Circle Sessions: Sanjay Poonen, CEO of Cohesity

Ken, pleasure to be here and thank you for all your support.

Yeah, absolutely. And first I want to just say I'm really honored that you guys took the bet on us. We don't take any investment for granted, but you folks were hungry. We want to make sure you and your investors and everybody that's behind that do well on this investment. So thank you for all your support and your belief in us, and we hope to make you proud of us.

Well, I still remember a couple of members on the board, Carl Eschenbach, called me. I took a year off between '21 and '22 when I left VMware. This was before Broadcom bought VMware. I was on the board of a medtech company, Philips, the big giant in Europe, on the board of Snyk, a developer security company, and then just kind of with my private capital investing, helping founders, being the loud, the rowdy parent at all my kids' games, doing all this stuff. And when the board called me, I felt like this company had an opportunity. I'd gotten advice from somebody who's really been a good influence in my life, now who's very famous, Jensen, who by then was just somebody who told me things periodically. And one of the things he said was, if you've done the big company thing — I was president of SAP, was very fortunate, we grew the company from 10 to 20 billion, I was COO of VMware, was again very lucky to grow the company from about five or six billion to 12 — he says, you've done the big company thing, why don't you take a small company and try and make it big. So we were at a little over 300 million in revenue in 2022. And but I'd known and heard of Mohit. I had not met him. He was the founder. He had been one of those people that Bill Coughran on our board said the Google teams — he had worked for Bill Coughran who was head of engineering at Google — there were three people who wrote 100,000 lines of code per year: Jeff Dean, who's the father of AI, somebody else I forgot who the person was at Google, and the third was Mohit. So I'd respected this guy quite a bit. I met him and it was clear that many of the VMware customers were picking Cohesity, displacing, because it was best tech. So I called one of them, in fact it was JP Morgan, I called the head of infrastructure there and I asked him, they had picked Cohesity, he said I haven't seen tech like this since VMware. And I was blown away by that. And I called a few other customers who had made choices and they all attested to this being the best tech. Now they probably weren't marketing themselves aggressively, some of the other competitors in the space, but they had the best tech. And I'd always felt best tech wins always. You know, SAP had the best tech in ERP, VMware the best tech in virtualization. So that's why I picked it. And I would tell you now, three years into my journey here, the tech is everything that Mohit built and some, and we're only trying to build even more great tech in other areas that go beyond data protection, security, AI. And super excited because I'm a technologist at heart. If we build great product that's 10x better than competition, then the other things like marketing, scaling, acquisitions, all of those things can come.

Well, it was very clear to me. I'd spent most of my years at SAP, eight years doing analytics and towards the end of it I'd say predictive analytics that you'd call today AI, so there was a data play to it that could be analytics. But it wasn't clear to me when I joined what that was. It's a lot clearer now given generative, we'll talk about that, and what's led to Gaia. But what was also clear, my tenure at VMware I was very involved in security. I was an investor in security after that. We acquired AirWatch, there was a mobile security play, Carbon Black, so I was really very close to the security industry. And you had these pillars of security: cloud, network security, endpoint security, identity, but data was one of those places where increasingly because of ransomware attacks there was a security angle here. So I had an instinct that there was a security and an AI play around data in this space. And Mohit showed me this picture of an iceberg where the top of the iceberg was primary data — think like an Oracle or Snowflake or Databricks or NetApp filers or OneDrive — and then the bottom of the iceberg was all of the secondary data: backup, archive. It was a revealing picture to me because it was so true. And he said this company could be a security and AI play around that secondary data. And it sort of locked in — I still have those diagrams in what we pitched the story of the company, you've seen them in the way we pitch the story of the company. I think you always have to go back to the founder story. And I felt like that really resonated for me. So I think my instinct was there was going to be an opportunity to create, I don't know, CrowdStrike meets Snowflake or Palo Alto meets Databricks in this space. And if there were sort of pillars that were big companies — in network security example Palo Alto, or endpoint security example CrowdStrike, or identity, you know, CyberArk or Okta, or cloud security example Zscaler — there was going to be a company that emerged in this area that was a play not just in data security but AI of data. And that's what we hope we can do. We're now the market share leader thanks to the move we've made and the innovations we're building. But I think it's a tremendous opportunity for a company who has that. We're a data company at core, but what we're doing with that data is securing it, providing insights on it.

I think it was clear to me within a month or two of my joining that it was a crowded space. There's 50 players in a market — just the data, if you think of us as three acts: protect, secure, providing insights — data protection is kind of classically backup, security some of the advanced things people are doing like scanning, classification, cyber vaulting, and AI is obvious things like we're doing with Gaia. 50 players in a 15 billion core market. We were number seven in the space, Veritas was number two. So as kind of the new guy in this market and all the other CEOs including our honorable competitors are friends of mine, I'd worked with them in many cases at VMware, I'd helped them because their number one workload they were protecting was VMware. So, as many of them that wanted to talk to me, I was just like, 'Hey, what's your view of the space? What's going on?' Some of them were a little bit cautious. But Greg Hughes and the Veritas team, when I said, 'You know, I'm new. I liked you. Are there things we could do together?' — it became clear that Carlyle and the folks who were the primary investors in Veritas had a similar view that the space should be consolidated. The question now is how. And thanks to some real good creativity on the part of our team and the bankers, we were able to construct this thing that basically was a carve out of the NetBackup business from Veritas, raise some debt and equity — you participate in the equity part of it — raise some debt. And I was telling my wife, how often could a number seven acquire a number two? Only in the United States where debt and equity is possible. And the beautiful thing about the US financial system is if you can show cash flow, which we are doing, and you have an incredible story which the team really put together, this combination is better than either two companies could have been on their own. And let me tell you why. Cohesity was growing really fast, but when I got there, was immensely unprofitable. There was a story in 2021 of people growing at any price and then losing a lot of money. Veritas was growing slower but immensely profitable. So the thesis was if you could put the two together, the tech was going to come from Cohesity — we had the best tech. There were elements of the tech that could come from Veritas, but the customer base and the market share and the continuity story, especially international, was going to come from Veritas. If we could put the two together and execute flawlessly — and we're on the path, I wouldn't say it's quite over, but nine, ten months into it, execution is doing really well — we could create a company that was three times the size of Cohesity that was profitable growth. Where you kind of took the profits from Veritas, you took the growth from us, the most of the tech coming from Cohesity side, and you planted a way by which you could take these customers from, think of them as using an older car, whatever of your favorite older cars, maybe it's a Mercedes or BMW or whatever have you, and you're going to take them to the Tesla. That's the modern car. That's where everyone's going. It's electric. It's got all these advantages, but do it non-disruptively. So if a NetBackup customer could get to the next generation much smoother than having to disrupt themselves and go to one of the competitors. And that was what we thought we could do. We had it sort of sketched on whiteboard and paper and then the moment we closed it we got to the engineering work and now we've delivered that integration roadmap and many customers are going on that journey. And what was happening with NetBackup was they were gradually defecting customers because they didn't have a modernized story to them and Cohesity, Rubrik, others might have been picking them off. The moment we finished the acquisition we put a moat around that and basically took the auction supply off anybody who was trying to kind of steal the NetBackup base because it became now our base. So we went really close and I made it a goal myself to say I'm going to go talk to the top thousand customers myself. I haven't covered all thousand but I'm probably 600, 700 into it. Listen, what Cohesity taught me in 2020 was you can cover a lot in a 30-minute Zoom call, okay? If you're organized about it, you have a crisp story that's last 5 or 10 minutes with some slides, you can get some Q&A and then you have an action. And how many 30-minute calls do you want to cover in a day? Okay, let's say you could cover maybe five, seven, you have 200 business days in a week — sorry, in a year. You could do it. So I would tell people, Cohesity taught me that you can fly from San Francisco to London to Tokyo in 30 seconds. Okay. You just need the ability to go easier on your body. Take a five-minute break and get the next one. And I find these customer meetings are a lot more exhilarating than many of the internal meetings. No offense to my team. I love my team. But I'd rather often talk to a customer. So now of course that is no substitute of course with travel and all that. I do meet many customers. But I would love to fill my day with as many customer meetings. Then you learn a lot. And in talking to many of these customers, especially the Veritas ones, we're able to convince them and convey to them the future of how they're going to modernize. So when you tell a customer I got your back, I'm going to take you to the promised land so to speak, and no customer left behind was our mission. We made that — in fact we wrote an article, blog that I titled jointly with CEO Greg Hughes of Veritas saying no customer is going to be left behind. It was a play on the 'no child left behind' mantra in education. And that's turned out to be a very effective way of galvanizing the team. We pride ourselves at Cohesity in sort of two core engines. One is product innovation. That's the roots of the company, that needs to be 10x better than the competition. And the second is customer obsession. And I really want to make sure our team on the second piece of it know our customers well. And you get a lot of brownie points with me when you have specifics of a customer rather than just sort of hand-waving. I talk to whoever at bank X and this is exactly what they're doing. And because of this narrative, I think I can go and talk to bank Y or Z. I have a lot of place in my heart for people like that. And that's the type of culture we're trying to create in our company where we're obsessed about product innovation — those are typically the engineers — and then the go-to-market folks are obsessed about customers.