I last met you in late 2010. How has business been since then?
It’s been unbelievably good. Since 2010 we’ve tripled top line performance, we’ve raised a recent round of funding after another last fall when we added $27.5m in capital. Since 2010 we have more than doubled the size of the team, particularly focused on engineering. We have launched a new engineering centre here in the UK at Tech City. So things have gone swimmingly well over the last two and a half years or so. We’re getting pretty close to a $100m run rate.
How many staff do you have now?
About 225 or so.
Has the average selling price changed?
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No the average deal size still runs about $250 to $300,000. It’s amazing to me that this little company can convince some of the largest companies in the world that the problems that they have can be solved by our technology. If you give us an opportunity to prove it we can do so conclusively, and we can demonstrate a return on investment within six months – that is what has allowed us to capture that kind of revenue performance. The savings come from reduced operating expense, and over time reduced capital expense, because you are able to size the infrastructure appropriately based upon what you know the workload model is going to be for the future. In the early days you reduce storage trouble tickets, system downtime, and things that really do drive operating cost day in and day out.
You mentioned your investment in Tech City [adjacent to London’s Old Street roundabout]. Have you been encouraged by the government’s role in attracting investment?
Very much so. Because hiring talent in Silicon Valley has never been tougher than it is now, we said let’s go look elsewhere. We put a search out around the world looking for the best place to land and build our second development site, and when the team came back to me and our head of engineering and CFO said it should be London, I have to admit I was surprised. But having looked at all the data that they had accumulated and all of the recommendations and proposals that we got from all the other governments around the world, this was in fact the most attractive in terms of talent, cost, and so on and so forth.
What was the focus for the latest funding round?
The focus for that round is around what we would like to do with the product. We have evolved our point of view about where we can add the greatest amount of value for customers and it’s not just around the fibre channel SAN [storage area networking] world where we had been so prominent but adding network attached storage [NAS] capability; and other virtual server platforms like HyperV and [IBM] AIX. It’s about new protocols and new environments that we can support. All of those things require engineering talent.
How much funding have you raised altogether to date?
To date just under $70m, which should be more than enough to get to where we want to go.
And is where you want to go an IPO?
Oh absolutely. That’s certainly the goal. And our belief is that the market that we are serving is big enough. We think the addressable market is about $9bn big so that gives us a lot of room to grow as a company and to be a very successful public company. All of the attention of the senior team is how do we prepare for that, so we are doing work right now back in California which is IPO readiness, which is an analysis by outside experts on how well prepared we are; they’ll make recommendations on business process changes and systems changes that we should make.
Do you think you have the right people around you to take a company public?
Well I hope so. We have a very experienced team in many respects. George Harrington who is the CFO was chief accounting officer at IBM and CFO at BMC. Sean Maxwell who runs our worldwide sales organisation has helped to turn small companies into big companies. Barry Cooks who leads engineering for us was an early engineering leader at VMware and worked at Sun before that. I’m more concerned about whether we can continue to capture mindshare and market share as we work our way towards what we think is the inevitable IPO process.
It obviously depends on the markets but do you think an IPO is quarters rather than years away?
The market will dictate how far away it actually is, but given our revenue performance and market momentum I can envisage us as early as late this year or early next year file an S1. If I had to pick a point in time I would say the first half of 2014 is about right, so about a year from now.
As you mentioned the company was focused on optimizing SAN environments, and you weren’t going head to head with people like BMC and CA…
We still don’t. What they typically do is systems management and they do some virtual environment optimisation but they don’t approach the challenge quite the way we do. So I would view our solution as complementary to anyone who is in the systems management business. We focus on performance, optimisation and health of the assets that customers are using for either a very complex physical infrastructure or that same set of assets that might run in a truly virtualised or cloud-based environment.
There may be marketing messages that they would have that would suggest that we are competitive but that’s just the case with every company, because you want to make yourself look a little bit bigger than you actually are and I think the reality bears that out when you look at how customers use us. They buy us as a complement to what they already have.
Today you only support VMware. You mentioned adding support for more platforms, like HyperV. Will you support others like Xen?
We’ll be driven by what customers want. Our priorities have been set by inputs from customers and prospects. So the roadmap has AIX next, HyperV after that. We may choose to do something in the Linux space, we’ll see. It’s likely that we will.
You talked about building market share and mindshare. How do you see that going?
Our revenue performance has been phenomenal. For the first three quarters of the fiscal year we should be up about 75%. So we should finish the fiscal year with growth in the 75-80% range which is pretty consistent with our historical trajectory. I see nothing to say that FY14 won’t be as strong as FY13, in fact given the experience that our sales teams are building I could make the case for FY14 being even stronger, but I don’t want investors to get too pumped up just yet!
Read my March 2011 profile of John Thomspon and Virtual Instruments here.
