Issy is the CEO and Co-Founder of Velostrata and a serial entrepreneur. Issy has two very successful exits under his belt; Velostrata is his third startup. Before diving into the startup world, Issy was a tenured faculty member at the Technion, Israel Institute of Technology, where he worked on design and implementation of wide-area distributed systems. Prior to the Technion, he was a staff member at the IBM Haifa Research Laboratory. Issy has published over 40 papers and holds 14 patents in the areas of WAN optimization and distributed systems. He holds a PhD and master’s degree in computer science from Columbia University and holds a bachelor’s degree in mathematics and computer science from Tel Aviv University. In short, he’s brilliant. And, lucky for us, a KBD client.
Tell us a little about the path that led you to Velostrata.
Sure, it’s a long history. This is my third startup, and arguably the most exciting one. Before this I had two startups. One was called Actona, which was acquired by Cisco in 2004. I became CTO of the applications business unit that was formed after the acquisition. We had a good run there. After three years I left and founded another company called Wanova. That one ended up being acquired by VMware in 2012. Again four years, both were similar in terms of outcome, with $100 million acquisitions. We tried to break that this time around and make something much bigger. Before that I was a professor.
What inspired you to stop being a professor and start your own company?
When I came to Israel Institute of Technology, I basically created a lab in which we were actually writing software as opposed to just doing theory. I had a really big team there. And all those guys graduating from my lab wound up doing their own startups. I had always had the urge to build a business too, but I just happened to go into academia, which was good, but it wasn’t always what I felt was the right thing for me.
During a sabbatical, my mentor connected me to another guy and that’s when we started Actona. It was such a better fit for me and much more exciting. Once I got a taste of entrepreneurship I never wanted to look back. But it was a really tough time to have a startup; the bubble had burst, there was no money, no market, and no customers. I went back to teaching for a while; which, interestingly enough, went pretty well. I got tenure and everything. But after a few months back in academia, I thought to myself, “You know what? I feel that I have to go back to Actona, it’s what I really want to do.” I went back and fortunately for us it was a very nice outcome. In academia, it was more about writing papers than about building systems. I really like to build systems. Now I feel like I can make an impact and feel much more satisfaction.
Do you think there are inherent challenges in being a technologist while also running the company and managing people? How did you manage that transition for yourself?
It took some time. This is the first time that I’m managing a company as the CEO. It’s been a journey for me. I just got out of the technology tech unit. We made a lot of mistakes, we started out with a solution that was looking for a problem. Eventually we ended up, fortunately, finding that problem, but it was in the wrong order. We had a lot of changes of people we needed to make. It’s a journey. When I was at Cisco, I was already starting to be more outbound and work closely with my general manager there. Get more exposure to the business side of the world, and how enterprise thinks, and how customers think. And then so it was a gradual transition and process. With my second startup, which was Wanova, I still felt I wasn’t ready to be a CEO, so actually even though I founded the company, I brought in my partner and I learned from him. I was already half way kind of starting to move more towards the business side of the house. When the time came in 2012 at VMware, I took more of a business development role there; it’s been a gradual transition. I still think that the technology foundation I have is very important but I brought in my cofounder to take over the product. We still think a lot about the product, but now I feel much more mature and have made this transition, but it didn’t happen overnight.
My core team has been with me for 12-13 years. Back then, I taught them everything I knew; now they teach me.
My core team, we have about 10 people, has been with me since the early days of Aktona, since 2000, 12-13 years. Back then, I taught them everything I knew; now they teach me. It’s the same core team of architects and engineers that work together in a very unique way. This team is still working together. In terms of leadership, which is probably arguably one of the most important things you need to have as CEO, I don’t want to sound, I had it all along. There’s a saying: How do you know if someone is a leader? Well look back and see if people are following him. I’m fortunate to have that kind of following through all the stages through Aktona, and Cisco, and Wanova, and VMware and Velostrata, it’s the same kind of core team that has been working together and that’s what I think is one of the strengths that I bring to the table.
So what do you think are the biggest lessons that you’ve learned along the way? Is there anything specific you’ve learned at previous companies that you are implementing at Velostrata?
At the leadership management level one of the lessons learned that I’ve implemented here is that I’ve created my executive team in a way that there’s not so much overlap, there’s delegation and responsibilities for each of the top guys to do their stuff without having to worry or talk about where the overlap is. Everyone has a clearly defined role so they can flourish and I think work together. That’s one lesson at the management leadership level.
At the product level we have a lot of lessons, the most important of which is that you can’t have an enterprise product in less than 18 months. But it shouldn’t take longer than that—you have to be as early as possible to market.
At the product level we have a lot of lessons, the most important of which is that you can’t have an enterprise product in less than 18 months. But it shouldn’t take longer than that—you have to be as early as possible to market. We set ourselves a very important goal when we started the company in April of 2014, by the end of 2016 we’ll have a product. Set attainable but stretched goals. It’s been always my philosophy, and we did it.
Eighteen months and two days after inception, we now have a product. This time around we were very focused. We said, let’s do one thing really well, focus on it. I think that’s been a big lesson for us from the past. I hope that it’s going to payoff. It looks like it so far.
One of the other struggles I hear from some of the younger CEOs is that they are really trying to figure out how and when to go for funding. Do you have any advice on that? What is the pivotal time to go for a series A?
Very good question. How much money to raise is another big question. It’s a complex topic, with a lot of aspects to it, it really depends on so many parameters. I was fortunate after two successful exits that I could potentially raise more money with less dilution. It’s always better to go for less money before you need it. When you need it you are under pressure. It’s better to set milestones.
The way I structured my most recent funding, our A-round was split into stages where I defined together with my investors some milestones I needed to reach in order to get the next batch. It worked for us very well because we hit our targets even earlier than expected.
I think that the pattern I’m trying to get is I want to raise enough money that will give me the ability to raise my next round with a much higher valuation. You need to find the optimal point that gives you the ability to execute enough so the next milestone will give you the next jump in your valuation. At the end of the day my goal is to raise the value of the company for the shareholders, and bring value and build a big company. In summary, don’t waste too much, that’s not good, but also don’t raise too little. Don’t allow valuations that drive your decisions for the short term. You need to find the right amount of money that will give you the next important milestone.
What were the factors that you looked for in partnering with a venture capital firm?
It’s very critical to choose a the right VC because it is a very long-term relationship one that you are tied to forever. You have to look at the individuals—are they someone that you trust and can work with? Are they someone that can give you guidance, but also understands the difference between being a mentor and coach and between being a player? And I’ve seen way too often cases where VCs forget that distinction. They try to be the players when they are not equipped for it, either because they don’t have the full context or they have not played, they are not active. Knowing this distinction is a very important element for the VC and one that I like. I don’t want someone who tries to be a player but is not equipped for it, either because they don’t have the full context or they have not been active for sometime. I need someone who I can bounce ideas off of and advise me.
The other thing is quite obvious. You want to have a VC that has enough, especially for enterprise products and companies, you want to have VCs that have enough deep pockets, and they want to help you build the company. But that’s kind of the obvious stuff.
How do you think design has impacted your perception in the market?
Design is much more than just design, it’s about the brand…the face of the company. I think that you know when you look at a website and anything that a company does, you like to see something that shows professionalism and perfection and something that comes across as top notch. We try to do it in everything we do in the company. From every touchpoint, business cards to website to a tradeshow booth, good design shows that there is something serious and professional in your company. It reflects who you are in the market. If you walk in our offices you’ll see that everywhere. There’s a quality that needs to be reflected in everything we do. Branding and design is our window to the world, that’s why it’s so important to us. It is a necessary requirement for success. It helps a lot.
From every touchpoint, business cards to website to a tradeshow booth, good design shows that there is something serious and professional in your company. It reflects who you are in the market. If you walk in our offices you’ll see that everywhere. There’s a quality that needs to be reflected in everything we do. Branding and design is our window to the world, that’s why it’s so important to us. It is a necessary requirement for success. It helps a lot.
Do you have any other important piece of advice that you’d offer to a young startup entrepreneur?
There are so many! Make sure you have the right founding team. It’s critical people don’t underestimate the importance of the founding team and the relationships between them, the trust between them. If you have a good team, the markets can change, the products can change, things can happen, but the team is the most important thing. I’m not the first one who said that. That’s the first thing, the foundation, it’s critical. Then you need to figure out when you go there that you have enough market, right?
If you have a good team, the markets can change, the products can change, things can happen, but the team is the most important thing.
You also need a differentiated product. I always tell the entrepreneurs that I talk to that it’s better to be different than better. If you don’t have a differentiated product it diminishes your chances for success, even if you have something that is marginally or incrementally better than anyone else. Work on your differentiation all the time; make sure you understand how you rise above the noise. You need to be able to easily explain how different you are, because otherwise especially in enterprise market no one is going to listen to you, and it’s going to be hard. It’s critical to create something that’s distinctive.
Don’t just go for getting more points, go for an all-out knockout. Know that what you can do, no one else can do. It’s critical to have that. Building a business is hard, but if you have that differentiation from the start, you are going to win.