Fireside Chat: How to Think “Unicorn”

With Jayant Lakshmikantan, President, CLARA analytics and Mohit Aron, Founder and CEO, Cohesity

Mohit Aron knows scale. He was one of the key engineers who developed the Google File System that sits at the heart of Google’s infrastructure today. He was the co-founder and CTO of Nutanix, a company that pioneered “hyperconvergence” in the storage industry and filed a $6 billion IPO last year, and he’s now the founder and CEO of Cohesity, a hot startup that’s reinventing secondary storage through hyperconvergence. Mohit has raised $160 million so far from top investors in Silicon Valley, and his company is growing at a fast clip.

Mohit was kind enough to spend 90 minutes with Jayant as part of the LeanTaaS “Fireside Chat” series to share his insights on how to start and scale a startup. As with every conversation with Mohit, there were tons of learnings:

Jayant: Tell us about Cohesity; how did you get the idea? Build out the MVP? Get the initial customers?

Mohit: At Nutanix, we disrupted the primary storage space. Before Nutanix, primary storage was a mess with companies having to buy multiple products from several vendors. Nutanix brought the whole thing together and was the industry’s first single-vendor hyperconverged storage solution. During my time at Nutanix, I realized that secondary storage was a largely underserved space; we were literally begging our customers to back up their data, but it was not easy for them to do so.

One of my rules of thumb is to not jump on problems that are visible and obvious. It’s easy to get tempted to solve such problems, but more often than not, they end up being small problems. So when thinking about a problem, it’s important to detoxify yourself and look at the big picture — and try to peel out the layers and address the big problems.

So when I left Nutanix in early 2013, I spent six months studying the markets and understanding the trends. I looked at all the market segments and trends that were getting attention and tried to combine them with my own experience. That’s when I realized that secondary storage is a hard problem and a big space that needs to be solved. Once I realized that, I developed a blueprint on how to tackle the problem and spent another two months developing a design and execution plan before I raised a seed round in October 2013. Today, Cohesity is growing fast; we’ve raised about $160 million and are seeing solid traction in the market.

Jayant: What was the blueprint? Why is it important?

Mohit: The blueprint includes everything: the exact problem we’re trying to solve, an inspiring vision that takes customers from point A to a much better point B, the technological components needed to make it work, a product and go-to-market strategy. It’s a synthesis of what we’re trying to do and why — and how we’ll build a business around it.

Once you have it, the execution becomes easier. Without a clear blueprint, you’ll end up spending a lot of time trying to figure things out. As a rule of thumb, I don’t hire anyone or write a single line of code without a clear blueprint in mind. I spent about six months studying the market and another two months planning and developing a blueprint before I raised a seed round and began execution. I laid out the problem, our solution, market segments we’ll tackle, our go-to-market plan, and a quarter-by-quarter hiring schedule all the way to GA before I took money and began execution.

Jayant: How do you validate the blueprint? What if it doesn’t work?

Mohit: Our gut told us it would work. One of the rules of thumb I have is to only do companies in areas I am familiar with or have a team member that’s familiar with the space. I won’t do a rocket technology company because I don’t have experience in it. I’ve been in the storage space for more than a decade now, so I knew my blueprint would work at a high level, but it would need to be refined to customer needs.

We hired our first head of sales nine months before GA, and we met with a lot of customers explaining the vision and getting feedback. We didn’t have a product to show customers, so the focus was solely on whether customers were getting and buying into our vision? Were they willing to try out the product and pay for it? Vision is one thing, but closing a deal and getting customers to pay is completely different. During our validation phase, we learned what our customers need to deploy the product and see value, and we refined our roadmap accordingly.

Jayant: During the validation, you get a lot of feedback from customers … how do you prioritize?

Mohit: At the core, we know what to build based on our blueprint and execute on it. That’s based on our gut and mostly includes the new things we’re building. But when we start talking to customers, we get a lot of practical needs — typically a feature they’re used to, something that the other product they have does and what not. So we aggregate all those requests and look for patterns and refine our roadmap. For example, how many customers are asking for feature X? If the answer is quite a few, then we probably need to bake it in and prioritize it. We continuously look for patterns that will make the product more usable, valuable and deployable as well as check what features unlock how many leads, etc.

As I said, during the pre-launch validation phase, it’s all about listening to customers and prioritizing our roadmap. Of course, sometimes we see a lot of one-offs, and we prioritize them based on the customer, deal size and more.

Now when we GA the product, I still consider that “unqualified MVP” because, at that point, we’ve had a few engaged customers use it and see value, but we’ll still see a lot of potential customers asking for specific features and enhancements. So from that point on, you’ll typically spend a year tuning and refining the product for a large audience. So, customer feedback is a continuous learning process and an important tool to constantly refine the roadmap and make the product better. Luckily at Cohesity, we haven’t had to make any major changes to where we started; we continuously refine the technology and the product, but the core technology hasn’t changed much from our original blueprint.

Jayant: What about pricing? How do you set pricing on your products?

Mohit: One of the most important things I recently learned at a Sequoia event is building products around pricing. When you start a company, one of the most important questions to ask is how does this company become a billion dollar company in a five- to six-year time frame? If you don’t see a path to it, you probably don’t have a good idea on hand and will have a hard time raising money.

Now, to become a billion dollar company, you need a $100 million dollars in revenue run rate (assuming a 10x multiple on revenue). Then the question is how many customers do you need to get there in a span of five to six years? If the number is 100,000, then you probably don’t have a company because it’s almost impossible to get that many customers buying from a small startup within five years. But 1,000 customers is probably doable — so now you work backwards and you’ll get a sense for how much you need to charge (typically $100k+ per customer).

We consciously chose to sell to large enterprise customers and high mid-market accounts. We can get into the SMB market today, but we cannot afford to distract ourselves from enterprise. Embellishing the product for the SMB market in itself is not a big deal, but it requires a whole new sales and marketing engine — the positioning, messaging and closing are all quite different. Today, all our messaging and sales process is tuned for enterprise. As we grow, we’ll expand into SMB, and that requires building out completely new sales and marketing engines.

Jayant: Are you at product/market fit? How do you know when you’ve achieved product/market fit?

Mohit: There are many ways to define product/market fit, but in my mind, it boils down to this: Can an average salesperson sell your product to an average customer without support from the senior leadership or founders? As I mentioned, before you launch, there’s no product and your focus is on validating the vision and roadmap and listening to customers — the sales team is purely in learning mode.

Once you launch, you’ll face a lot of friction around features, adaptability, etc.; the sales team is closing deals but needs a lot of hand-holding from the senior leadership. As you refine the product and tune it to what customers need, at some point, the friction goes down and the sales team is now able to sell the product to customers without much friction or senior support. In my mind, that’s product/market fit, and once you get there, you’ll start to see the hockey stick and then it’s an execution game.

Jayant: You’re considered one of the top engineers in the world, and you’ve built several high-performance engineering teams. How did you get there, and how do you identify great engineers?

Mohit: When I was at IIT Delhi, I was given a lot of difficult assignments, and I used to sit for long periods of time — often two to three days — thinking and coding. Those bouts of long coding exercises gave me a good foundation, a mindset to persevere and solve tough problems. I realized that I enjoyed such long stretches of thinking and coding, and over time I developed many patterns in coding — I learned what to do and what not to do. It’s like driving a car; as you drive more, you’ll develop many patterns that become part of your skill. So today when I encounter problems, I apply those patterns to tackle them. Often I’ll encounter problems I haven’t learned, and I use my knowledge and experience to develop new patterns to solve them. So even though people think I am a great coder, what I am really doing is applying many patterns that I’ve learned over time. Anyone can do it if they enjoy coding and are willing to put in the effort to learn.

When I hire engineers, I mainly look for potential. Sometimes you’ll see it in their resume, based on their academic background or work experience. Sometimes you’ll see it when you talk to them and ask questions. There’s no silver bullet — some of my best hires have come from mediocre backgrounds. When I interview candidates, I look to see if they have good patterns, and I’ll also see if they’re open to learning. That’s important because over time we pick up bad patterns as well and carry some baggage. So the question is “are you willing to unlearn some of the patterns you’ve learned and learn new things?” Attitude is as important as aptitude.

When it comes to leaders, I look for people that can scale teams. Startup growth is generally non-linear. You may have 20 engineers today, but that might quickly become 100 as you scale. So it’s important to have leaders that can not only manage the 20 today but can also rapidly scale to 100. Some people are good at leading small teams, some are good at scaling, very few are good at both. You want to make sure you have the right leaders before you start to take off.

Audience: How do you build a culture of innovation within the company?

Mohit: By empowering engineers to come up with new ideas and voice their opinions. That’s really important because there’s no point in hiring great engineers and telling them what to do. There are a few things we do to accomplish this. First, we have a flat hierarchy — we have a head of engineering and several tech leads who are pseudo-managers. We don’t have formal managers that babysit engineers. This helps us stay lean and mix well. Second, I make sure I am approachable and mix with engineers. That makes them feel comfortable and open up. Third, I try and mentor engineers by reviewing their design and code as much as I can. That helps them and makes them feel like they’re learning directly from me.

I also make sure that I play by the same rules as everyone else in the company. For example, I have the least preferred desk in the company, I travel economy class, and I don’t have anything special just because I am the CEO or founder. That makes me more approachable and able to get to know people as opposed to staying in an executive bubble.

Engineers generally tend to be introverts, so it’s important to create an environment where they open up and chime in, where they come up with ideas and ways to filter them as opposed to just doing what product management wants them to do. I believe that great companies are built from that global intelligence in the team rather than the intelligence of one person or a few people in the company. So empowering engineers to experiment and innovate is very important. Google was keen on doing that early on, and great innovation has come out of that. Gmail, Google News and many other products were a result of the “20 percent projects” that Googlers worked on in their spare time.

Jayant: You are at a point where you don’t really need to work. You could be at a beach sitting on a rocking chair sipping a martini. Why do you keep doing this?

Mohit: The problem is … when I go sit on the rocking chair, all I can think about is coming back. 🙂

I do things for passion, not money. I’ve been in the storage industry for a long time, and I’ve worked for many good companies. With Nutanix, we disrupted the primary storage industry. With Cohesity, we’re disrupting the secondary storage industry. It’s an important problem to solve, and more importantly, it’s fun!

Audience: These days, many people — especially in Silicon Valley — want to start their own companies. What advice do you have for them?

Mohit: I see this a lot, especially with young grads from Stanford. They rush to start a company after school and realize how difficult it is later on. I worked for many companies before I started my first company Nutanix. Some succeeded, some failed. I worked with different types of people and noticed a lot of good and bad patterns.

If you want to start a company, make sure to “set it up” well first. This “setting up” is important. If you want to make money from stocks, it’s not a good idea to go to a large company that’s not growing fast; you want to get into a small company that’s growing fast. Similarly, if you want to start a company, you want to make sure you’re “set up” for success — from everything you know. You want to build a good sense for what people want in your industry, what’s missing, how to enter the market, how to sell and how to hire good people. You want to build up a reputation and following so that people will join you when you start a company. Don’t jump to start a company — learn the ropes first, make sure you’re set up well, and then do it.

Jayant Lakshmikanthan is the president and founder of CLARA analytics, a division of LeanTaaS. CLARA analytics is focused on redefining the injured workers’ experience through easy-to-use AI products. Prior to starting CLARA analytics, Jayant was part of the executive team that built LeanTaaS from scratch to being a powerhouse in the healthcare analytics space. His prior experiences were at McKinsey, Novartis Diagnostics (acquired by Grifols), Deloitte and i2 technologies. Jayant has a BTech from the Indian Institute of Technology (IIT), M.S. from Rensselaer Polytechnic Institute (RPI) and an MBA from University of Chicago’s Booth School of Business. For more information, visit http://www.claraanalytics.com/ and follow CLARA Analytics on LinkedIn, Facebook and Twitter.

Mohit Aron has over 15 years of experience in building scalable, high- performance distribution systems and has been attributed as the father of hyperconvergence. Aron founded his current company Cohesity in 2013 and co-founded Nutanix in 2009. Prior to co-founding Nutanix, Aron was at Google as a lead developer on the Google File System engineering project. In July 2016, CRN recognized Cohesity on the list of 10 Storage Emerging Vendors You Need To Know and listed Mohit as one of the Top 25 Disruptors of 2016 in August 2016. Aron graduated with a Ph.D. in Computer Science from Rice University with a focus on distributed systems. He holds a Bachelor of Science in Computer Science from the Indian Institute of Technology, Delhi India.