How To Defend Your Dream Against All Odds: Alex Bouzari, CEO of DataDirect Networks (Part 5)

Sramana: When you went through your fight with the VCs and they resigned they still owned a very large portion of your company. How did you resolve that situation?

Alex Bouzari: We bought them out. They walked away from the company in 2002. They told us we had lower than a 1 in 1,000 chance of even surviving the next 30 days. After we made it through that first month due to our supportive employee base we were able to start scaling the business. Our customers loved our product and we were the only ones there who could accomplish what they needed. Media customers really loved it because they were creating movies with computer special effects and they needed the power we were giving them. The VCs just did not understand our market.

By 2003 when we were running the company profitably so in 2004 we went back to the VCs and told them they were sitting on our table and we wanted them out. The funny thing is that by then they were sitting across the table telling us that they always believed in us and that they knew we would make it. We had some discussions and we bought out the lead investor in 2004. We bought out the remainder of the investors in 2007.

Sramana: What kind of terms did you negotiate with them and what was the process of those negotiations?

Alex Bouzari: We told them that we remembered what they did to us in 2002 very, very well. We told them we were going to make sure that they could not monetize their investments. We told them they were welcome to stay but that we were going to run the company as a lifestyle company and they would never see a penny. We gave them two choices. They could either own shares in a company that was doing well but that they could never monetize, or they could sell their shares and make some money when we parted ways. After a few months of back and forth we came to terms and we parted ways. The partners who we bought out in 2007 had stayed in longer but the life of their fund ran out and they were ready to exit.

From their point of view I don’t think it was about animosity. VCs have a different way of looking at things. I understand it. It is all about spreading risk, pushing companies to the limit, and try to hit the jackpot.

Sramana: VCs don’t work with niche businesses. They like to work with multi-billion dollar businesses. What you are working on is a complex problem in a great, niche market. That is not really the VC model. They should never have invested in your company.

Alex Bouzari: I think they felt it was something that could become big. Looking at it today we realize we are going to build a billion dollar company out of this. The Internet came to be and now unstructured data is everywhere. Organizations struggle to store and process unstructured data cost effectively. Now it is really a multi-billion dollar market that is growing rapidly. We are absolutely intent on taking the company to a billion dollar company. In the 2001 and 2002 timeframe it was very much a niche market. If the Internet had not happened it would have remained a niche market which was perfect for a lifestyle company.

This segment is part 5 in the series : How To Defend Your Dream Against All Odds: Alex Bouzari, CEO of DataDirect Networks
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