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Copyright M. Leslie 1
The Story of VeritasAnd Some Things I Learned…
mleslie@leslieventures.com
Copyright M. Leslie 2
A Brief History of Veritas
1982 $0 Startup as Tolerant Systems
1989 $0 “Restarted” from Tolerant Systems (12 employees) Established industry standard file and disk
management software Novel OEM business model
1990 $95K Renamed Veritas, ML as CEO
Copyright M. Leslie 3
Parachuting in as New CEO – 2/90
The Standard VC transition plan 4:00 PM: VCs fire current CEO 4:30 PM: VC’s meet w/ management team 5:00 PM: VC’s + ML meet with management
team 5:05 PM: VC’s leave 5:10 PM: ML meets with management team,
announces we are changing our name
Copyright M. Leslie 4
The new name…
Anything but “Tolerant” Company-wide contest My wife proposed…
… “Intolerant Software” Being more marketing aware, I proposed…
… “Belligerent Software” We gave the attorneys three to check out
…VERITAS was the “cheapest to defend” VERITAS means TRUTH in Latin, and also
decorates the Harvard University crest
Copyright M. Leslie 5
A Brief History of Veritas 1993 $10 M
Initial Public Offering $16 million raised, market cap of $64 million post-money
1996 $36 M
1997 $121 M Acquired Open Vision -- Entered Backup / Recovery business
1998 $210 M
1999 $700 M Acquired Seagate Software -- Established leading position in
Windows NT market
Copyright M. Leslie 6
A Brief History of Veritas
2000 $1.2 B F1000 company (5,500 employees)
2001 $1.5 B New CEO
Copyright M. Leslie 7
$95K $1.5 Billion
12 employees 5,500
Startup Fortune 1000
--In 10 years
Copyright M. Leslie 8
What do investors hate the most?
Re-starts “The last idea crashed and burned, so let’s sift
through the smoking debris and see what we can salvage”
Mergers of equal size companies “A collision of two garbage trucks”
Copyright M. Leslie 9
Tolerant Systems
Start up in 1982 Fault tolerant computing Too many companies Tolerant System fails in late 1988
200 people 12 Changed company name to “Tolerant
Software”
Copyright M. Leslie 10
Tolerant Software and theAT&T Deal
An opportunity to “rent space” in the AT&T UNIX monopoly Develop next generation file and disk technology AT&T agrees not to develop these strategic products Both companies market/sell, share revenue 50/50
Underwrite customer risk of Veritas as start-up - if failure: AT&T would get source code AT&T pick up support of customers
UNIX taking off as THE commercial workhorse
Copyright M. Leslie 11
A New Business Model
Develop UNIX OS component technology
OEM distribution through systems companies (Sun, HP, etc)
Long term relationships (design-out could take 2+ years) = Very nervous customers
Copyright M. Leslie 12
The First Vision
Become an OEM supplier of OS components to UNIX systems companies
Make UNIX more available and robust – suitable for commercial data center usage
Ride the UNIX wave into the ’90s, establish a strong strategic position
High IP content, high margin, but…
…Limited scale
Copyright M. Leslie 13
1990 Strategy ~4 yrs
Establish new identity Tolerant Software Veritas
Develop FS/VM products Close AT&T deal Become de-facto industry standard
through broadest distribution Demonstrate profitability IPO
Copyright M. Leslie 14
Setting the Culture
IP intensive company, knowledge-worker based employee population
Highly open communications We changed the question from “what should we tell them?” to “Is
there any good reason not to tell them?” Weekly meetings, accessible executives
Employee participation in key decisions 1991 3:1 reverse split 1996 merger with OpenVision
Articulated values generated from the “grass roots”
Copyright M. Leslie 15
The First Four Years 1990 - 93
Closed, AND renegotiated AT&T agreement Completed 1.0 releases of products in 1991 Licensed our products to over 60 UNIX system
companies including all industry leaders – Sun, HP, Digital and IBM
Set up “annuity” revenue stream Became profitable in 1992, IPO in 1993
Copyright M. Leslie 16
The IPO
Had our initial public offering on December 9, 1993 A “micro” IPO: $16 million raised, $64 million market cap
after the money My message to the employees:
Like a college graduation – marks the achievement, but… Commencement – the beginning of the next, new phase Future value will be far greater than current value
i.e., Microsoft, Cisco, etc. Keep focus on execution
Copyright M. Leslie 17
The Next Vision -- 1994
Expand the scalability of the company Create reseller / end user products and
presence Leverage the strong industry standard
position through acquisition Initiate a Veritas Brand
Copyright M. Leslie 18
1994 Strategy (~5 years)
> $100 million revenue run rate Develop additional OS technologies Product segmentation of existing products Develop integrated higher level products
Editions (Oracle Edition, MS Exchange Edition) Build direct and reseller channel capability Acquire backup technology
Use VERITAS OS technology for enduring competitive advantage
Platform build-out: Develop equally strong position in… (…Netware, …OS2, …NT).
Copyright M. Leslie 19
The OpenVision Merger – 4/97 Both companies ~ $36 m / year, prior year
Veritas 180 people, OV 240 people Entered Backup business
~$20 million / yr Shed other lines of business
Huge distribution channel win OEM Global 2000 end user direct reseller/distributor
Established first “End-to-End storage management” company – changed the paradigm Used “franchised” OS components to leverage competitive
Backup/HSM apps Difficult integration w/ very different cultures 18% EPS, accretive on Veritas 1997 operating plan THIS WAS THE COMPANY MAKER
Copyright M. Leslie 20
The Seagate Software (NSMG) Merger 5/99
Largest independent NT “enterprise” channel Each company ~ $200 million
Each company ~ 1000 employees
Veritas gained dominant backup and dominant NT channel position
Critical mass in the industry – clear leader Pioneered “virtual pooling” pro-forma for
“purchase transaction” style merger Seagate II – financial engineering transaction in
2000
Copyright M. Leslie 21
Six Years Later… FY 2000 reached $1.2 billion in revenues
Which IS > $100 million!!! F1000 Company
Segmented products to light and full Successfully re-wrote ALL major agreements
Created very successful “editions” business, with focus on Oracle market, expanding to NT
Developed world class end user / reseller sales force Acquired FirstWatch product, high availability failover
Ended up with >75% of Sun HA installed base Entered and came to dominate backup market
1996 = $20 million (#6+) 2000 = ~ $660 million (33 X in 4 years), clear market leader with
40% share. Went from 1/3 Legato to 3 X Legato
Gained massive channel in NT space
Copyright M. Leslie 22
And Some Things I Learned…
Copyright M. Leslie 23
Software Is a Great Business
Making money in high-tech is all about getting paid for your IP The better (and more unique) the IP, the more
valuable In the hardware business the IP is embodied
and delivered in the form of a “machine” The business of making and shipping machines is
error prone, which can sap the profit from the business
In the software business you just deliver the IP – sometimes in the form of bits transmitted over the ether…
At the extreme, Veritas delivered a $1.50 CD in exchange for $20 million
Copyright M. Leslie 24
The More Grandiose the Plan, the Less Likely to Succeed
Tolerant Systems, OpenVision, Go Computing, General Magic, WebVan were “grand plans”…
… and so many others But many of the great companies started out
with small goals, and became overnight successes…
…after many years Like HP, Dell, Apple, Oracle, Microsoft, eBay,
Yahoo (and of course, Veritas…)… and so few others
Mergers are Risky
Over 10 years we probably did 25 mergers / acquisitions
Three worked FirstWatch OpenVision Seagate
The rest quietly disappeared But this is OK – the few big winners pay many
times over for the rest (not unlike the VC business)
Copyright M. Leslie 25
Merger Integration is Really Hard!!!
Our most success came when the merger integration was…
…LIFE OR DEATH!
Copyright M. Leslie 26
The OpenVision Merger
The OpenVision Merger was the most difficult It involved the creation of a new exec team w/ 4 from
OV, 3 from Veritas It took a full year.
When it was over it was the most difficult thing I had ever done in business
Physically / Mentally / Spiritually Exhausted
It started with a key person meeting of Veritas folks, three weeks before signing
Key event was lunch with the EVP Sales immediately after the close
It ended at an offsite – one year laterCopyright M. Leslie 27
Each Merger is Different
OpenVision – creation of a new company, new team, new values, BEST of BOTH
Seagate – Total Takeove -- We fired ~ 22 of 25 senior execs
FirstWatch – Product team integrated into engineering, product sold through existing distribution (Cisco model)
Copyright M. Leslie 28
See the Discontinuity - Bet the Farm!
Veritas from the beginning was a bet on UNIX becoming a dominant factor We figured we would find a way to leverage it in the
future
Discontinuity: Transition from Glass House IBM Mainframe to Unix Transition from “DP Manager” to “CIO” Transition from data processing to information
technology / internet
Of course, you have to see it before everyone else does!
Copyright M. Leslie 29
It’s all About Great Strategy!No, It’s Only About Execution!
Strategy with no execution can end in disaster (early OV)
Execution without strategy is getting all the trains to run on time…
…but with no place to go Great companies need both!
Copyright M. Leslie 30
Copyright M. Leslie 31
Only Those Who Are Both Paranoid and Courageous Will Survive
You never know where and how the world might change
Great companies make transformational changes You may have to put your whole company at
risk in order to save it Microsoft, Oracle, Intel, HP, Cisco, Apple
You need the courage to stay the course in spite of great risk, great effort, and the many who tell you otherwise
Copyright M. Leslie 32
There is Life after Death
In the course of events there WILL BE black days
…days so black that all you will see is despair
Dark days are “leadership opportunities”
When things are great, remind people that there will be dark days again
Copyright M. Leslie 33
There is No Finish Line…
Building a great company is like building a cathedral those who start it hopefully will not see its
completion
Each accomplishment is a prelude to the next challenge
The IPO is not a “harvest”, simply one step on the long road
Copyright M. Leslie 34
Values and Culture make it worthwhile
We spend more time “at work” than any other single activity in our life
The outcome of our efforts is not always predictable so the quality of the daily experience is important
Values and culture define the character of the company Values and culture permit us to do our work with
integrity, and to conduct business in a civilized and honest environment
Values and culture help the organization to recruit the best, the brightest, and the principled
Values and culture do NOT sap the competitive capability
Copyright M. Leslie 35
One Final Thought…
Copyright M. Leslie 36
If you want a friend…
…Buy a dog
ROXIE
Copyright M. Leslie 37
The Story of VeritasAnd Some Things I Learned…
mleslie@leslieventures.com
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