How To Defend Your Dream Against All Odds: Alex Bouzari, CEO of DataDirect Networks (Part 4)

Sramana: Where did you and your investors agendas diverge?

Alex Bouzari: The investors wanted us to go into the broad market with that technology while we kept telling them that it was not technology that applied to the broad market. It was high-performance, high-capacity storage for unstructured data. We had put in three years of blood, sweat, and tears to figure out who to store, process and distribute unstructured data for a particular market, primarily images and video. Back at that time it was a niche market for big government labs and the media industry. There were probably a thousand customers in the world who could use our product.

Sramana: Didn’t they ask those questions before investing?

Alex Bouzari: I think they saw us as naïve entrepreneurs who did not know what the market potential really was. Our VCs were a smaller firm out of Los Angeles as well as a European group that focused on the media industry. They looked at our firm as something that could become much bigger. Within six months we realized that our views were diverging on what the business should be. It became fairly confrontational. Then 9/11 happened and our investors freaked out. They wanted to shut down the company.

We told them they were nuts and that we were just getting started. We had fantastic technology that our customers loved. We were approaching breakeven within 12 months. We felt we had something that was phenomenal. The VCs just did not understand. When they came on board they brought layers of management and infrastructure. When we started having differences of opinion about the vision of the company in early 2002 we realized something had to be done. We saw two options; one was for them to take control and run the company with the founders leaving and the other was the investors leaving and letting the founders run the company the way that we knew it had to be done.

Those were difficult times. We were really passionate about the company and we really believed in it. We knew we could turn it into a great company but we had a bunch of guys sitting very far away who did not think the company would go anywhere. In April 2002, we got a call from them saying they were going to pull the plug. I said hell no, and that if they did decide to pull the plug that we would do everything in our power to make their lives miserable. We had a very tense 24-hour period after which their conclusion was that we did not have enough money to make payroll the next week and that they were pulling out, resigning from the board, and we were free to do whatever we wanted to do.

We instantly went back to the company and our employee base. We explained the situation to our employees. We all knew we had something great and a good future, but the reality was we had no money. We told them we would do whatever we could with whatever money we had personally to get things going, but that it would take some time to get the company back on track and to a breakeven point. We asked our employees for help. We asked the employees that could delay salary to allow us to do so. We asked for any employees who could take a small cut in compensation to make that offer to us. Our employee base was incredibly supportive. Everybody was passionate about the company and was willing to do whatever they could to help. We also got rid of all the people the VCs brought in who did not truly add value.

The VCs basically exited the company in April 2002. Somehow we managed to make payroll in April. We lost roughly $3 million in the first half of 2002 and we made roughly $3 million in the second half of 2002. In 2003 we were profitable and did roughly $25 million in revenue. By 2005 we earned 45 million dollars in revenue and broke $100 million in revenue by 2007. Last year we hit $188 million in revenue. Right now we are above a $200 million run rate.

This segment is part 4 in the series : How To Defend Your Dream Against All Odds: Alex Bouzari, CEO of DataDirect Networks
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