In this series, I look at some of the ‘unicorn’ companies that Aileen Lee with Cowboy Ventures identified in her article, Welcome To The Unicorn Club: Learning From Billion-Dollar Startups. In it, she offered a list of companies that have had billion dollar exits, and analyzed some of the common threads. We will explore the early stage entrepreneurial jouneys of these Unicorn companies, as well as some others that I know well.
We started the series with Tableau Software and continue on today with FireEye, further elaborating on the general theme of cross-domain innovation.
Christian Chabot, CEO of Tableau, says: “They say that the greatest innovations are born from strange bedfellows.” FireEye’s founder Ashar Aziz found his sweet spot at the cusp of virtualization, networking and security, two industries that he had insights into, and that generally, did not talk to each other. “What we do is a combination of very deep system level work in virtualization and operating systems, as well as network-level packet processing,” Aziz says.
And he loses no sleep worrying over the thought that some big giants will come in and replicate what he has done. “Large companies are very busy doing release 6.5 of the previous 6.0 version,” Aziz says. “They cannot take many different things and put them together. They do not have the varied domain expertise to put it all together.”
You can read the full interview with Ashar Aziz here on the 1M/1M blog. This interview (Oct 2008) was long before FireEye took off in the marketplace. But it gives you visibility into some of the core thought processes that went into envisioning what became a multi-billion dollar ‘unicorn’ company.
At its heart is a real, big problem that Ashar thought was worth solving. It was early, the market hadn’t fully started realizing the pain. But eventually, Ashar was right in his bet.
In September 2013, FireEye went public nine years after its founding. The company had raised more than $85 million in venture capital from Norwest Venture Partners, Sequoia Capital, DAG Ventures, Juniper Networks, Jafco Ventures, In-Q-Tel, Silicon Valley Bank and Goldman Sachs.
Note also, that this is not your popular lean startup. Instead, FireEye is a fat startup that had to make intensive R&D investments. [Related reading: How To Fund a ‘Fat’ Startup.]
Finally, note that the company did hire an outside CEO, and the founder took on the CTO role. However, during the IPO, he still owned close to 10% of the company that became worth almost $400 million.
The company’s current market cap is $3.2 billion.
While FireEye was heavily funded by VCs including Norwest and Sequoia, the lack of domain expertise to work with cross-domain innovation is a real issue in most venture firms. The level of conviction it would take an early-stage investor to understand three different fields and synthesize the learning in terms of technology, business models, go-to-market strategy and people is rare in today’s Silicon Valley and altogether absent elsewhere in the world.
This raises a major question: How does cross-domain innovation get brought to market? Contrary to lean startups and web ventures, high-impact cusp ventures require real investment up front to assemble cross-domain teams and fund extensive R&D. The gestation periods are longer, but so are the impact and the returns. Not all of them can be bootstrapped to validation, certainly not unless the entrepreneur has personal capital to play with. Ashar did not. His previous venture had failed.
Excerpt from Billion Dollar Unicorns.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here.
This segment is a part in the series : Starting Unicorn Companies