Andy Ory is the co-founder and CEO of 128 Technology which allows company networks to better facilitate the delivery of business services and applications. The company has raised $70 million from G20 Ventures and The Perkins Fund. Prior to this Andy co-founded Acme Packett which provided voice, data and communications services and applications across IP networks for service providers and enterprises. Acme Packet was sold to Oracle for $2.1 billion. He also co-founded Priority Call Management which became one of the world‘s leading suppliers of enhanced calling and messaging solutions. The company got acquired for $162 million.
In this episode you will learn:
- When to sell your company
- The smoke and mirrors of selling a public company
- How to choose your investors wisely
- Why raise money, even when you don’t need the cash
- Why embrace your mistakes
About Andy Ory:
Andy Ory, CEO and co-founder of MA-based128 Technology. 128 Technology has a differentiated approach to software-defined networking, or SD-WAN. Its software makes routers smarter and allows company networks to better facilitate the delivery of business services and applications.
In 2000, Ory co-founded Acme Packet, a Boston-based company that offered session border control technology that allowed telecommunications network operators to more efficiently manage voice and data communications over IP. His timing couldn’t be better, as Acme Packet emerged as a viable solution just as connected businesses were looking for a more secure, reliable way to deliver communications to any device, over any network.
The company raised $100 million in its 2006 IPO. After continuing to build the business into a networking powerhouse, Ory sold Acme Packet to Oracle for $2.1 billion in 2013.
After taking some time to recharge, Ory and his business partner, Patrick Melampy, founded 128 Technology in 2014. Ory’s timing was right again as corporations are desperately seeking greater network security, agility, reliability and performance. Ory projects that 128 Technology is on a similar growth trajectory as Acme Packet, given the global market for its networking solutions.
To date, 128 Technology has raised $68 million. It is quickly acquiring new customers and partners frustrated with experiences with Cisco and other providers of hardware-based approaches to networking, which has seen little innovation over the past 30 years. Some recent partner momentum comes from companies such as AWS, Lanner, Intel, NESIC, Redvine, CMC, and Voxai, just to name a few.
Connect with Andy Ory:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone and welcome to the DealMakers show. I am very, very excited with the entrepreneur that we are going to have on the show today. He is someone that has built several businesses from the ground up. Someone that is coming from a family of entrepreneurs. He’s seen it. He’s done it, and I think that we’re going to be learning a lot from him, especially when it comes to the software-defined networking and Voice over IP, and all the good stuff that we’ve seen from technology during the past ten years, and also to what we have in the future ahead. So, without further ado, I’d like to welcome our guest today. His name is Andy Ory from 128 Technology. Welcome to the show today.
Andy Ory: Alejandro, thank you so much. It is a pleasure to be here.
Alejandro: So, originally from Massachusetts. Is that right, Andy?
Andy Ory: Yeah. I was born in Worcester, and I lived just outside of Boston. So, I haven’t made it very far. About 40 miles in 53 years, but I have to say I love the region. I love New England.
Alejandro: So, how was life growing up there?
Andy Ory: It was great. It really was great. I grew up. I went to the public schools in Worcester, and I managed to go to the colleges in Boston. Massachusetts has done right by me, and I try very hard to do all of my engineering, all of my support, all of my manufacturing in this great state.
Alejandro: Very cool. I understand as well that you were born in a family of entrepreneurs, and you were really able to see the kitchen-table type of entrepreneurs. How was this for you?
Andy Ory: You know, I got to see my father come home from work every day, and he would talk about the things they were making, people buying their materials, the trials and tribulations, the ups and downs of their little community. It was really wonderful. I just discovered that having a business is about creating community and culture. It’s a bunch of people banding together to do something, and there’s a lot of pride associated with it. I found that to be something quite attractive and enticing.
Alejandro: And I guess this started with your grandmother doing a coat manufacturing business. What a powerhouse.
Andy Ory: Yeah. Well, my guess is if we go back 100 or 200 years, just about everybody was involved in some level of entrepreneurship trying to take limited resources to create a living. I was exposed to it in a more direct fashion, and it had an indelible impression on me.
Alejandro: Just out of curiosity, what are your thoughts on entrepreneurs being born or developed?
Andy Ory: You know, that’s really interesting. I think that if you really aren’t interested at all in entrepreneurship, it’s going to be a hard row to hoe. But if you do have an interest, it is definitely something that can be cultivated. I think that most entrepreneurship is something that you mentor. You intern, you experience, and you just engage in. So, I do think that it’s probably similar to music. Everybody has the capacity to be musical, but if you’re not interested, you’re not going to be very good at it.
Alejandro: Got it. From seeing your family building and scaling their business, was there a point in time where you told yourself, “One day I’ll do this myself?”
Andy Ory: Yeah. I don’t think there was ever an epiphany. I think that it was just something that I always wanted to do. I was always interested in how things are made, how things are sold, how resources were accumulated. I am a people-person, so the cultural aspect of aligning, motivating, and just reaching your goal was something I always wanted to do. There was no single moment. It was just what I always wanted to do.
Alejandro: I guess the projects started in high school? Tell us about these projects.
Andy Ory: Yeah. I will say with people that write code I always felt that the best coders were probably born, though you certainly can learn it if you’re interested. I remember, I used to go to WPI back in ninth grade, Worcester Polytechnic, and I would take classes in assembly language in their programs. I just had a knack for it. So, I started writing code, and I discovered that people were having a lot of personal computers in the late ’70s and early ’80s. There weren’t a lot of programs people could buy. So, I started writing programs and selling them through the back pages of the Wall Street Journal, the USA Today, and the New York Times. It was called Consumer Software Systems. That was my first business. I didn’t really make much money, but it was really interesting. I’d get the orders every so often, and I’d have to copy the discs and fulfill them. It was fun. You take me back with that question. I haven’t thought about Consumer Software Systems in 40 years.
Alejandro: Really cool. Here you are writing code and doing your projects, why did you decide to go to Harvard and do the film major?
Andy Ory: There was very little about me that was wise back then. It’s probably the same could be said now, but certainly back then. But I did have one salient observation, and that is that there is a time to pull back from something that you’re obsessed with to survey a broader landscape to understand what’s going on. That’s really a liberal arts education studying history and studying all sorts of philosophy. I didn’t want to just be singularly focused my entire life without a larger cultural or historical context. So, I did want to go to a liberal arts school and not be involved in technology directly for a few years. For me, that served me well. I can’t say that’s the right path for all your listeners, but it was the right path for me.
Alejandro: I understand. Obviously, film major, so storytelling was something that you were able to really get exposure to. I’m asking here, how would you say that storytelling has played a part in your career as an entrepreneur?
Andy Ory: Companies are willed into existence. It’s not a rational, reasonable thing. I remember when I wanted to start one of my businesses, a family friend, a dear friend of mine who’s also an attorney said, “I have to tell you. I don’t believe this is something that is going to be a great business because if it were something the world needed, it would already exist.” Think about that logic. The flip side of that logic is if it doesn’t exist, why now and why you? The reason of why now and why you is because of your belief. Ideas are cheap. They’re all over the place. They’re a dime a dozen, but the life energy that an entrepreneur can breathe into that idea and inflate that sail and make it go, that’s the precious, critical, scarce commodity. That life energy needs to coalesce around an idea that attracts, motivates, and aligns resources; aligns people, product, capital, and customers. And it all has to happen in advance of there actually being an enterprise, in advance of there being a solution. That means you need to tell a story. That story has to be compelling.
Alejandro: We’ll get into it a little bit deeper later, but out of curiosity when it comes to fundraising, like when you have your pitch, what would you say are the three assets of good storytelling in a pitch?
Andy Ory: Well, wow. I remember that what made a great salesperson – this was a long time ago. Someone told me about IBM and training. It was about being knowledgeable, about being excited, about being friendly. I think what makes a great pitch is there needs to be authenticity. There needs to be something that’s compelling. It needs to be insightful. I find that when I look at it, and I do invest in other businesses, I want to learn something when someone comes in and talks to me. I want to learn. I want to learn about them. I want to learn about the market. I want to learn about me as a potential customer. It’s not about arbitrage. It’s also not about something that it’s nice to have. It’s something that needs to be a must-have. These are things. You asked such a broad question, and I’m probably not the best one to answer what makes the most compelling pitch. I just know that I’ve been able to deliver very compelling pitches, and I think a lot of it has to do with the fact that I genuinely believe in what we’re trying to accomplish, and I’m excited, I’m committed, and I’m able to educate people about something they didn’t know before we talked.
Alejandro: I love it. I find that what you’re pointing to of authenticity is the critical factor behind this. Let’s go back here to Harvard. You graduated from Harvard. What happened immediately after in ’88?
Andy Ory: Well, right after college, a lot of people met with recruiters on campus and took jobs. I didn’t want to do that. A couple of my roommates and I bought a VW Microbus Camper, and we traveled around the country going to three or four different elements. We saw a lot of Grateful Dead shows. We saw a lot of architectural monuments. We went to a lot of breweries and a lot of amusement parks. We did that for about eight weeks, which was about the right amount of time. That was really fun. Then I came back to Cambridge, and I said, “Now, I need to get a job.” I will say that I had a structural advantage. I had many, but one in particular, as I was able to walk into my career services at Harvard where people post a whole bunch of jobs. Massachusetts is a very vibrant technology community, so there were lots of different jobs. I found one where they needed a combination of people that understood technology and programming but also understood editing. Because I understood film and film editing, and I was a computer science guy, I was able to do both. I was hired as a user interface specialist at a company called Boston Technology. I designed, recorded, and programmed all of the prompt trees, the decision points in residential voicemail for a business. I was the 28th employee. A year and a half later, there were 150 people, and the business was offering large-scale voice messaging for the telephone companies to sell to residents.
Alejandro: I believe that the stay within this business was a short one. It was like about two years?
Andy Ory: Yeah. It was about a year and a half. The business changed dramatically. It outgrew me. I just had a college degree. I was like a Radar O’Reilly for the people that remember M*A*S*H. I basically did a little bit of everything and knew everything that was going on. But as the business got so large, it was pretty clear that I was going to have a much narrower job, and that wasn’t something I was interested in. I thought very naively, of course. “Well, I ought to be able to start a business. These people were able to do it.” I think the lesson in there, of course, is that you want to expose children to all sorts of opportunities because if they see others do it, they believe that they can do it. That was something that I benefited from. I saw these young folks. They were 30-years-old at the time and started a business. I thought, “Well, I’m 22. I ought to be able to do it.” So, I started a business in March of ’91. It eventually became a single-number-type business where prepaid calling, call-back, cellular voicemail, stuff like that all tied together behind a single number. That was what we did.
Alejandro: Before we talk about Priority Call Management, which is the name of this business, your first real business, you actually on Boston Technology, you were introduced to Networking Technologies. What got you like, “Wow! What is this?”
Andy Ory: You know, networking wasn’t so significant back then. More, there was a frontend programmable digital switch from Bob McDonald’s business, Xcel Corporation. But, much more important than the technology, I met someone named Patrick Melampy back in ’88 or ’89. Pat and I have been partners working together ever since. I think that’s going to be 30-some-odd years at this point. There are half-a-dozen very senior engineers working with me in my current business that I also met back at Boston Technology, Bob Penfield, Peter Commerford, etc. What Boston Technology represented to me more than anything else was a community. Enterprises are a collection of souls, and a great enterprise is a collection of great souls. You need to meet these people, and the way you meet people is that you get involved in a community. That’s what Boston Tech represented.
Alejandro: In this case, for example, talking about Patrick because relationships in business, and more especially co-founders, I think it’s like over 65% of businesses fail because of co-founder issues. It’s something crazy like that.
Andy Ory: Yeah. I bet it’s higher than that.
Alejandro: Yeah. What would you say made Patrick your better half in business?
Andy Ory: You need lots of non-overlapping compatibility. Your strength is your weakness. So, the things that I’m good at, perhaps my partner is not so strong at. The things that he’s good at are things that I’m not strong at. We have a similar set of ethics and mores. We have similar goals. The cultural overlap is close to 100%. Partnerships are the best and the worst. When they work, they’re the best. When they don’t work, they will take you out of business. We talk about Cisco, an IP routing company. They didn’t invent the IP router. It’s really a stone’s throw from where I am here off of 128, [15:26] invented the IP router. But they failed, and the reason they failed is that their management team is dysfunctional. When partnerships are dysfunctional, the enterprise will fail. It’s like a giant leak in the boat.
Alejandro: Got it. Absolutely. So, Priority Call Management. You started this in ’91. What was essentially the business model?
Andy Ory: I knew so little. My father gave me a battlefield MBA about seven years in. I needed money. I raised money from family and friends. It took about a third to a half of my parent’s retirement fund, which was actually nuts. I don’t know who was more stupid, my parents, or myself. My father, at some point, said, “You have so much of our money, I might as well come work with you. My dad, who I still work with to this day, became my partner at Priority Call. We started with Meet Me, Paging in Convention Centers. We realized that was a crappy business. It became Meet Me, Paging with Enterprises. That was not such a great business. Then what happened is we discovered that our technology could be used for rate-based arbitrage. Back then, it was International Callback. So, if you were in Boston, and you made a call to Germany, it would maybe cost you 50 cents a minute. If you were in Germany and made a call to Boston, same switches, same network, same everything, the direction was different; it was opposite. It cost you $1.50. So, it was purely a tariffing issue. So, by being able to set up phone calls in the reverse direction, based on what was the cheapest way to set it up, you could have a quantifiable ROI that was quite fantastic. Companies like TeleGroup were built. We made a lot of the infrastructure to help people to set up telephone calls as directional vectors based upon the most effective rates. Then that morphed into things like cellphones were very expensive. So, a lot of people couldn’t get them because they didn’t have credit. So, we built cellular debit systems where people could pay money, get access, and you’d meter in real-time how much cell net access they had before you would cut them off. So, we started doing things that really made the telephone network work better for people’s business models. It was not a great business; it was a good business. We learned a lot. We built a great team. In June of ’99, we sold the business for 162 million dollars, which was actually a wonderful outcome. We really only raised about 17 million dollars to get there. I thought we were very cash-efficient. My VCs, I did at the very end have venture capitalists come in. They probably were about 10 million of the 17 million raised. They really tried hard. They really tried hard to get me to take the business public. I was just convinced that this was not a great business. It was not strategic to anyone, and when the heady days of the late ’90s go away, we were going to lose our market and our customers. Sure enough, I ended up being right, unfortunately, because I hate to see anybody suffer. We did get out of Dodge in June of ’99. That was a really good time. It taught me something else, which is about decision-making. You make decisions every single day. What clothes to wear. What way to take to work. When to put your seatbelt on, which you should as soon as you get in your car, but you put it on at the end of your driveway. You drink iced coffee. Who do you hire? But some decisions are much more important than other decisions. The most important decision was on November 4th of 1998, when I decided at breakfast that it was time to sell the business. I spent six months, and I finally sold the business. That one decision was worth more than many others. So, understanding when you run an enterprise, you can’t get mired down in taking a long time to make decisions, and you can’t spend too much time on the decisions that don’t matter. I learned that. This was a really effective lesson that I learned in ’98 and ’99.
Alejandro: Got it. Then after that, you actually went on to build probably what has been one of your biggest, if not the biggest success from an outcome perspective, which is Acme Packet. How did the idea of Acme Packet come about?
Andy Ory: You know, when I sold Priority Call, I thought I was never going to work again. You learn a lot about yourself. Having a job is truly a blessing. I really enjoy being around people and building community and having a purpose, a mission, and a vision. I did get to spend time with my wife and my emerging family at that point. I love them dearly, but I did miss that other facet, that other dimension in my life. A year later, Patrick called me. At that point, he was my CTO. He wasn’t my co-founder at Priority Call. He said, “The world’s going to change. Everything’s going to be IP.” I said, “Okay. What does that have to do with us?” He said, “Well, you don’t understand. Voice is going to have to go over this network.” I said, “Well, yeah. People can already do that today. NPR, they had a father and a son using their computers and doing Voice over IP halfway around the world.” He said, “Yeah, but really making telephony work in a safe, secure, scalable way is going to require things that don’t exist today.” I said, “Oh, okay.” There was an innovation called SIP, Session Initiation Protocol. It was a new protocol back in 2000 that the Free GP consortium standardized on. These were the wireless carriers. He said to me, “It’s routable signaling protocol. The reason the telephone network works is because it has a signaling protocol called SS7. The internet does not have a signaling protocol.” He said, “That’s what the missing ingredient for allowing largescale, highly-secured telephony to move onto the IP networks.” I didn’t quite understand what he was saying. We were at a Dunkin’ Donuts in July of 2000, but he was really excited. I said, “All right, Pat.” I drew a line right through the table. I said, “You get all of the technology and product. I’ll take all of the marketing, sales, and business side, and we’ll be partners. On August 3rd, 2000, we started Acme Packet. I had just bought a house – the first thing I had ever bought in my life. I nailed a whiteboard up on the kitchen wall, and we started inviting people on Route 128 in Boston to come to my kitchen and show me how two people could do a Voice over IP call from their respective desks in their business, in their enterprise. Nobody could actually make it work. They could sort of connect things to clouds; there were lines connected to the cloud. I said, “No. Show me the walk of the packet. I want to see it go.” The fact that only about 85% of this solution made sense, that 15% that was missing, I said, “That’s our business.” And we started the business. It ended up being a great business. By every measure, it was a great business.
Alejandro: How were you guys making money here?
Andy Ory: Well, what we discovered is that there was an element that needed to exist at every network edge. We called it a Session Border Controller. People said to me, “Wait a second. You’re telling me for your solution to work every single service provider has to have one of these products at the edges of their network?” We said, “Yes.” They said, “Well, that’s never going to happen.” We said, “There’s really no other way to make it work.” We ended up being right. We produced purpose-built pieces of hardware with specialized software, and they were called Session Border Controllers. That became the architecture that the world uses for all Voice over IP calls, which is essentially almost all telephony today that happen to cross in between networks where people’s homes and businesses want to engage in highly-secure, high-quality telephony. In fact, I think 30-40% of the world’s telephone traffic probably traverses our elements at these network edges. We had 2,000 of the largest service providers in 110 countries. We had an 82% margin on all of our products. It was truly a great, great business. The problem is we ran out of market. We had 300 million of a 600 million market, and while there were 30 other companies, we had at least 50% of the market and very high margins. But at some point, if your market doesn’t grow, you sort of become confined. As a public company, I ran the business for 51, 52 quarters, and it was public for 26 of them. It became clear to me near the end of the 26 public quarters that my customers, the large service providers weren’t able to grow. People like Apple, Facebook, and Yahoo were growing at their expense. We were able to find someone that wanted to buy us, and it was a very good outcome. It worked very well for the acquirer. It worked very well for us, and it freed us up to do new things, to tilt at new windmills, and have a new purpose.
Alejandro: Very cool. We’ll talk about this transaction in just a bit. I want to ask you, based on your previous business, on the first business that you did. Perhaps there was one lesson that you learned that you told yourself, “I am absolutely going to apply this one to Acme.” What was that lesson?
Andy Ory: I learned so many. This is a lesson that, unfortunately, is not always a good lesson to learn. I just was never going to give up. I was never, ever going to give up. There was a point in 1995 where I had to lay off most of the organization. There were 11 of us that remained. My father, brother, and I were working together. We took no salary. We went to work, my dad and I, 107 days in a row. Before the sun came up, we would be at work, and we would not leave until after the sunset for 107 days, not paid anything. We had $550,000 in the bank, and we were spending $85,000 a month, and we did not have a business. But we had taken 4.5 million dollars from friends and family. I was like, “I just can’t fail.”
Andy Ory: That was very, very hard. But we didn’t give up, and we continued to reinvent ourselves. We continued to work until we could find some sort of value proposition where the business was able to turn itself around. I can’t say that’s necessarily the right lesson in all instances, but that kind of perseverance, that kind of belief, I think is a cornerstone of any entrepreneurial effort.
Alejandro: Absolutely. Out of curiosity on Priority Call that you did, the exit was almost a 10x for the people that put money in. Or the early ones.
Andy Ory: Yeah. The VC exit wasn’t quite a 10x, but it was close, but for everyone else, it was much more than that.
Alejandro: Then my question is, on Acme, you guys raised some money from people like Menlo Ventures and others. Why did you raise money? You guys had already made a lot of money, especially through some of these investors so you could finance this. What was the reasoning behind bringing outsiders?
Andy Ory: Well, that question is actually more salient to 128 Technology because we were much, much, much more successful with Acme Packet than we were with Priority Call.
Alejandro: Maybe we can answer the two of them in one go. Why bring outsiders?
Andy Ory: Yeah. Look. I have a fantasy. Sometimes, fantasies are best left as fantasies, not as realized. Ever so often, someone’s a great cook, and their friends say, “You should start a restaurant.” And it’s the last thing they should do.
Andy Ory: I have a fantasy of not doing the restaurant. My fantasy is not having any shareholders because then I can do things that aren’t necessarily connected to value. I am highly value-driven and value-connected. For example, getting box seats at the Patriots, who I happen to love, and saying, “Well, this is how we’re going to entertain our clients.” It’s actually not 100% accretive, and we don’t do that. If I didn’t have any shareholders, I could do it, and I wouldn’t have to answer to anybody. So, that’s my fantasy. Now, in reality, why do I have my shareholders? I think that enterprise creation, particularly enterprise creation where it’s disruptive innovative technology at a market that’s about to turn, velocity really matters. The ability to attract and put resources to work is dependent upon velocity. I think unless you’re willing to put a huge amount of capital without too much constraint, psychologically because it’s your own capital to work, you might be better served by having a coalition of investors. It provides balance. It provides context. It provides access to capital. I do think there is a discipline and a rigor associated around running a business where there are many different investors. There’s governance. There’s a whole bunch of issues that all of the sudden emerge where you solve them in a way that I think is most appropriate. So, taking capital is probably the right thing to do, but you have to think about how much capital, when, in what increments? Those are the real questions. Not, should I take capital or not? Now, look. If you want to build a small business, or you want to build a business slowly, you don’t necessarily need to take capital. But if you want to build a great business, if you want to change the world, then you need capital, and you need velocity.
Alejandro: For Acme, how much capital did you guys take?
Andy Ory: We raised a total of 44.5 million dollars. When we went public, we had 31 million dollars in the bank. Now, we had started generating cash. We probably consumed a total of 30 million. Businesses need capital. You can’t just run out at zero. So, 44.5 was probably the right amount, but the first 2.4 million, the seed investment, was done by my father, my business partner, Patrick, and myself, and then a few friends and family. Then we raised another 12 million on top of that. We were very careful. We raised money as we needed it over time. It was a very capital-efficient business.
Alejandro: Sure. I see with the transaction obviously there was an M&A. You guys were acquired by Oracle for 2.1 billion in 2013. So many zeros. I’m getting dizzy here, Andy. But basically, I want to know how big was the business immediately before the transaction?
Andy Ory: Yeah. We had about 1,000 people. We had 440 million dollars of cash in the bank. We were a very profitable business. We had a couple thousand customers, all the large service providers in 110 countries were our customers. We partnered with just about every network equipment vendor, whether it was Lucent Alcatel, Nokia, Siemens, Erickson, WOWWay. We partnered with just about everybody. We were the dominant player. We had 82% product margins, and we had operating margins in the 30s. It was a great business. We just ran out of market. Markets make companies – no more market, no more company.
Alejandro: Again, it goes back to the decision. The time when you make the decision to perhaps go after the M&A process. How was the M&A process for you guys? What was that like?
Andy Ory: Well, it’s really complicated being a public company. First of all, the last thing you can ever have happen as a public company is have people believe that you’re in play, that you’re trying to sell yourselves. Great transactions aren’t because companies sell themselves; it’s because companies are bought. So, the two things we had to navigate were:
- Avoid anyone believing that we were considering a transaction.
- Making sure that we weren’t for sale, but that someone might be interested in buying us.
Andy Ory (cont.): Again, I had great bankers that I worked with. I also had great M&A transaction folks. I do think that working with folks of quality and integrity really matter. I approached them probably sometime in 2012 just to talk about things and to explore. Not much came of it. Then later in 2012, we were approached, so I don’t know whether or not we fertilized the ground or softened the ground or not, but we were approached, and then we started talking about it. Clearly, they were willing to pay for some future value. I remember the board meeting. My board did not want to sell the business. They loved the business. They did. It was a great business, but I really had to explain to them that you don’t sell things when you see things are wrong. You sell things when you intuitively understand that even though this is “the best of times,” the underlying dynamics aren’t there for you to continue to deliver on your vision over time. It was an emotional time because, for a lot of people, this was really special.
Alejandro: It seems that you’re very good at identifying patterns that perhaps are going to help you understand that it may be the peak of the business, at least to the point where you’re able to take it. Is there a process, or a methodology, or something that you do to get to that decision?
Andy Ory: Yeah, you know, I’m getting data all the time. It’s funny. If you go back to like Henry David Thoreau’s time, observation, being an observer is a noble, very high art form. It meant something fundamental in understanding one’s place in the world. Today, being an observer is like a pejorative term. You don’t even get a vote when you’re an observer on a board. And we keep ourselves so busy and distracted with social media that we don’t really observe. I’m an observer of what’s going on in the enterprise. I see what the customers are doing, what the competitors, what the partners, what our funders, what the employees. I’m looking all the time at what’s going on and trying to absorb data, and I’m trying to make sense of it all. That’s what I do. In some ways, being a CEO, your job is to look for the sharp objects in the room. Everybody wants to invest and grow, they want to get bigger, and create more value, but I have to look for where the corners are. Where are the things that we could really hurt ourselves? It’s the combination of being an observer and constantly trying to understand where the openings are and where the corners are. It’s much more intuitive than it is formulaic. I suppose what I would say is, engage in observation. And it’s hard, especially as an entrepreneur because part of being a leader is to constantly tell the story, to constantly share the vision, to constantly enlist people in the mission of the enterprise. Sometimes, you start believing your own words, and sometimes what you’re observing are your own words being reflected back to you, and that’s not very helpful or insightful.
Alejandro: Yeah. That’s very powerful because many founders, you see them really getting out of reality and not being grounded as a result of this. So, it’s very profound what you’re saying there, Andy. After the transaction in 2013, 2.1 billion, incredible exit, you then instead of getting your boat and going to the Caribbean, you decide to complicate your life once more, and you go and launch 128 Technology in 2014. What was the incubation process of this idea?
Andy Ory: It’s funny. My dad’s 87. He comes to work three days a week, and it’s one of the high points of his week, and it keeps him going. I can see that I’m wired the same way. As I mentioned, it is a blessing to have a job. I love coming to help and be part of and build and lead a community. I miss that. When we sold the business in 2013, sure, I got to spend time with my family who I love dearly, but I was missing that other dimension. But I had been through this with my partner, Patrick before. I have a relationship with the investors as the CEO of a public company. He has the relationship with the customers. So, when the transaction happened in 2013, my investors were all gone. Oracle already has a CEO. They don’t need another. God forbid a company with two CEOs. Look what it did to RIM. One is more than enough and probably one too many. So, my job went away, and Patrick’s job didn’t because he had the customers that had committed their business to our technology, and he really wanted to spend a year working with them to make sure the transition worked, just like he did a Priority Call back in 1999. So, I went off and wandered, and did a whole bunch of different things for seven, eight, or nine months, but I would come see Patrick every other week. Thanks that he and I split the bill, but every other week, “No, Pat. It’s my turn to pay.” We’d go to Legal Seafood or some other place. I would just keep buying him lunch and just stay in touch with him. One day he said to me, “Networking is all s****ed up. It hasn’t changed, and it needs to, and it’s the source of many of the problems of the internet, and we can fix it. This is a very big opportunity. I heard that, and I saw the conviction in his voice. I said, “Okay. Let’s start the business.” On the 14th of July in 2014, 128 Technology was born.
Alejandro: It seems that Patrick is a machine of generating ideas. The same thing happened with Acme, so I’m wondering, where does he get the creativity and those ideas? How does he come across them?
Andy Ory: So, he’s an inductive reasoner, not a deductive reasoner. In other words, he, like me, is observing and trying to understand and formulate even though you can’t really connect the dots if you only have the data set to work from that you’ve acquired. And Patrick is also often wrong, which he will say that. He will say, “I’m wrong more than I’m right. That’s part of the liability of being as creative as he is. So, figuring out what ideas are off the wall and crazy and what ideas the prescient want is very, very difficult. That’s where I think our partnership and the larger community that we built at Acme and that we have at 128 is really helpful. This really is Patrick’s idea. When we were acquired by Oracle, he saw for the first time a large corporation, Acme – we were meeting incorporation, being subsumed into a large corporation, Oracle, with 100,000 people. He saw how crazy enterprise networking was. We’re not networking folks. We just didn’t do networking. He just couldn’t believe how crazy it was. How they were connecting things, and routing things, and how mobility and applications and everything were causing problems, and security. That was when he said, “This can be much better.” He started thinking about it, and he discovered an unmet opportunity, an unmet need with a lot of technology and timing. You’d have to ask him. Very impressive. He’s really, really impressive.
Alejandro: 128 Technology. What’s the business model?
Andy Ory: Well, I’m going to be highly revisionist because, for almost five years, we’ve been trying to figure it out, but it goes something like this. The network shape is changing. So, in other words, if you could go up in space five or ten years ago, and you could look at the shape of the network, all the packets flowing across these millions of public and private networks. It would have a shape to it. That shape has changed dramatically because things now have moved to the Cloud, and people are mobile who consume these services and applications. The applications, themselves are mobile. Now, we have all sorts of security considerations, so there’s a lot of these firewalls and these disintermediations between these flows. So, the shape of this network that’s changed is not one network. It’s a million networks. It’s a million public and private wireline and wireless network. The connective tissue of these networks wasn’t designed to be flexed the way it’s being flexed. That’s why it’s not working, and that connective tissue are routers. Patrick said, “You know, it’s time. We can actually build routers virtualized in software, so it’s no longer hardware. It’s an application that can run on any general-purposed computer environment, and we can change its DNA to make it inherently more flexible, more in tune with these forces of security and mobility in Cloud that are impacting networks, and we can make it work a whole lot better. It turns out that if you want to fix the networks we have if you want to make the internet work better you, first of all, can’t throw anything out because nobody’s going to throw out what they have. You need to be able to take what you have and add a little bit to it and solve these problems. The little bit that you add to it is next-generation very session-smart or session-aware routing software at the edges of all these networks. All of the sudden, complexity, security, and fragility all start to go away, and they work much better. So, we want to make the internet and make the interconnection of these million networks work a lot better. You know, if your listeners were looking out the window wherever they’re listening to this podcast, and they could see the infrastructure that the world relies on, there are about 440 billion dollars of infrastructure, it would come in three colors: storage, compute, and network. Storage and compute are totally different than they were ten years ago. I’m sitting in front of a MacBook Pro here. It doesn’t even have a disc drive. EMC, which was one of the large disc manufacturers in Massachusetts, has been sold. It’s gone. It doesn’t exist anymore because people store things in the Cloud. From a compute point of view, nobody runs one application on one processor, on one operating system. People run 100 different applications virtualized on a single processor. That’s how data centers even could exist. But networking hasn’t changed. If you took a router from 25 years ago and dusted it off and plugged it into the network, it would be slow, and it would have very skinny pipes, but it would work because networking hasn’t changed. We believe that the same change that hit storage and compute is about to hit network because we invented networking to connect computers so that you could have remote control and that you could share bits of data, but nobody uses the network to share bits of data. We use it to consume services and applications. Networks don’t understand services and applications. When you put session-smart routing at the edges of all these networks, the networks begin to understand services and applications. That’s what’s missing in today’s internet.
Alejandro: Got it. I see that for this business, you guys have raised about 68 million dollars. How big is the business today?
Andy Ory: We’re operating now on four different continents, and we’ve got deployments throughout Europe, throughout Africa, in the United States, and we have deployments in China and in Japan, and soon in Korea. Networks everywhere. Now, the four largest markets in the world would be the U.S., China, Japan, and Germany. Germany, Japan, and the United States are very big for 128. We are deploying thousands and thousands of sites every single quarter. It’s very exciting.
Alejandro: Really cool. One question that I always ask and maybe before I ask you this question, now, it seems to me – I was getting your image as an entrepreneur, and it gave me the same image of let’s say like a celebrity going on the streets and having the paparazzi with the cameras; the same as you going on the street and having investors around you to invest on this given the track record that you have. When you’re picking an investor, in this case, you’ve picked a couple of ventures, what are the top three traits, the absolute must for you to be able to let one into your cap table?
Andy Ory: Well, I think first and foremost, they have to be a good person and everything that is associated with that. These people are partners. They have to be nice. I really don’t want to work with mean, nasty people. They have to be honorable. They have to have high integrity. They have to have a common vision or context for how we’re going to create value. They have to be people that I believe I can collaborate with because I really don’t create anything individually. I don’t write software. I don’t come up with the marketing message. I don’t dial for leads to go see a salesperson. I sit there, and I collaborate. If I can’t collaborate with these people, or I don’t want to collaborate, or I don’t enjoy it, then I don’t want to work with them. I think those would be the key traits. Of course, if you want to get more tactical about it, I don’t want people to engage in unnatural acts to work with me, so the size of their fund, the stage they invest, the period of time they’re willing to be a liquid the markets that they focus on. Those all have to be continuant with what I’m trying to do, or it’s not going to create a sustainable construct over time.
Alejandro: Got it. Let me ask you this, Andy, a question that I always ask founders that are on the show. If you had the opportunity to go back in time and talk to yourself at the point where you were giving your notice with Boston Technology to establish your first company, what would be one piece of business advice that you would give to your younger self and why?
Andy Ory: It’s funny. The vector I live in is always forward, never backward. I really haven’t thought about that. I could be very tactical, and that’s not really the spirit of your question, which is don’t go into the convention center business with crappy business. I feel pretty much kind of satisfied with the way I did it. The failures I had, I wouldn’t want to have avoided because it informed me an awful lot about what I needed to do the next time to be successful, and it created a character in me, so I don’t think I’d do much differently, which is odd.
Alejandro: I love it. I agree. Failures are good. They are there, and the universe is putting them for us so we can learn. I think it just made you who you are today and how you view things. So, I can get that. Andy, for the folks that are listening, what is the best way for them to reach out and say hi?
Andy Ory: email@example.com
Alejandro: Fantastic. Well, Andy, it has been such a pleasure and an honor to have you on the show, and thank you, thank you so much for being with us today.
Andy Ory: Alejandro, thank you so much, and thank you for the opportunity to share our story. I genuinely appreciate it.
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