Because I’m the CEO of a Silicon Valley start-up, people are often surprised that my dream is not to become a unicorn - a billion-dollar start-up. A unicorn is a mythical creature, beautiful and rare, but also hard to fathom.
I want to be horse, a sure thing, reliable, dependable, secure and fast. And so this is how we’ve built our company, not to obtain some ethereal status, but to be grounded in what people need and to be around for the long haul.
Bracket, which I started in 2011, creates software that allows large, security-conscious enterprises to use servers in the public cloud - as well as servers in their own data centre - securely, safely and reliably. The idea behind Bracket was heavily influenced by our collective time at Cisco, where we spent a lot of time looking at the transition to cloud computing. That experience inspired an opportunity to start providing a single set of security capabilities that are very advanced and done completely in software; capabilities that can run on whatever data centre infrastructure the customer desires.
It was a good idea, a necessary idea, an idea whose time had come. But like all good ideas, it would see the light of day only if we managed execution correctly. Success is always the result of a product strategy that aligns with a financial strategy that, ultimately, aligns with a go-to-market strategy. Attracting capital that can tolerate making investments in software development over the course of years, not months or weeks, is key. Having a long runway and matching investments and expenditures to fit the envelope is vital to a start-ups survival.
But how big do you go? Over time, and after a career in the tech industry, I’ve learned that smaller is sometimes more beautiful. When raising money in a super-heated private equity market, it’s not uncommon to see very young companies raising money at valuations that are way ahead of their progress. While that’s desirable from a shareholder’s standpoint because it minimises dilution, it also brings some dangerous consequences with it (a.k.a. crash and burn).
First, companies that are overcapitalised tend to spend too much. When there’s money, it gets spent, and that leads to sub-optimal use of resources. Second, when raising money, companies must consistently keep the next move in mind. If a little start-up is raising money at a billion-dollar valuation, the next round of funding will need to be higher. Maybe twice as high. That can be tricky, causing negative effects from over-reaching. I argue that taking a slightly lower valuation from super-high-quality investors leaves room to grow. Contrary to popular belief, this strategy is actually a shareholder value maximising action in the long term - more so than simply going for the highest price on a given round.
Investors help drive the success of a business. Bracket has been incredibly lucky to have some of the very best in the business, which have outstanding people working on our behalf and believing in what we are doing. That’s been more valuable than the dollar amount we’ve been offered. In fact in the tech world the difference between success and failure always comes down to people not some particular technology. Technologies change so rapidly that intellectual property in tech can be a fleeting advantage. Ultimately it is about people. Great people build great products, and great products build great companies.
As a result, a start-up must work hard to attract, motivate and retain the best people. I’ve found the most successful route to do so is by building and maintaining a strong company culture. Holding events and functions, and building social relationships that go beyond professional relationships, have made Bracket a place where people love to work and are proud of the work they do. That’s mattered most when times were tough. Like any start-up, Bracket has had its challenges, challenges associated with creating innovative new software all the way to getting customers to accept and embrace this software. In the venture industry, half of what you’re betting on is the technology and the idea, and the other half is the team. Technology and ideas will always change, but a great team keeps things in motion.
Recently in Silicon Valley there’s been a few meteoric rises of start-ups. With little more than an interesting idea, some start-ups have amassed runaway consumer usage and multi-billion dollar exits in extremely short time frames. This creates a panicky feeling of a need for speed. But for most, this path is not a reality. Entrepreneurs should be patient, take the right money, hire the most talented people and create the best work environment.
This path gives a start-up the best chance of winning the long race, which is far favourable to a short moment of glory flying dangerously close to the Sun.
Tom Gillis, co-founder of Bracket Computing
Photo Credit: alphaspirit/Shutterstock