9.4M Dollars In Concept Financing To 100M In Bookings: Palo Alto Networks Founder Nir Zuk (Part 6)

Sramana: Cost of development is also attributed to quality design. Perhaps you gained significant savings because of that?

Nir Zuk: We saved money because we were able to hire extremely high quality engineers in the United States. You can’t hire the same quality of engineers in China or India. You can find them in Israel, and you can find them in parts of Europe.

Sramana: There are plenty of successful Indian companies that have done extremely complex software engineering tasks. Zoho has a thousand engineers and has replicated the entire office suite.

Nir Zuk: You don’t need a thousand engineers to do that. I heard the exact same story when I started this company. Check Point has 600, Juniper 1,000, and Cisco 3,000 engineers working on their security products. I have 60 engineers today, and they are all in the United States. We are competing very successfully against all of those companies with a fraction of the number of engineers.

Sramana: I definitely agree that you do not need an excessive number of engineers.

Nir Zuk: Yet that is what ends up happening when companies go to India. Companies hire thousands of engineers because they can afford it.

Sramana: Yes, they do hire more engineers there because they are more affordable. However, if you wanted to find 25 high-quality engineers in India or China you could do it. I cover that space extensively and can give you thousands of successful examples. You are right that companies starting out of India and China struggle and that is because they do not have the product marketing skills and go-to-market strategies. They are too far removed from the customer base.

Nir Zuk: It will be extremely hard for you to retain them in India. I know only the space that I compete in, and every company that has used that model has failed. There is not a single successful company in that space. Juniper failed in that model. When they acquired NetScreen their engineering was almost 100% U.S.-based. Today, they are almost 100% based in India and they can’t compete anymore. Startups in our space have failed using the same model. My philosophy is that you need to be where the market is. I believe very strongly that in the early days of a company it all needs to be in one space. That is another key aspect of my philosophy.

Sramana: I don’t think the entire company needs to be in one spot. The design team needs to be close to the market. Management of your development is a skill set. If you do product architecture, product management, and product positioning close to the customer, then you can do development offshore if you are good at management. I think what is important out of this is that you found investors who shared your values and strategy.

Nir Zuk: Yes, it was very important to me. Another value I had was to only hire extremely good engineers. That means spending money and equity on engineers. I had arguments with my investors on it. I don’t do business by giving engineers 0.1% of equity.

I met a bunch of potential CEOs who came from large companies. They immediately started talking about building a team, and we did not even have a product yet. I needed a CEO who was willing to get his or her hands dirty. We needed an early-stage CEO who understood that they would later be replaced one the company became successful. That happened in 2008.

Sramana: How did that transition go?

Nir Zuk: It went OK, but our early-stage CEO left before we had a new CEO in place. As a result, our VP of marketing stepped in as CEO and left the company as well once our permanent CEO was hired so that he could go be a CEO at another company. We had a few issues with lead generation. Few companies fail to recognize that lead generation is the most important aspect of marketing, and our new VP of marketing is extremely good at lead generation.

This segment is part 6 in the series : 9.4M Dollars In Concept Financing To 100M In Bookings: Palo Alto Networks Founder Nir Zuk
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