Jay Chaudhry never thought he would run a business, amass a fortune or helped popularize an entire industry. Not growing up in rural India, not after moving to the US in 1980 to study engineering and marketing, not even after landing jobs at tech giants IBM and Unisys.
“I don’t have an entrepreneurial background in my small farming family. So if you ask me, ‘Did I ever think of being an entrepreneur in my childhood? [or] ‘early years of my career?’ Not really,” Chaudhry, the billionaire founder and CEO of cloud security company Zscaler, tells CNBC Make It.
It took the dot-com boom in Silicon Valley — the incredible success stories of tech startups like Netscape — to make Chaudhry think in 1996, “Why can’t I start a company?” He made the rash decision to quit his job as an executive at Atlanta-based technology firm IQ Software, and his wife Jyoti quit her job as a systems analyst at telecommunications giant BellSouth.
Together, they invested their entire savings — about $500,000 — into SecureIT, a cybersecurity software startup they co-founded in 1997. At the time, “probably less than 5% of Fortune 500 companies had firewalls,” Chaudhry says. “Within 18 months, we had firewalls in about 50% of [the] “Fortune 500.”
The timing was perfect: In 1998, Chaudhry sold SecureIT to VeriSign in a stock deal worth nearly $70 million. Over the next decade, the husband and wife founded two cybersecurity companies and an e-commerce business, each of which was acquired.
By 2007, they were wealthy entrepreneurs, and Chaudhry — who was “bored” with no job — decided it was time to launch “one big company and focus 200% on it,” he says.
That company is Zscaler, which aims to help companies move from outdated firewalls to the cloud era. The pair invested $50 million of their own money, Chaudhry said. Today, the company generates $1.6 billion in annual revenue and has a market value of about $30 billion.
Chaudhry’s own net worth is estimated at $11.5 billion by Forbes.
Here, Chaudhry talks about risking his family’s savings to follow his heart, how his education influenced his relationship with money, and the advice he would give to someone looking to quit their job to start a business.
CNBC Make It: What prompted you to risk your entire life savings on a startup idea — in an industry that doesn’t actually exist yet?
Chaudhry: This happened because I love reading and I love technology.
In 1996, Netscape had just launched and gone public, and I was fascinated by it. I said, “If [Netscape co-founder] Marc Andreessen could start a company — he’s still young [right] graduated from college — why can’t I start a company?”
My wife and I discussed it several times, and the more we thought about it, the more we were convinced of it: [Netscape’s web browser] is a way to access information, and it should be popular. But if every company is connected to the internet, it means there will be security risks.
That’s my simple thought. There is no IDC or Gartner study on market size. It’s mostly based on what our gut tells us.
A hunch is one thing. Risking every dollar on your behalf is another.
It started with us saying, “Let’s raise venture capital.” I had no experience raising capital, and I quickly realized that it wasn’t that easy. [1996]Atlanta is not a VC mecca and we kept hearing, “Hey, you have no experience.”
We were disappointed, but our confidence grew stronger, which made me say, “Why don’t we bet our entire savings?”
I don’t know anything. So, I really don’t know how big the risk is. I can’t measure it.
How do you come to terms with that risk?
After discussing, we asked each other, “What’s the worst that could happen?” The company could close down, we could lose all our savings.
The next question is, “Can we find jobs?” There is a lot of confidence that we can.
I never had any money growing up, so there was never any sense of having to buy A, B, and C. Our lifestyle was pretty modest. Our house in Alpharetta, Georgia, was $200,000 — a nice, middle-class house at the time — and we didn’t have a fancy car or a big mortgage.
Our only child at the time was in public school. There wasn’t much overhead. We said, “Let’s give it a try.”
When a bet pays off, does that success make you more confident to take bigger risks? Are there other ventures that are as risky as your first?
That [financial] SecureIT’s risk is, like, 1,000 times greater than Zscaler’s risk. The amount I invested in Zscaler is a fraction of my net worth.
But Zscaler was much harder. I invested more money in it than all the others combined. I took bigger bets. I hired people faster to solve some really hard problems. I wanted to do something big, something that would last.
We are trying to solve a futuristic problem. Will it work or not? Will the market grow or not? Those are all unknowns.
So if you ask me about the chances of Zscaler being successful, the risk is much higher. Because, with SecureIT, it’s pretty clear that when you’re connected to the internet, you need a firewall.
What is your best advice for someone thinking about quitting their job to start their own business?
First, build confidence by learning more about what you want to do. Don’t just do some cursory work.
Second, start investing your own money. That is actually part of testing your belief. If you really believe, you will take a risk on yourself. It also means you have done serious homework, you are ready, you are committed.
You can also make decisions that you want. If Zscaler was mostly owned by VCs, they could have shut it down. It took us a few years to really start gaining traction in the market, and VCs could have ignored you and moved on. They said, “That’s one of my 20 investments.”
If you invest your own money, this is the only business you own.
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