Jay Chaudhry never thought he would run a business, amass a fortune or help popularize an entire industry. Not growing up in rural India, not moving to the US in the 1980s to study engineering and marketing, not being employed by tech giants IBM and Unisys.
“I have no history of entrepreneurship in my family of small farmers. So if you ask me, ‘Did I ever think of becoming an entrepreneur in my childhood? [or] the first few years of my career?’ Not really,” Chaudhry, the billionaire founder and CEO of cloud security company Zscaler, tells CNBC Make It.
It took Silicon Valley’s dot-com boom — the wild success stories of tech startups like Netscape — to prompt Chaudhry to think in 1996, “Why shouldn’t I start a company?” He made the rash decision to quit his job as an executive at Atlanta-based technology company IQ Software, and his wife Jyoti quit her job as a systems analyst at telecommunications giant BellSouth.
Together, they sunk their life savings—roughly $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 ” says Chaudhry. “Within 18 months, we had installed firewalls in about 50% of the [the] Property 500.”
His timing was perfect: In 1998, Chaudhry sold SecureIT to VeriSign in a stock deal worth nearly $70 million. Over the ensuing decade, the husband-and-wife couple founded two more cybersecurity companies and an e-commerce business, each of which was acquired.
By 2007, they were already wealthy entrepreneurs, and Chaudhry — who was “getting bored” without anything to work on — decided it was time to start “a big company and focus 200% on that,” he says.
That company was Zscaler, which aimed to help companies move away from outdated firewalls and into the cloud era. The couple invested $50 million of their own money, Chaudhry says. Today, it brings in $1.6 billion in annual revenue and has a market value of about $30 billion.
Chaudhry’s net worth is estimated at $11.5 billion by Forbes.
Here, Chaudhry talks about deploying his family savings to follow his mind, how his upbringing influenced his relationship with money, and the advice he’d give to someone wanting to quit their job to start a business .
CNBC Do It: What prompted you to put your life savings into a startup idea – in an industry that didn’t 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 was a young man [right] out of college—why shouldn’t I start a company?”
My wife and I talked a few times, and the more we thought about it, the more convinced we were about it: [Netscape’s web browser] it is the way to access information and it should become popular. But if every company is connected to the Internet, that means there will be security risks.
That was my simple opinion. There was no IDC or Gartner market size study. It was mostly based on what our gut told us.
A gut feeling is one thing. Every dollar bet with your name is another.
It started with us saying, “Let’s go get venture capital funding.” I had no experience in fundraising and quickly realized that it was not that easy. This was [1996]Atlanta was not a VC mecca, and we heard over and over, “Hey, you don’t have any experience.”
We were disappointed, but our conviction was growing, which made me say, “Why don’t we risk our life savings?”
I didn’t know anything. So I really didn’t know how big the risk was. I couldn’t quantify it.
How did you make peace with that risk?
After talking back and forth, we asked each other, “What’s the worst that could happen?” The company could close, we would lose all our savings.
The next question was, “Can we get a job?” We were very confident that we could.
I never had money in my early childhood, so there was never a notion that I had to buy A and B and C. Our lifestyle was very simple. Our house in Alpharetta, Georgia, was $200,000—a nice, typical middle-class house at the time—and we didn’t have fancy cars or fancy payments.
Our only child at the time went to a public school. There were not many expenses. We said, “Let’s take a chance.”
When a bet pays off, does that success make you more confident to take bigger risks? Were any of your other ventures as risky as your first?
of [financial] the risk of SecureIT was, for example, 1000 times the risk of Zscaler. The amount I invested in Zscaler was a small fraction of my net worth.
But Zscaler was much more difficult. I put more money than all the others put together. I took bigger bets. I hired people faster to solve some very difficult problems. I wanted to do something big, something lasting.
We were trying to solve a problem that was futuristic. Will it succeed or not? Will the market rise or not? This was all unknown.
So if you asked me about Zscaler’s chances of success, there would be a much higher risk. Because, with SecureIT, it was pretty clear that as you connect to the Internet, you need firewalls.
What is your best advice to someone who is thinking of quitting their job to start their own business?
First, build conviction by learning more about what you want to do. Don’t just do some of the sketchy work.
Second, start by betting your money. This is actually part of testing your conviction. If you really have conviction, you will take a chance on yourself. It also means you’ve done some serious homework, you’re ready, you’re committed.
You can also make decisions the way you want to make decisions. If Zscaler was mostly owned by VCs, they probably could have shut it down. It took us a few years to really start gaining traction in the market, and VCs can brush you off and move on. They say: “It is one of my 20 investments”.
When you invest your money, that’s the only business you have.
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