Launching and Scaling a Security Startup During an Out-of-Favor Time: HyTrust President Eric Chiu (Part 6)

Sramana: How much money did you raise from VCs?

Eric Chiu: We raised 5.4 million dollars in Series A. In the end we also converted our 200,000 dollars into that Series A. That allowed us to start paying ourselves again. I think you have to have that period where you are not making any money. Your focus and attention has to be on making that idea successful. Without that I don’t think you can have your cake and eat it too. The idea of bootstrapping a company brings a lot of focus and clarity into starting that company. Once we raised Series A we were able to hire our core engineering team. We got our first product launched in May of 2009. We started closing customer deals in Q4 of 2009.

Sramana: So it took you about 18 months to get the first product out?

Eric Chiu: It was about 10 months to get our beta launched. In terms of shipping and selling a GA product, we closed our first deal in October which would be 15 months from GA. In September of 2009 we one VMWorld Best of Show. We won not only the security category award, but also Best of Show across all 8 categories.

Sramana: That must have given you ton’s of visibility.

Eric Chiu: It was huge. We were still very early in the market. We had a ton of visibility. We closed our first three customers which were the Federal Reserve Bank of Chicago, GEICO, and Active Network. That also allowed me to go out and fund raise for Series B.

I closed Series B in three months based on the visibility we had from VMWorld and that early customer traction. Late 2009 was a tough funding period. In a lot of ways I believe the timing was fortunate because when we got funded for Series A we had the Wall Street meltdown. Our timing was awesome. We had money in the bank. After that it was very difficult to get funding for two or three years. It caused us to keep startup competitors out of the market. It was also very difficult for big guys to fund new products. They were not investing in new solutions to address these problems in virtualization and cloud.

Sramana: Where large customers buying during that time frame?

Eric Chiu: It was difficult, but less because of the economic environment. We were still dealing with early market adopters. We were dealing with bleeding edge evangelist buyers and they did not care as much. They were not going to avoid spending a couple hundred thousand of dollars because they believed in the dynamics of technology and where we fit.

Sramana: When did you close your Series B?

Eric Chiu: In December of 2009.We left it open for two months because Cisco invested in us in that round as well. From there we started hiring out our sales team and build out our customer base. We started seeing verticals forming. Insurance turned into a major vertical. We have GEICO, AIG, Farmers Insurance, Zurich Insurance and a few others. We also have some of the biggest government contractors in Boeing, Lockheed Martin, General Dynamics, and Northrop Grumman. With In-Q-Tel we have quite a bit of effort in the Intelligence community. We have DoD customers like the Navy and Army. We do have a broad spectrum of customers who came on in that 2010 to 2011 period.

Fast forward to today and we just announced and 18.5 million dollar round that rounds out our strategic investors. Not only do we have Cisco as an investor, but we also have Intel, VMWare, In-Q-Tel and Fortinet. If you look at Cisco, Intel and VMWare you will see that we have three of the biggest players in virtualization and cloud, hands down.

This segment is part 6 in the series : Launching and Scaling a Security Startup During an Out-of-Favor Time: HyTrust President Eric Chiu
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