Nov 02, 2016

How Dheeraj Pandey built Nutanix, the latest IPO star, in less than 10 years

On September 30, Nutanix (NTNX) made a debut on the Nasdaq stock market, opening at $26.50, 66% above its IPO price of $16 per share. The enterprise cloud solutions company is now valued at over $3 billion.

BYJayadevan PK

A little over a month ago, Dheeraj Pandey took his seven-year-old company, Nutanix, public. On September 30, Nutanix (NTNX) made a stunning debut on the Nasdaq stock market, opening at $26.50, 66% above its IPO price of $16 per share. The public market now values the enterprise cloud solutions company at over $3 billion.
In 1997, Pandey had packed his bags from India and left for the US with a paltry $900 in his pocket, part of the amount he’d received from two educational trusts in India as scholarships to study abroad. At the current valuation, Pandey’s stake (9.2%) in Nutanix is valued close to $300 million.
“It was the first flight of my life. I’d never taken a flight before I was 22,” Pandey told FactorDaily in an interview last week.
Pandey comes from a middle-class Indian family, and this is no rags-to-riches story. Nevertheless, it is a story of how a mindful entrepreneur built a successful business against odds in a very short period of time. You can watch the interview embedded in this post or read edited excerpts below.
Q. Tell us about growing up in Patna and your formative years.
A. I grew up in Patna. After finishing high school there, I pursued an undergraduate program (BS in computer science at IIT-Kanpur from 1993 to 1997. After that, I went to Austin, Texas, in the US to pursue my PhD in computer science. But then, after a couple of years, I went on a leave of absence, and I never returned to finish my PhD.
Q. What was your family background like?
A. I grew up in a middle-class household that didn’t have any of the trappings of a rich family. It was imperative for us to study hard and I had to choose between medicine and engineering. I chose engineering as my profession. My four years at IIT-Kanpur (while pursuing a BTech in computer science) were a great experience because they really baked me. The course hardens you. It infuses a character of steel in you because everybody who gets there is a topper from their school. So, you are in a first-among-equals crowd and it’s a very humbling experience.

Two education trusts in Mumbai gave me $3000 as scholarship funds. I bought a ticket for $1000, left $1000 at home with my parents, and with the remaining $900 and two suitcases I flew to the US  

We didn’t have enough money to buy an air ticket to the US. The university would have taken care of the tuition and scholarship in the US, but they don’t pay for the air ticket and other things. There were two really good education trusts in Mumbai — the J N Tata Endowment Fund for the Higher Education of Indians and K C Mahindra Education Trust — that gave me $3000 as scholarship funds. I bought a ticket for $1000, left about $1000 at home with my parents, and with the remaining $900 in my pocket and two suitcases I flew to the US.
Q. Tell us about the beginning of Nutanix.
A. Before starting this company, I was already building software. I had been in three companies working on distributed systems. In computer science, ‘distributed systems’ means how you use multiple machines to make them work and look like one large machine.
Q. What problem were you solving then?
A. The common thread in all of this was distributed systems: distributed file servers, distributed databases, distributed data warehouses and so on. But, distributed systems, or clusters as people call them, are difficult to use. So, they never became successful products. They were always high-touch products.
Q. What was your approach to solving this problem?
A. Most enterprise panes of glass (a single pane of glass is a consolidated management view that includes data from multiple sources) were frozen in time about 15 years ago. They were clunky, difficult to use, policy driven, and security was a big pillar in enterprise panes of glass. In the consumer space, it was all about end-user delight and other such things. So, we focussed on rethinking the consumer grade design.
Q. What was the trigger to your startup?
A. In my last startup, there was a lot that was left to be desired, especially as the founders were not letting go of the company. There were three of us in the startup who felt curtailed and were unable to follow our instinct in terms of making our company larger.
Q. You started just after the recession. Was that bad timing?
A. It was one of the best times to start a company. By the time you’ve worked on your product for two-three years, pent-up demand makes customers’ purse strings open up and they are ready spend on new products and new innovation and new technology. This came about in 2012-13, which was great timing for us.
Q. What’s the future of Nutanix?
A. It’s a relatively young company right now — it’s been around for just seven years. In seven years, you don’t form long-lasting companies. The next 10 years is when a lot of the interesting things will happen. The IPO and the public market standing have given us a cache and we can now dream further and innovate more. If we stop innovating and stop thinking about innovating as a company while it’s still in it’s early life, then we’ll be dead in no time.
Q. Which was the most challenging phase in your life?
A. The most competitive time in my life was at IIT-Kanpur, because of the first-among-equals setup at the institution. You have to deliver on the promise of being in one of the best schools in the country. A lot of people fizzle out before the end of the course.
The last seven years too haven’t been easy when it comes to running this business (Nutanix). There have been many highs and lows, and we’ve had near-death experiences in this company. The best thing is that when things don’t work, we never pin down our failures on any one individual.
We came together and created this “antifragile” character of our business. This is a term I learnt from the book Antifragile (Antifragile: Things That Gain from Disorder) that says when systems undergo shock, antifragile systems actually improve. The resilient systems go back to where they were, but the antifragiles become better. These near-death experiences have been great moments of character building for our company.
Q. Describe a near-death experience faced by Nutanix.
A. Once, we were working on a VMWare product, an end-to-end solution, and that version of VMWare available was not amenable to the kind of assumptions we had made about resiliency and fault tolerance. It looked like our most fundamental assumptions about how the product would work did not actually hold true. And then, VMWare upgraded their software. They came up with a new version of their operating system. That gave us a new lease of life.

The IPO and the public market standing have given us a cache and we can now dream further and innovate more. If we stop innovating and stop thinking about innovating as a company while it’s still in it’s early life, then we’ll be dead in no time  

Three years later, when VMWare became a competitor of sorts, they looked us in the eye and said we would have to OEM (original equipment manufacturer) their software. And we said we’re not a server company. We can not resell someone else’s software at the kind of gross margins they expect us to. It was a pretty defining moment for the company.
Q. What is the future of technology in your view?
A. Tech is now maturing to a point where it has to humanise. The fact that today even a two-year-old child can interact with an iPhone or an iPad and do so intuitively, elderly people can use FaceTime and WhatsApp, tells you that technology is at a point where it can be really relevant for the billions of people on the planet. The same is true for the enterprise as well. As nerds and geeks, we’ve looked at technology as an end in itself whereas it is a means to an end.
Q. What are your thoughts on India’s education system?
A. In some ways, it is good because of its emphasis on math and science. In the US, people have started to run away from math and science. However, in China, India, the Eastern European block and even in Russia, there is huge emphasis on science and math, which I think is the strength of our education system. The weakness is that there aren’t too many good teachers and it’s the early days of self-learning and self-based learning using technology. This emphasises compliance. Education in India stresses on following the teacher rather than rebelling against them, which is what creates entrepreneurship. Our education system doesn’t produce too many leaders. The people who become leaders become so because of the fire in their bellies. We should probably look at creating an environment where we celebrate failure as well.
Q. What do you think will be the impact of technology like automation on jobs?
A. We’ll just become more efficient. I don’t think technology is going to take jobs away. With each passing decade, we digitise more, use more machine intelligence, expect more from software. Think of software from the 1990s compared to the software of the 2000s and that of the current decade. Every five-ten years, we expect more from software. Before 1995, there was no internet, and the expectation from software was very different. So were the expectations from the human workforce. In 1990, we could only get so much done in 40 hours; in 2000, one could probably get 5X the earlier amount done and 5X more after the mobile revolution in 2010. I just expect that we’ll end up doing a whole lot more due to technology.
Note: This transcript has been edited for clarity, brevity, and better readability.

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Jayadevan PK is a writer of FactorDaily.