1Mby1M Virtual Accelerator Investor Forum: With Tim Guleri, Managing Director at Sierra Ventures 2021 (Part 3)

Sramana Mitra: Let’s do a few case studies. You have developed a very informed perspective on this. Walk us through a couple of examples of what they came to you with and what you saw. What was the business model or distribution model that made them successful?

Tim Guleri: The easiest example to give you that your audience will also understand are companies that have an open source genesis. I invested in a company called Sourcefire, which was my second investment in Sierra. This company was based in Washington DC in the security space.

They build firewalls and products for intrusion detection prevention. If there is bad stuff flying in your network, they could detect that. The company was founded by this phenomenal entrepreneur Martin Roesch.

Martin had written this piece of open-source software called Snort. It is a wordplay on sniffer which is how you sniff traffic and see if there is any bad stuff in it. This little open-source project had taken a life of its own. When we invested, they had about 2 million downloads. They were getting enterprise traction at that time when we wrote our $3 million check.

My partner Mark Fernandez and I jumped on a plane to get on the term sheet. We were very excited when we met Martin at the RSA show. We had a sales team for that company and we nourished the open-sourced project. We had a whole part of the company that just did community marketing.

I still remember when we were having the board meeting right before going public. This company after going public ultimately got bought by Cisco for $2.4 billion. At that board meeting when the CEO was doing his 40-year view, there were only four companies in that quarter that were above $500,000 in size.

A plethora of the deals even when we were about to go public were in the $50,000 to $70,000 range. This was the power of distribution and the fact that the customers were experiencing the product as an open-source and then buying it.

That is a great example of a company that has sustained its arc of growth. Cisco which is a good prototype of a closed source company saw the value of the distribution and ended up paying a good multiple for Sourcefire.

Sramana Mitra: Have you done other deals in that mode?

Tim Guleri: Yes, I have. There is an interesting company out of Cincinnati called Astronomer. They are based on an open-source project called Airflow. They are building the next generation Neilsoft. In the data pipeline space or pipeline as a service, those polyglot data infrastructures that run on the cloud become the mainstay of the computing backbone today.

Connecting these databases and applications is very tough at scale. Astronomer is going after that market opportunity. It was in the same mode. I did a series seed and backed with an entrepreneur that I worked with before. His name is Joe Otto. He is out of Cincinnati. This is not a popular venture destination but we love this entrepreneur. He was partnered with Ry Walker who is the founder. We were lucky enough to help them start building the enterprise version of the product. The company has raised a couple of rounds and they have been successful right off the gate.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Tim Guleri, Managing Director at Sierra Ventures 2021
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