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Will the enterprise market spend significant IT budget on Windows Vista in 2007?



CEO Spotlight: Abe Kleinfeld, nCircle
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Angel Mehta: What are the top three business priorities for nCircle as of today?

Abe Kleinfeld: Just execution. Weíve been in this business since 1998 and like most early stage companies, we came up with a great product idea and at some point the market either catches on to this idea or it doesnít. Usually products are ahead of their markets, right? Pretty common. Our product has matured to a point now and the company has gotten to a point where this wave is rising and cresting, and we happen to be on the surfboard thatís sitting right on top of that wave.

Angel Mehta: How do you know?

Abe Kleinfeld: Because our business in the last 6 months has just skyrocketed. Gartner Group put out a report saying vulnerability management is 90% more effective than intrusion detection. Intrusion detection is a billion and a half dollar market. Also, the customer base, the prospect base that weíre out there talking to, have active projects to buy vulnerability management. So weíre seeing that customers have active projects, defined budgeted projects, the analyst community is validating it, and our revenue and customer base is rapidly growing

Angel Mehta: Has this market evolved more quickly than other segments have? It certainly seems that way.

Abe Kleinfeld: Absolutely. The PC industry took a long time, the mini computer industry took a long time. The enterprise software industry has taken 30 years. Network security, because of the circumstances of the Internet, has been forced to evolve extremely quickly and so a lot of the things that you normally go through, which is knockdown a bowling pin here and a bowling pin there, what weíre finding is from a network security standpoint, not very industry specific. Everybody has the problem.

Angel Mehta: Itís an infrastructure problem.

Abe Kleinfeld: Exactly. Very horizontal in nature although weíre finding that as we move up market with the product, and as we expand the functionality of the product, different industries do have different requirements such as specialized compliance reporting needs due to industry-specific regulations.

Itís also technology that proves itself very quickly. Unlike enterprise software, for example, where you have to install it and go through a lot of integration effort or where youíre replacing existing systems and you have data transfer or data conversion issues and it takes 6 months to implement. This solution literally takes a day to install and itís collecting information and providing value within 24 hours. So, as a result, a lot of the crossing the chasm characteristics that are associated with new products, new industries, new marketsÖ weíre able to jump across a lot of that very very quickly. And what weíre finding is that the market is pulling us along. Itís a great place to be.

Angel Mehta: Letís shift gearsÖ I want to talk a little bit about selecting CEOís Ė Iím a recruiter, right? I find it interesting that most of your background is in fact on the applications side.

Abe Kleinfeld: Yes.

Angel Mehta: Yet generally, when weíre conducting an executive search, we want executives who have relevant domain expertise. So ideally, for a security company, weíd at least want someone from an infrastructure background. In your opinion, do you think that venture partners or executive recruiters like myself make too big a deal out of related domain expertise on the product side?

Abe Kleinfeld: Having experience in a particular market certainly helps depending on the complexity of the market and the maturity of that market. For example, before this I was at a supply chain software company and supply chain has been around for a long long time. People have understood manufacturing and distribution and the whole process of building products and putting them through and outsourcing and kinds of things. Itís extraordinarily complex and itís evolved over a hundred years. And I think in a market like that you are much better off having domain expertise because itís so complex and so deep that the more experience you have in that market the better youíre going to do. Youíre just going to make better decisions, youíre going to hire better people and youíre going to be able to recognize opportunities in that market much more quickly. So I think that in a lot of the enterprise software space having experience in that particular market will make a difference.

Network security, though, hasnít been around that long. You can literally, I mean YOU Angel Mehta, or anybody else thatís intelligent who has been around the computer industry could pick up pretty much everything you need to know about network security from a business standpoint in about 3 or 4 months.

Angel Mehta: Because the body of knowledge just hasnít developed that far as yetÖ

Abe Kleinfeld: Exactly. If you go back 15 years youíre not going to find a computer science major in network security. It just hasnít been around that long. So as long as a CEO has some context, they can pick it up. Going the other way, Iím not sure you could be quite as successful. Iím not sure you could take a network security guy and put him into a supply chain software company. My guess is that that would be a lot harder.

Angel Mehta: You spent some time at Oracle earlier in your career; how did that prepare you to be CEO?

Abe Kleinfeld: I was at Oracle at a time when the company was growing exponentially, growing very very quickly. When I joined Oracle they were about $250,000,000 company. Two years later they were a billion dollar company. It was extraordinary growth. I guess the thing I learned there was that management makes a difference. Oracle was going through a phase where management was very immature. Larry Ellison is an extremely bright guy but he had never run a big company before and so he was already operating above his knowledge level. He was kind of inventing things along the way and he has surrounded himself with very very young people, most of these guys were right out of college. They joined Oracle and next thing they were vice-presidents and they were running a billion dollar company. Larry was smart enough to recognize that the company hit a wall to bring in a professional management team that had run big companies before. He brought in Ray Lane and the whole contingent.

What I watched was the company hit that wall and it was the result of not having experienced management. It got extremely political and people just kept running into each other. There wasnít clear definition of who owned what. It was a buyerís market so it hid a lot of evils, but in the end, the reason that Oracle hit a wall was because it just didnít have the management infrastructure to deal with a lot of the basic infrastructure issues related to growing a company.

It took me a while to learn that lesson, even as a senior manager myself, as I grew up. Because I have found myself in positions where I was doing things I had never done before and if Iím honest with myself. I realize that the reality is youíre always going to be in a situation where youíre doing things that youíve never done before. So youíd better surround yourself with people who have done it before. I find that I donít really teach very much to the people that work for me. I learn more from them. If you bring in the right people Iím the one thatís learning all the time and then I can focus on just looking forward and make sure weíre paying attention to the right things. I donít have to know how to do anything. I just have to make sure that I bring in people that do know how to do them.

Angel Mehta: Letís talk about risk taking during the early stages of building a company. What I want to know is, what is the mental or emotional process you go through to figure out whether each risk is one you actually WANT to take?

Abe Kleinfeld: I can tell you about my experiences at a company called Odesta, which was pretty unusual. It started as a private, family funded business and the family decided they didnít want it anymore. So a few of us decided to take a piece of the technology and try to turn it into something. It was the worldís first document management product. We bought it from the owners and did a complete raw start-up. Today the company is called Open Text Corporation and itís a billion dollar market cap company.

But early on, it was a very slow growing process. It took four years before we finally got the company to the point where we had enough revenues that we could take it public and it was a hard 4 years. We missed payroll for 6 months in a row. We were not venture funded.

Angel Mehta: So the employees were working for free?!?

Abe Kleinfeld: Sometimes, yes. There was a point in time where we had about 30 to 40 people that werenít getting paid including me, of course. I was literally, out of my own pocket, buying the demo equipment that the field would use, and you know these laptops cost a lot of money back then! And so we did it the hard way. It ended up being a great success. The company today is a very successful company.

Angel Mehta: But how do you decide that youíre going to put your own money in like that? How do you get to the point where you think the opportunity is big enough that it justifies not getting paid for six months! Thatís crazy!

Abe Kleinfeld: Iíll tell you what, knowing what I know now I would never have done it. It was out of complete ignorance and lack of experience that I did something like that. I do not regret it. Iíd never give back the experience, right? Iím so happy I went through itÖ but the odds were so against us. It was just pure unadulterated willpower that made that team cross that chasm, if you will, and this was long before the book got written. It was just pure willpower and thereís a lot to be said for that. Thereís a lot to be said for pulling together a bunch of smart people, creating a culture where the teamís just very very tight, and having iron will.

Angel Mehta: What do you think some of the key things that a first-time CEO needs to keep in mind?

Abe Kleinfeld: Thatís a good question. Put it this wayÖ Iím one of those people that have a broad range of talents. I have a pretty technical background. Iím a pretty good salesperson. Iím a pretty good marketer. I pay attention to numbers so I have a pretty good accounting sense. So what was hard for me is that every time I would hire somebody I felt that I could their job better than they could. That was my biggest weakness when I first became CEO - being able to let people do their job. It was just pure arrogance on my part. The reality is that people can do their job better than I can do it for them. It was a big deal for me to actually overcome that false belief, that I could do any job better than anyone. You have to trust people to do their jobs, believe that they can do it and have them prove otherwise. Usually great things happen.

Angel Mehta: So the challenge is just letting goÖ.

Abe Kleinfeld: Yes. Letting go of the ego.

Abe Kleinfeld has more than 24 years of successful management experience in the high technology industry. In the past 10 years he has led several companies through successful liquidity events, including two mergers and two IPOs. Abe can be reached for interview feedback at: abe@ncircle.com.

Angel Mehta is Managing Director at Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies. He can be reached for feedback at: amehta@sterlinghoffman.net


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