Nutanix made waves last month when it fetched a $2.2 billion valuation in a successful IPO. So far this year, the cloud-storage provider is only the fifth venture-backed company to go public, following such behemoths as Twilio and Everbridge.
Still, Mohit Aron, the co-founder and former CTO, recalls a number of struggles the team faced in getting Nutanix off the ground seven years ago.
"It took us almost three years to crack our first enterprise customer," said Aron, who launched the company 2009 with co-founders Dheeraj Pandey and Ajeet Singh. "We didn't have the top investor in the world backing us, and we didn't have our own reputation, so it took us time. It was a lot of hard work to convince the world that we were a viable company."
On September 29, the day Nutanix went public, its shares jumped an impressive 131 percent. (The company already began trading at $16, above the expected range of $11 to $13.) Today, Nutanix sees around $445 million in revenue, and counts some 4,000 clients including Nordstrom, Nintendo, and the U.S. Department of Defense. Such companies use the system to store and manage sensitive data.
What sets the Nutanix apart in the hyperconverged infrastructure industry (HCI) is its ability to deliver continuous data protection--aggregating computing, storage, and networking services--all into a single entity. Nutanix sells for roughly one-fifth of the price companies would pay when purchasing these functions separately, according to Aron. (A simple unit goes for around $70,000.)
Challenges amid a changing VC climate
The company originally planned to go public in December 2015, though ultimately postponed those plans. It subsequently borrowed $75 million from Goldman Sachs as "insurance," the Wall Street Journal reported. Aron, who exited Nutanix three years ago to launch Cohesity, a similar new venture, says that the company likely felt pressure to achieve profitability sooner rather than later.
"When they recognized that the investor sentiment changed, they seemed to have delayed their IPO," he said, referring to a growing number of VCs priding profit over sales growth. "Nutanix had the time to think and change its business practices to align more with what the investors want."
It's worth pointing out that Nutanix is not yet profitable, and the company's loss widened to $169 million in 2016, up from $126 million the previous year, according to a recently updated SEC filing.
Here's what Aron says he learned from early mistakes at the now-public tech firm:
1. Approach profitability
As investor sentiment has shifted, so does Aron's approach. In building out Cohesity, he's focusing on building slow but steady growth. As a general rule, the company only adds a new sales team once existing teams have become productive enough to pay for themselves (and even return some money back to the company). That's very different from the early days of Nutanix, when the founders would hire consistently to ramp up their revenues.
2. Target the high-profile investors.
Prior to going public, Nutanix raised nearly $400 million in venture capital, from firms like Lightspeed Venture Partners and Khosla Ventures. In retrospect, the former CTO says he wishes he'd pitched a high-profile VC firm from the very beginning.
"At Nutanix when I raised money, I basically took money from the first investor that came along," he says. "The mistake was that we should have tried [to pitch other investors.] From the strength of the idea, we may have been able to convince Sequoia [Capital.]"
Raising money from a recognized firm is important, he says, because this "opens doors" in the broader industry.
Cohesity waited to raise $70 million in a 2014 funding round led by Sequoia Capital and Wing Venture Capital. The company, which launched in 2013, now counts around 2,000 customers, including 80 percent enterprise clients. It took Nutanix roughly three years to win its own enterprise clients.
3. Hire slow, fire fast.
"I don't want anyone sleepy on the leadership team," says Aron. "At Nutanix, we had some sleeping people and we were too nice to do anything about it. There was definitely some hiring that could have been fixed quicker," he adds.
It can be hard to let people go, especially if you come from a programming background rather than from the C-suite. Aron has grown from that: "I was not ready to make those hard decisions [at Nutanix]. I was soft," he said. "I became harder over time."