Concept Financing from Andreessen Horowitz: Andrew Rubin, CEO of Illumio (Part 7)

Sramana Mitra: Also, your sales cycle was already in full swing. If there are 100 customers engaged in the developing of the product, that means that as soon as the product is ready, a good percentage of those are ready to buy. If you have product–market fit, a good percentage of those are ready to buy.

Andrew Rubin: Even though we didn’t do it with the idea of pipeline in mind, it was obvious to us that some of the work that we were doing would eventually pay off after we launch the company. We ended up running in stealth mode until October 22nd of 2014. On that day, we publicly launched the company. Just to endorse what you said about not only building the feedback loop but also the customer engagement, on the day that we launched, we had referenceable customers on the record who were talking about us. One of them in particular is worth calling out. Morgan Stanley, who I’m sure you know by name, is obviously one of the very large global banks.

Sramana Mitra: I’m Morgan Stanley’s customer. I know them more than by name.

Andrew Rubin: Wonderful. Morgan Stanley was one of our public customers who actually was profiled in our launch. The CIO of Morgan Stanley was the person who went on the record on their behalf. A funny side note that I can tell you is having been in the security industry now for over a decade, I can assure you that getting banks to talk about their security publicly is generally considered impossible. It’s a very rare occurrence and we had Morgan Stanley’s CIO as one of the public references for the launch. We built the motion with customers that paid dividends from the day that we launched. We’re nine months post launch now and we’re incredibly proud of our early days in the market.

Sramana Mitra: How many of these 100 customers became paying customers? What did you close with in 2014 in terms of revenue?

Andrew Rubin: I appreciate the question, but we don’t comment in any way on either customer count or revenue. I will say that most private companies say that but in our case, there is actually one reason beyond just that. As you can imagine, security is unbelievably important and taken very seriously. If a customer is willing to talk about us, we’re very thankful. Unless a company talks about us, we simply don’t talk about them mostly because of the security angle.

Sramana Mitra: I’m asking more about how many of these 100 customers converted in the short term.

Andrew Rubin: We simply don’t comment on customer count or revenue.

Sramana Mitra: Never mind. What else is interesting in the story?

Andrew Rubin: There’s probably two other things worth noting. The traditional infrastructure security space is a lot about security and networking. Those are the two disciplines that, traditionally, have been inside the building. One of the things that I’m incredibly proud of is that what we’ve built is a blend of a lot different pieces of IT. There’s a very important part of infrastructure. In our story, security is key. We talk about things like virtualization and dev ops. This is certainly true of the seven executives, but it’s pervasive throughout the entire organization. We’ve built an interesting and diversified blend of disciplines and background. In a lot of ways, it mirrors what our customers look like. To me, that’s a very interesting thing because there are people sitting in this building who have been working in the technology industry for 20 years and who are sitting 15 feet away from people who also have been doing that and never once crossed paths. I think that’s an important part of our story because it’s sort of the state of the world. Everything is being mashed up and blended together.

In tech, things are being forced to work together in ways that they never did. I think for vendors like us, you have to have that understanding and perspectives inside the company to be able to appreciate what the customer is looking for and dealing with. It actually takes a lot of work to do that in recruiting and it takes a lot of work to get people comfortable that you’re going to a security company, but we actually care deeply about the design of our UI – something that security companies traditionally have never really thought about as a meaningful part of their value proposition. I think that’s one.

The second one is, I’d be remiss if I didn’t point out that in March of this year, we raised a third round of funding. This came after launching the company and after acquiring our early customers. We raised $100 million in Series C round. In 27 months, the company has raised a total of $142.5 million. I’m certainly very appreciative and thankful for the large amount of funding, but I think the people who gave it to us are much more important. I don’t want to go through the entire list. It’s actually a long list but I want to highlight a couple. Obviously, Andreessen Horowitz took the early bet on the Illumio idea. Our Series B round was led by Steve Herrod who is a venture capitalist by day job today. Before becoming venture capitalist, Steve was the CTO of VMWare for many years. That’s actually the reason why I so badly wanted him involved. He brings a perspective to the table not just from the industry, but also from the customer.

Sramana Mitra: I have one question. Why do you need so much money?

Andrew Rubin: The simple answer is we’re very serious about building a company for the long term. We’re very serious about building a public company. We believe that there is a massive opportunity in security today. Quite frankly, one that hasn’t existed. We believe that we built something that allows the customer to do something completely different in terms of their operating model than they were able to do in the past. That opportunity gives me confidence that if we execute well, we have the opportunity to build a very large and sustainable company. Fortunately, our early customer acquisition trajectory indicates that we’re on that right path early on.

The funding allows us to do two things. One is it allows us to build a scalable global organization in less time than it would otherwise take. Secondly, it allows us to build an operating model so that when we approach somebody like Morgan Stanley, they understand that they can trust us despite us being young. As an organization, we’re mature enough that we understand and can support somebody like them. I think that the funding has done that in a lot of different ways for us.

Sramana Mitra: Terrific. Thanks for sharing.

This segment is part 7 in the series : Concept Financing from Andreessen Horowitz: Andrew Rubin, CEO of Illumio
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