The tech industry brims with examples of bright entrepreneurs who have struck it big by selling their startups and then hightailing it out of those larger companies once contractually eligible so that they can pursue their next venture.
So what the heck is Matt Cutler still doing at Cisco three years after selling his mobile collaboration startup to the networking giant? Well, among other things, he’s teaching a bunch of his peers who have stayed at Cisco after having their own companies acquired -- as well as any Cisco lifers who will listen -- a thing or two about how to keep cranking out new ideas.
“From where I sit, innovation is not just about what you do and what you have for technology, but it’s also how you do it,” says Cutler, who along with his wife and three kids moved from Massachusetts to California when Cisco bought Collaborate.com. “One of the obvious opportunities for Cisco to drive innovation is to incorporate modern workstyles and that includes design thinking.”
Cutler, whose entire 8-member Collaborate.com team remains at Cisco, now serves as director of product management within Cisco’s Spark cloud-based unified communications infrastructure team and is one of 46 members of the company’s little-known Founders Forum. This dynamic internal group, which formed two-and-a-half years ago, incents founders from many of the 193 companies Cisco has acquired to stick around for the benefit of Cisco, themselves and customers (See also: "Meet Cisco's Founders Forum members").
Cisco: Innovation from Anywhere
As a nearly $50 billion company, Cisco concedes the obvious – it’s not as nimble as the startups it consumes. One of the main ideas behind the Founders Forum is for Cisco to tap into the “entrepreneurial vigor” of those smaller companies, says Hilton Romanski, a 15-year Cisco veteran who serves as the company’s chief strategy officer and who chairs Founders Forum meetings (See also: "Inside the Strategy Team at Cisco"). “I can’t think of any other company that has dozens of CEOs to tap into for their knowledge or experience, and we do that on a regular basis,” the Cisco SVP says.
(I reached out to other acquisitive tech companies, including IBM and Microsoft, but neither got back to say whether they have any sort of Founders Forum-like operation.)
Given that Romanski manages a $2B venture capital investment portfolio and has been responsible for about $20 billion in acquisitions, his interest in making the most of Cisco’s buyouts is understandable. He’s quick to point out that about 1 in 5 members of Cisco’s population came to the company through buyouts.
“One thing that’s been true from the very beginning [at Cisco] is that we’ve thought about the potential for innovation and disruption coming from anywhere,” Romanski says, also citing the company’s Innovate Everywhere Challenge open to all employees. “So our approach has really been: Let’s continue to be very focused on build by partner and then more recently, focused on invest and co-develop as ways to continue to make sure we’re harnessing the most interesting innovations in the market.”
Romanski contends that one way Cisco has grown and thrived is by acquiring its way into new markets and strengthening its position in others. Some buyouts are more technology or platform based, such as the $1.4B Jasper Technologies IoT deal, whereas others, such as the recent Container X purchase, are more focused on bringing fresh blood and smarts into the organization.
The Founders Forum brings together for quarterly meetings at Cisco headquarters in San Jose the people who started many of the acquired companies. One basic thing Cisco wants to do at these meetings is get feedback on its buyouts.
“Where can we do things better from an acquisition perspective? How was the process for you and how can we improve this so we get better every time we bring awesome teams into the company so they want to stay,” Romanski says.
How Founders & Customers Benefit
Forum members get access to Cisco higher-ups at these meetings and also learn from one another, such as how to navigate Cisco. One lure for being acquired, beyond the immediate financial gain, is access to greater resources and bigger clients. Cisco is really trying to sell security startups on this, as the company aims to be the No. 1 player in the market.
“As each team comes on board the next team sitting outside our walls is looking at this and saying, ‘Wow, that’s a really amazing team’,” Romanski says.
Who knows, maybe some of these founders will hit it off and form a new dream team at Cisco along the lines of its famed “MPLS” engineering group that repeatedly received funding to build spin-ins like Insieme.
Collaborate.com’s Cutler volunteered his services recently to lead a separate workshop for Forum members on ideation, and he says the 90-minute meeting resulted in a handful of action items, including the possibility of pulling together a global forum for internal Cisco developers (See also: “4 cool ideas hatched from Cisco ideation session”). Romanski foresees sharing ideation advice with Cisco’s enterprise customers, too.
Romanski says one way customers have already benefited from the Founders Forum is that leaders of SaaS vendors bought by Cisco have helped the company smooth integration of other as-a-service acquisitions into the fold even as Cisco overall tries to move to a more flexible consumption model for its enterprise customers and more predictable revenue stream to satisfy investors. “That’s historically very different from where our business has been and we’re very rapidly scaling our capability to deliver as-a-service and recurring revenue,” he says.
One example of this is that it took Cisco more than a year to make 2015 cloud security acquisition OpenDNS services available to customers under a recurring revenue model, but with its more recent buyout of cloud access security broker company CloudLock, Cisco was able to make services available almost immediately upon closing the deal.
While the Founders Forum should help Cisco retain the talents of many startup founders, Romanski knows Cisco won’t keep them all. The founders of prized acquisition Meraki, for example, left the company about two years after Cisco’s $1.2 billion buyout of that cloud-based networking outfit. But the next level of talent within Meraki has stayed and now leads the $1B run-rate business inside of Cisco, Romanski says.
Rod Randall, a former technology executive who is now in venture capital and private equity, says he thinks Cisco’s Founders Forum is a great idea. “During my time as a VC, I can't remember even one of the founders that I backed that ever stayed post acquisition,” he says.
Having sold a networking company called Teleos to a larger company back in the 1990s, Randall saw first-hand how a founding management team can be stifled within the confines of a larger, acquiring company.
Founders’ “combination of energy, curiosity, boldness, and ego is often difficult to find in a corporate managerial chain of command,” Randall says. “They are often the best communicators, seeing things not only as others do, but more importantly, as others do not. These people are an enormously powerful resource, and resource network, which would be hugely beneficial if the acquiring company was able to keep and harness them… But therein lies the rub. These founders are un-harnessable, by definition. A company can only keep them if they want to be kept…”
By recognizing the talent it has acquired through the Founders Forum, Cisco is trying to do just that.