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Perspectives,Portfolio May 21, 2011

The Entrepreneur Questionnaire: Nir Zuk, Founder and CTO of Palo Alto Networks

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Nir Zuk is the Founder and CTO of Palo Alto Networks. The company’s next-generation firewalls provide unprecedented visibility and control over applications, users and threats. Palo Alto Networks began shipping its product line less than four years ago and today is one of the fastest growing companies in enterprise IT.

Nir Zuk, Founder and CTO, Palo Alto Networks

Describe your business in 10 words or fewer.

Reinvent the network security market, starting with the firewall.

What is the big idea behind your business?

To extend network security beyond basic web browsing and email to secure social applications such as Facebook and Twitter and enterprise/SaaS applications such as Salesforce, WebEx and SharePoint. We consolidate multiple security devices into a single, high-performance device. The approach of adding a new device every time you have a problem just doesn’t work anymore.

 How did you come up with the idea for Palo Alto Networks?

In 2004 I was working inside Juniper Networks and wondered why there had been no real innovation in the market in years—the existing firewalls were based on decade-old designs. I wanted to build the next generation product but realized it would be impossible within Juniper so I decided to do it on my own. I met with Asheem Chandna, a partner at Greylock with whom I worked with at Check Point Software, to hash out some ideas. I knew I could design and build the next generation high performance network security device, so I resigned from Juniper Networks in 2005 and raised a small seed round from Greylock and Sequoia. I worked out of Greylock’s offices and spent several months brainstorming with my investors, Asheem Chandna and Jim Goetz, and potential customers. It became clear that application control would be our main early advantage. We figured it would be a powerful incentive for our customers to replace their legacy firewalls.

Why are you excited about the future for this company?

We are grabbing share very quickly in a $10 billion market. More than 4,000 customers have rapidly adopted our solution and we are seeing very strong interest from customers across the globe. We see an open highway ahead of us.

Why did you become an entrepreneur?

I have wanted to be an entrepreneur as far back as I can remember. I started my first business when I was in the eighth grade, building and selling commercial software to automate legal offices. Early in my career, it became clear that I could build products better than my managers. I felt they were slowing me down so I decided to continue to build things myself.

What was the most difficult lesson you have learned as an entrepreneur?

Things will go wrong. You cannot expect everything to go smoothly at a startup. A million things could happen: either you screw up or your business plan is not great or the market will tank on you. You will face tough times and when that time comes, you need to have really good people around you.

What five adjectives would you use to describe yourself?

Competitive, tenacious, generous, loyal. I know this isn’t an adjective but I don’t take B.S.

What values are important to you as an entrepreneur?

-Keeping my business in the U.S.

I learned how to be an entrepreneur in the U.S. and I think it is my duty to give it back to the U.S. This includes keeping development here as opposed to China, India or anywhere else.

-Having no ego and surrounding myself with people without egos.

I’ve seen companies hire engineers with great egos and their businesses went nowhere. Someone with a big ego will do things for himself instead of the company. I don’t think there is any room for that in a successful business.

-Frugality

You can show a correlation between frugality and success of a company. Companies that spend a lot of money tend to be less successful than those that are frugal.

-Innovation

Companies rise and fall on their ability to innovate. If you stop innovating you die. For startups, it’s the only thing you have. To build a long-term, successful company you have to continue to be innovative. This has to be built into the company’s DNA from the beginning and you must innovate with each and every thing you do.

-Never compromise

You need to have a strong commitment to high quality with your product, your actions and the people you hire. You must not compromise. With hiring, a good rule of thumb is that if you find and hire people very quickly, something may be wrong with the quality of people you are hiring. Also, your early hires should demand and deserve very strong equity.

What is the best business advice you’ve ever heard?

“I’d rather have a C business plan with an A team than an A business plan with a C team.” The CEO of my previous startup said that to me once.

What is your motto?

Drive the competition out of business.

What are you passionate about?

Innovative technology.

What motivates you?

Building great technology that actually solves customer problems.

What was your first paying job?

Building software at the age of fourteen.

What do you like most about being an entrepreneur?

I really enjoy seeing customers loving what we built. I also like to see the employees who work with me being successful.

What do you like least about being an entrepreneur?

Any signs of bureaucracy or when things don’t move fast enough.

If you could change one thing about yourself, what would it be?

I’d like to be more tolerant of stupidity.

What do you consider your greatest achievement?

I’m most proud of my kids. Palo Alto Networks is my greatest professional achievement.

What is the last book you read?

A book about the history of biology.

What advice would you give on how to build a great business?

-Aim high

If your business plan doesn’t call for a big, sustainable business you will probably fail. If you find yourself building a business because you want to sell it for $100 million and walk away with $10 million for yourself, you will end up with a lousy $10 million company. Don’t even bother.

-Hire a great team.

Everybody says they do this but in most cases it’s not true. Commit to hiring the best people in the industry you are in. If you need someone to build a social networking company, hire the top guys from the best social networking businesses. If you are starting a networking company you need to hire the top networking guys. Otherwise how do you plan to beat those companies with your startup?

-Do all of your R&D in one building.

When you start off-shoring and outsourcing, quality goes down and you cannot act fast enough or exercise control over anything. Your engineers and management team should be based near your target market. If the U.S. is your biggest market, your engineers and management team need to be there. If your market is India or China, go there.

-Raise money from tier-one VCs.

Don’t waste your time with anyone but the top handful of VCs in the world. You may end up with a smaller equity position in the company, but it’s always better to have 10% of $1billion than 20% of zero. Focus on value creation, not small differences in early valuation.

-Don’t be greedy; share the wealth.

I don’t think an entrepreneur needs to have twenty times more equity than his early employees. If your early employees have .1% and you have 20%, that’s wrong.

If something doesn’t work, fix it immediately. This is especially true for people. If you can’t fix it, nix it.

“If something doesn’t work, fix it immediately. This is especially true for people. If you can’t fix it, nix it..”