ENTREPRENEUR STORY

CloudGenix: How A Mid-Career Bet On Entrepreneurship Turned Into Industry Defining Success

October 22, 2020 –As a mid-career executive when he arrived at the start-up game, Kumar Ramachandran had plenty to lose when he left Cisco Systems in 2013 to start CloudGenix. 

Ramachandran was walking away from job security at one of America’s largest infrastructure companies and the relative comfort of leading a proven product development team. In exchange, he’d face prolonged uncertainty, the grind of startup life, and a level of personal sacrifice that could exact a toll on fatherhood.   

“I didn’t want to become an absent parent for a number of years,” says Ramachandran, whose daughter, Ananya, was seven at the time. “That was my biggest fear.”

Thanks to a gritty, no-excuses style – both as CEO and a parent – Ramachandran’s decision to embrace entrepreneurship and its challenges has more than paid off. After pioneering a new category of networking technology called SD-WAN, CloudGenix was purchased by security giant Palo Alto Networks in March for $420 million in one of the first big deals of the Covid era. And by deciding early on to bring Ananya along for the bumpy ride, he imparted important life lessons about the value of hard work, courage and character to his daughter, who is now 14.

“I made the decision that if I was going to do this, I was going to expose her from the start to all the ups and downs,” he says. Whether he was disappointed after a day of rejections on Sand Hill Road or ecstatic over a big sale, he explained it to her as directly as possible. He also created a summer “internship” program for employees’ young kids, in part because many of his colleagues were in a similar life-stage to his own. As part of it, Ananya tried her hand at cold calling alongside the inside sales team, because dad wanted her to get a taste of what it feels like to be rejected.

“I think we do a disservice to kids when we pretend that the world is all rosy,” he says. “What’s important is the character you display in the face of adversity. Whether it’s losing a few consecutive points in volleyball or having the big bad incumbent introduce a product that seems to attack what you’re doing, do you let your shoulders droop or do you say, ‘Come at me!’ and promise to hit back 10x harder?”

Inventing the future

Ramachandran and the CloudGenix team had plenty of opportunities to prove their own character in building the company. The first was co-founder Venkataraman Anand deciding to not allow architectural short-cuts that could only win in the short-run but instead build transformative and long lasting value to customers. Leading technical architecture through the exit, co-founder Mani Ramasamy built capabilities in networking that had never existed in the decades before – building a network that understood the details of applications and how best to deliver exceptional user experiences. Driving such big innovations required not only exceptional engineering, but great diverse teams that brought cross-functional disciplines together and then a great sales organization that could deliver this transformation to the largest global companies on the planet.

CloudGenix also adopted the “go big or go home” adage. While mid-career entrepreneurs often look for a product niche they can fill in hopes of a quick acquisition, CloudGenix opted for the much harder job of creating a new technology category: “software-defined wide area networks” to support IT departments’ rapid adoption of the cloud and SaaS. “We knew the existing technologies were archaic, and nowhere near what was required for a multi-cloud world,” Ramachandran says. “We knew we could help redefine the next 25 years of networking.”

The entrepreneurial hustle

Given their wealth of experience, defining CloudGenix’s technical vision – essentially, doing with software what incumbent vendors had not been able to do even with hardware – was the easy part. Getting investors and others to believe they could succeed against competitors like Cisco was a huge hurdle.

To prove they were onto something big, they had to chase every last lead and find inventive ways to stand out from the crowd. “When you’re trying to build a new category as a startup, you have to make every hustle,” Ramachandran says. 

Their embrace of the hustle started boldly. Before seeking a Series A financing round, the team decided to do something very few infrastructure startups try: to nail down potential customers willing to get on the phone to profess their support for CloudGenix’s plan. Not two or three customers, but twenty.

Ramachandran started cold-calling prospects he researched on LinkedIn. He’d never done sales and knew from his own reactions to cold-calls how difficult it might be. “Many of us can be rather abrupt when we are interrupted in the middle of the day by a tele-marketer,” he says. Sure enough, the repeated rejection was “brutal.” But after four weeks, the team had drummed up the 20 advocates, who were willing to not only talk with VCs but also to commit to at least doing a pilot project with CloudGenix. 

With the testimonial at the ready, Ramachandran reached out to Ursheet Parikh in early 2013, who had co-founded StorSimple, which was later sold to Microsoft. Parikh had close ties to Mayfield who were investors in StorSimple – and would later become a partner there in September 2013– and he encouraged managing director Navin Chaddha to take a meeting with the CloudGenix founders. It’s a good thing they had these testimonials, because their lack of experience with pitching to investors was clear in the first meeting. Long before the end of the hour-long encounter, it was clear Chaddha was intrigued but not convinced. “We were very inarticulate in our early pitches,” Ramachandran says.

Fortunately Chaddha called back a few days later and invited Ramachandran to meet at Hobee’s, a favorite diner of the Silicon Valley set, to try again. For two hours, they talked more about the customer problems and the business value that made SD-WAN necessary than about the technology itself. This time, Ramachandran left with a handshake commitment and introductions to other investors and potential partners and customers to call. Shortly thereafter, Mayfield co-led the $9 million round along with Charles River Ventures, and Chaddha joined the Board of Directors. Parikh took the independent BOD seat and later transitioned into a board observer after joining Mayfield.

“Navin is truly a founder’s friend,” says Ramachandran. “He sees plenty of deals every day, and could have easily have said ‘nice to have met you’” after that first meeting. But he knew we had the domain knowledge and the right backgrounds to pull this off, so he gave us the benefit of the doubt until something clicked.”

Over their seven year journey together, the team at Mayfield worked closely with Kumar and the founding team at CloudGenix, with Ursheet spending time outside the board meetings, serving as an advisor at critical inflection points for the company.

Validating the vision and refining the product

CloudGenix was built with customers from day one. Even with the financing in hand, Ramachandran insisted that the earliest customers either pay for the prototypes or take the time to test it in their environments. It seemed like the only real way to ensure CloudGenix was developing exactly what customers would buy rather than what they wanted to build. “We wanted customers to have serious skin in the game,” he says. “Having a customer spend time in testing tells you way more than verbal feedback. People can sometimes be kind with verbal feedback – but that kindness backfires in product development – you want the unvarnished truth.”

The results were a mix of good and bad news. The upside was that CloudGenix had the right product strategy and architecture. The challenge was that customers wanted a more radical form of SD-WAN that would work farther into the cloud-based future. That would require another 12-months or so of engineering work, creating the risk that others can jump into the market, and they did – in-part through the acquisition of CloudGenix rivals. This is where having investors that are aligned to the company’s ambition is critical – Mayfield was clear that there was a large category to be built and supported going long.

Chips all in

Through rapid product development and bold marketing, CloudGenix was able to succeed going toe to toe with large public companies. But in a market so competitive, Ramachandran was always reminded to never let his guard down. At a board meeting in 2017, he proudly announced that CloudGenix had beaten its own forecasts for the fourth consecutive quarter. “I thought I was going to get a bottle of wine and chocolate,” Ramachandran says. Instead, Chaddha and the board urged him to push a lot harder to truly seize the moment. Recognizing when to go big on GTM can be tricky, and sometimes companies burn cash by firing the sales cylinders too early – but when you have product-market fit and sales-model fit – it is time! Having incredible sales leadership with leaders such as Matt Hickey and Robert Sexton gave the board confidence in pulling out all stops knowing that this team would deliver every single time.

Matt Hickey and Ramachandran seized the opportunity, immediately okaying investments to double the size of its sales staff, and taking on Cisco and others with ever more gutsy gambles. At Cisco’s massive user conference in 2019, CloudGenix set up a Coke-versus-Pepsi-style challenge outside of a Cisco customer appreciation dinner where attendees could try the companies’ offerings, no manuals allowed. “Some founders think you should slide under the radar,” says Ramachandran. “We took the exact opposite approach. We challenged the status quo.” 

CloudGenix went on to beat its numbers for 13 straight quarters, and by late 2019, it was growing 300% a year. Along the way, it had turned down a number of acquisition possibilities. But after running into executives from Palo Alto Networks in the lobbies of various potential customers, the two companies began serious talks on how they could serve customers even better. The value proposition of a merger was clear: as companies have to connect public cloud and data centers to more endpoints outside of the traditional enterprise networks, security and networking needed to be addressed together. 

Then the pandemic hit, forcing in person engagements to now be remote. Any acquirer would have had to consider the fact that CloudGenix is in the business of serving branch offices at a time when the future of branch offices was in doubt. This is where having a clear long term vision overcomes any short term market shifts. Both sides remained committed, and the acquisition became one of the first post-pandemic M&A deals. It was consummated over Zoom.

Post the acquisition, Palo Alto Networks is recognized as having the best and most complete SD-WAN and Secure Access Service Edge (SASE) solutions. The acquisition, of course, had an impact in Ramachandran’s own home, where Ananya saw herself as an integral part of the company. At first, she was saddened that CloudGenix would no longer exist on its own, Ramachandran says. But rather than feel bad, the girl who once made him a birthday card that encouraged her father to hit back 10x at competition got busy on a project of her own: a video highlighting the seven year CloudGenix journey that was truly intertwined with her own growth.