Opportunities At The Cusps: FireEye CEO Ashar Aziz (Part 3)

SM: A $100M education? Wow! You better have learned the lessons very well!

AA: You can’t get that at Harvard or Stanford! The interesting thing was not necessarily about learning what to do, rather it was about learning what not to do.

SM: Besides biting off too much, what are some of the other things on your list of ‘What Not To Do’?

AA: Cash. I was not the CEO, I was the CTO at the time so I can’t take full blame or credit, but the lesson is this; cash, cash, cash. We went through a lot of cash.

SM: The cash structure of the company was completely screwed up?

AA: It did. We were doing $5M a month pre-revenue. It hurts me to think about it because I raised that money. That is part of the lesson I want to carry on. You have to be very, very tight when you spend the money. The only time you do an expense increase is when it is completely broken. In the old days you raised a lot of money and then you spent it.

SM: That brand of entrepreneurship is gone.

AA: It is gone now, but it was possible then. In fact people expected it. We had a tough time, but then Sun came in and acquired the company. It was the not the best outcome for the employees or the investors because it was 2002, the bottom of the bust. We missed out on a good outcome by turning down the earlier outcome offer.

I was able to walk away knowing the vision was right. The mistake was biting off too much and requiring too much capital to get to stage one. The higher the capital intensity the greater the risk of ultimate failure. If you are going to build a business, build it with the lowest level of capital intensity. The key lesson is to get into the revenue stage with a minimal amount of cash. You can do three startups with $100M, which is what is so painful about that.

SM: Your point about capital intensity is very important. First time entrepreneurs, in my opinion, should not take on capital intensive projects. They do not know how to manage capital.

AA: No they don’t. They should be given a constraint of “here is $5M or $10M, let’s see what you can do with that money.”

SM: Over the course of time. They should not get that in one shot.

AA: Definitely over time. Take two years to spend the money and get to a proof of concept, a product with a revenue stream, and a market validation. That is what needs to be done.

SM: That is a discipline that entrepreneurs need to put on themselves. If they do then they will not lose control of the company. It is a milestone-based, disciplined approach.

AA: That will maximize the chance for success. If you are in a place where you need another $20M to get to the next stage then things become very hard. I learned that lesson the hard way. It is easy to say in hind sight that you should make sure that you have money to keep the doors open while going through the process.

This segment is part 3 in the series : Opportunities At The Cusps: FireEye CEO Ashar Aziz
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