‘Fire in the eyes’ and a disruptive idea — your ticket to VC funding

Juniper Networks Inc. this year created a venture capital fund to encourage development on its Junos platform, which provides a common language across the networking company’s routing, switching and security devices.

Other companies and government agencies, including the CIA, have established venture capital funds. But the person who started this fund, Pradeep Sindhu, is the chief technology officer and founder of Juniper, who began his company with VC backing in 1996.

In an interview with Computerworld, Sindhu outlined the reasons he believes in the venture capital approach and what he looks for in a funding proposal. The project, called the Junos Fund, is designed to spur innovation on Juniper’s platform. The following are excerpts from the interview, including Sindhu’s views on venture capital funding, the state of cellular networks and other topics.

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Why not just take the $50 million and apply it as extra money to your own R&D effort?

It would be like doing the development internally. We have only 7,800 employees, maybe 50% of them are developers, and the number of developers available outside is much larger. And what the Junos Fund does is it gives us a multiplier effect, which is far bigger than applying the same number of dollars internally.

What has been the response?

We have gotten a lot of interest from potential start-ups and venture firms wanting to work with us.

How do you determine success?

Success in this space is measured always, at the end of the day, as whether the rate of innovation has actually increased over and above what it used to be. We will measure that by productivity increases.

We will not measure this by new and interesting applications. We will measure this by the fundamental problems of service providers and enterprises getting solved — those are the ways that we determine success.

What’s the time frame for seeing results?

This is a medium- to long-term endeavor. If you just look at the time that it takes for a company to get funded, to develop its products and then to go and test it in the marketplace, you are talking about a three-to-four-year minimum, so for an effort like this to see fruit, you have to look over at least a five-year period.

What are some of the most important qualities in a VC funding proposal?

The quality of the people is one of the most important factors. If you talk to a venture capitalist, they will tell you that one of the most important things to look for is the people.

And what constitutes quality?

Fire in the eyes, the quality of the idea, how disruptive potentially it can be. It’s hard to pin down what constitutes innovation, but it’s advancing the agenda of the industry, really, at the most rapid rate possible and doing things in a new and unforeseen way.

Is that something that you can easily recognize?

Not always. There is no formula that I know of that you can cause to have innovation happen. But what I do know is that when the economic incentives are aligned properly, that you can have innovation happening at a very rapid rate, and the best way that I know of is the venture community, which is why we have taken this approach.

Have you started making awards yet?

We have a few, but the level of interest is very high. We are just being careful and methodical at this point.

What kind of product development do you expect out of this effort?

The vast majority of applications that we expect will be in the area of Juno’s space, for example. Juno’s space is basically a network applications platform. It is software which provides an environment that makes it much easier to write applications that control, monitor and make it easy to operate entire networks. It’s applications in these areas that we think will be the biggest growth area.

What does your venture fund most resemble? Did you model it after anything?

The venture industry itself — it is a model that has been very successful.

The merger and acquisition rate all but shut down in the tech business to $3 billion, and then it shot up in the range $20 billion early this year. The enterprise vendors are driving a lot of it, and they are saying that they need to provide a complete end-to-end stack to customers, or a converged strategy. What’s your view?

Our view on this so-called convergence is the following: Yes, enterprises need innovation in the information technology industry, and it’s badly needed. We don’t believe the correct way to solve this is by having proprietary solutions, because that takes us back to a world that I think people were very happy to walk away from.

AT&T riled a lot of people by ending its unlimited pricing on the iPhone. People would like unlimited services, but we’re obviously not there yet. What are the problems?

I would like to be able to go to a grocery store and get everything for free as well. The fact is these networks cost money to build, and in the cellular networks particularly. Cellular networks are actually way behind the wireline network in terms of technological development in the following sense. Wireline networks have been built for carrying voice. And 15 to 20 years ago, DSL came to them, broadband came to the wireline network, packet switching came to the wireline network, and we saw an incredible increase in performance.

Cellular networks have not gone through the same revolution, even though people have been talking about 2G, 3G, 4G. But, fundamentally, the infrastructure of these networks has been lagging tremendously. At the same time, the benefit to the end user in terms of being able to get access to my information — anytime, anywhere — is huge. Carriers find themselves in a position where the infrastructure is not able to keep up. Meanwhile, the promise is still there.

What we are trying to do as an infrastructure provider is to be very thoughtful and to provide the most cost-effective and scalable solutions that are possible. At the end of day, the marketplace will determine what the right pricing model is, and I don’t know what that is. What I do know is that it is very important to allow carriers to have flexibility with respect to business models because right now they are struggling. We do know that the cost of building networks is rising faster than the revenues people are deriving from them. Our answer to that is a new network, which tries to address the CapX part of the issue. It tries to address the OpX part of the issue through automation and it tries to address the revenue part through innovation.

Is videoconferencing going to primarily be a B2B application or spread out to the vast market?

Videoconferencing is an interesting and perhaps compelling application. The way in which it is currently delivered and positioned, it’s necessarily a B2B application because of the cost of the systems. We believe there are ways of providing this capability on the new network that would allow pervasive application of videoconferencing. “Pervasive” meaning that anyone and everyone can do it conveniently, anytime, anywhere.

When will that happen?

It depends completely on the last-mile problem and the cellular networks becoming capable of providing video.

How far do you think the push by President Obama’s administration, and Congress generally, will go in addressing that last-mile issue?

We ought to look very carefully at what can be done to spur innovation and to spur investment into building out the access part of the network. It’s not about making new laws — it’s how do you provide incentives for people to make new investments so that infrastructure gets built out and that the country has the world’s best networking technology. We are actually quite far behind the rest of the world.

How important a national priority do you think this should be?

I think it is a phenomenally important priority for the nation, on par with the excitement that everyone has about solving the problems with energy, if not more important.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld.

Source: Computerworld.com

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