From Zero to $3.7 Billion: Jyoti Bansal’s Textbook Case Study of Building AppDynamics (Part 3)

Sramana Mitra: How did you get this off the ground? Did you build something and then go out to raise money?

Jyoti Bansal: I was an engineer in my late 20s. I was convinced that there was a need there. First of all, the market was bigger than anyone thought. Then, the approach I was bringing in was the right kind of approach. I started coding it over weekends and nights.

Sramana Mitra: You kept your job at Computer Associates and you were doing the prototyping during nights and weekends?

Jyoti Bansal: Initially, for about three to four months. I started pitching my idea to VCs as well. Initially, a lot of VCs were skeptical about how big the market is. You’re one person. You don’t have much business experience. You don’t have much experience managing teams and leadership. It was hard. I got a lot of rejections. But you learn what is not working. I would always take rejection almost as a learning experience on what I’m not doing right. What’s happening that can’t convince others to believe it?

There’s one VC that I was talking to. He said, “Do you really believe in this?” I said, “Yes.” He said, “Why are you still in a job then?” That was a question I didn’t have an answer for. I thought about it. The next day, I quit my job. Once I quit my job, I worked on it full-time. I got about 20 or 30 rejections.

Sramana Mitra: Did you get any customers in the process?

Jyoti Bansal: I didn’t have a product. I couldn’t build the product by myself. I needed to hire engineers to build it. It was an early prototype.

Sramana Mitra: You needed to do a fat startup as a first-time entrepreneur, which is a very difficult thing to do in Silicon Valley. During the timeframe that you were describing when you were doing this, it became very difficult.

Jyoti Bansal: I was doing this in the beginning of 2008. The seed market and angels weren’t as ripe as it is now. You had to raise capital from VCs. These products take time to build. They take 12 to 18 months to build. You need, at least, a team of 5 to 10 engineers to work on them.

Sramana Mitra: That’s why they’re fat startups. How did you get around that chicken and egg problem?

Jyoti Bansal: To me, it was very clear. My company will take off only if I can raise venture capital. I didn’t have savings of my own to hire engineers on my own and pay them. What I learned over time is, it’s how you tell your story. It has to be right. There’s three parts of the story. One is, I need to show that if everything goes right, this is a billion-dollar company. This is not a small niche thing. That’s how the venture world works.

Their whole business model is that you bet on 10 and one becomes a billion-dollar company. You have to show that if everything goes right, this has the potential to do that. Telling the right story around that is the first important thing. The second thing is, you have to show some validation. For a product like this, there’s that chicken and egg problem. You can’t have customers because you need to have funding to build the product and hire engineers.

This segment is part 3 in the series : From Zero to $3.7 Billion: Jyoti Bansal’s Textbook Case Study of Building AppDynamics
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