sales force, today numbering three people, but about half its sales are through channel partners and Gundavelli says his goal is to increase that to about 80 percent.
David versus Goliath tip #10: Help channel partners succeed; bring them deals
The channel has proved a good sales strategy for Solix, but it takes work.
The first step to making partners successful is to sell through them, rather than compete with them.
"Every deal we get," Gundavelli says, "we have to ask the question why we don't want to sell this through an alliance partner."
Sometimes a large customer insists on working directly with Solix. Sometimes no likely partner sees any benefit in being involved. But there must always be good reasons for a sale to go direct.
David versus Goliath tip #11: Help channel partners succeed; give them lots of support
The next is to give your partners ample support.
Solix has an online portal for partners, where they can get answers to technical questions, as well as support on sales and marketing matters.
Built and hosted by Digiprise, another company Gundavelli founded, this portal gives partners access to marketing materials such as PowerPoint presentations and white papers, and to competitive information: "anything that we believe can be useful to the partner."
It's also a communications channel.
When a partner has a sales lead, for instance, they register it through the portal. If two partners pursue the same customer, the one that registers it first gets preference.
The portal also provides a FAQ backed up by 24/7 live support.
Managing the portal takes about half a full-time job, Gundavelli says, and Solix has two people dedicated to managing partner relationships.
David versus Goliath tip #12: Help channel partners succeed; create opportunities for future sales
One other thing that helps Solix's partners succeed is built into the nature of its product: stickiness.
Having bought the software, Gundavelli explains, each customer will periodically need to add data to its archives. For that, the customer needs help.
"There is some work every year that enables the partner to have the stickiness to the customer, and also helps them in selling other solutions that they have."
This ongoing need for professional services, plus a shot at selling further hardware and software, keeps the channel partners motivated.
David versus Goliath tip #13: Sell your passion, especially before you have reference customers
From lining up funding to landing Solix's first sale, when you ask Gundavelli how he did something, one word seems to
come up over and over.
That word is "passion."
He got the first angel funding for Solix when a business connection "saw my passion" and introduced him to an LA doctor with some experience backing technology startups.
The doctor threw in; because he could see the need for data management in the medical field, he believed in the potential for Solix's product.
Then came Solix's first customer, a U.S. company called Western Gas Resources, now Anadarko Petroleum Corporation (NYSE: APC).
Although Western Gas knew it needed some kind of data-archiving software, Solix wasn't the only option on the market, and the company had no existing customers to give as references.
How did Solix get the sale?
"What you can sell is your passion and what you are trying to do," Gundavelli says, "and you need a break."
How you get that passion across is admittedly a tough question.
Gundavelli thinks there is a certain "fire in the eyes" that people recognize. But he says it also shows in how well-prepared you are, and how thoroughly you've thought through what you're doing.
David versus Goliath tip #14: Differentiate your company with your vision
Actually, Solix didn't make its first sale on passion alone.
Giving Western Gas a good price certainly helped. But that was something Solix pretty much had to do.
Its competitors --- realizing that if Solix survived, it would become a threat, Gundavelli says --- were pricing quite aggressively.
What Gundavelli sold to Western Gas with such passion was primarily his vision.
He convinced the company of the importance of a single integrated platform to meet its needs for years to come --- rather than a point product that would do the job for a year, and then need to be supplemented with another point product.
"Our technology is primarily our differentiation," he says.
David versus Goliath tip #15: Get your message to the analysts
Solix has a marketing budget of around $2 million a year, and that goes primarily to get the message out
to key influencers.
From the beginning, one of Gundavelli's priorities was taking the vision of a single platform for all data management to the analyst firms: Forrester, Gartner, IDC, and so on.
For this to work, the analysts had to agree with what Solix was saying, which they did.
The company reinforced that message with white papers, webinars, and appearances at numerous industry conferences.
"It was all about creating enough content, and continually talking up our differentiation," Gundavelli says.
And it worked.
The company Gundavelli started on less than $10 million in 2001 approached $10 million in revenues in 2007 with an impressive list of clients and partners. He hopes to double that revenue this year.
It goes to show what passion can do, even when you're a little guy fighting the giants.