It wasn’t until the dot-com boom in Silicon Valley and the meteoric rise of tech startups like Netscape that Chaudhry asked himself in 1996, “Why shouldn’t I start a company?” He made the rash decision to leave his executive position at IQ Software, an Atlanta-based technology company, and his wife Jyoti left her job as a systems analyst at telecommunications giant BellSouth.
Together, they invested their life savings (about $500,000) in SecureIT, a cybersecurity software startup they co-founded in 1997. At the time, “maybe less than 5 percent of the Fortune 500 had firewalls,” Chaudhry says. “Within 18 months, we had firewalls in about 50 percent of the Fortune 500.”
The timing was perfect: In 1998, Chaudhry sold SecureIT to VeriSign in an all-stock deal worth nearly $70 million. Over the next decade, the couple founded two more cybersecurity companies and an e-commerce business, both of which were acquired.
By 2007, they were already wealthy entrepreneurs, and Chaudhry — bored with nothing to work on — decided it was time to start “a big company and focus 200 percent on that,” he says.
That company was called Zscaler, and its goal was to help businesses ditch outdated firewalls and embrace the cloud. The couple invested $50 million of their own money, Chaudhry says. Today, the company generates $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 how he risked his family’s savings to follow his instincts, how his upbringing influenced his relationship with money, and what advice he would give to someone looking to quit their job to start a business.
CNBC Make It: What made you decide to invest your life savings into a startup idea? in an industry that didn’t really exist yet?
Chaudhry: It happened because I love reading and I love technology.
In 1996, Netscape had just launched and gone public, and I was fascinated by the initiative. I thought, “If Marc Andreessen (Netscape’s co-founder) could start a company – he was a young guy (just out of college) – why shouldn’t I start a company?”
My wife and I have discussed this many times and the more we thought about it, the more convinced we were: Netscape’s web browser is the way to access information and it should become popular. But if all businesses are connected to the Internet, it means there will be security risks.
That’s what I thought. There was no study from IDC or Gartner on the size of the market. I was relying largely on what my gut told us.
Intuition is one thing. Betting every dollar on your name is another.
At first, we said, “Let’s go get some venture capital funding.” I had no experience raising money, and I quickly realized it wasn’t that easy. This was 1996, Atlanta wasn’t the mecca of venture capital, and we were constantly being told, “Hey, you have no experience.”
We were disappointed, but our conviction grew, which led me to say: “Why not risk all our savings?”
I didn’t know anything. So I didn’t really know how big the risk was. I couldn’t quantify it.
How did you make peace with this risk?
After talking, we asked ourselves, “What’s the worst thing that could happen?” The company could close and we would lose all our savings.
The next question was, “Can we find work?” There was a lot of confidence in our ability to do so.
I didn’t have any money growing up, so I never thought I had to buy A, B, and C. Our lifestyle was pretty simple. Our house in Alpharetta, Georgia was worth $200,000 (a typical middle-class home at the time) and we didn’t have fancy cars or fancy monthly payments.
Our only child at the time was going to a public school. The tuition was not very high. We thought, “Let’s take a chance.”
When a bet pays off, does that success give you more confidence to take bigger risks? Were other projects you’ve tried as risky as the first one?
The (financial) risk of SecureIT was about 1,000 times greater than that of Zscaler. The amount I invested in Zscaler was only a small fraction of my net worth.
But Zscaler was much harder. I invested more money in it than in all the other projects combined. I took bigger bets. I hired people faster to solve very difficult problems. I wanted to do something big, something sustainable.
We were trying to solve a futuristic problem. Would it succeed or not? Would the market take off or not? All of that was unknown.
So if you ask me what are the chances of success for Zscaler, the risk is much higher. Because with SecureIT, it was pretty obvious that when you connect to the Internet, you need firewalls.
What is your best advice for someone considering quitting their job to start their own business?
Start by convincing yourself by learning more about what you want to do. Don’t just do superficial work.
Second, start by investing your own money. This is actually a test of your conviction. If you really have conviction, you will take risks. It also means that you have done serious research, that you are prepared, that you are committed.
You can also make decisions however you want. If Zscaler was largely owned by venture capitalists, they probably could have shut it down. It took us a few years to really start gaining traction in the market, and venture capitalists can write you off and move on. They say, “This is one of my 20 investments.”
When you invest your own money, that’s the only business you have.
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