1. Copyright M. Leslie 1
The Story of Veritas
And Some Things I Learned…
mleslie@leslieventures.com

2. Copyright M. Leslie 2
A Brief History of Veritas
 1982 $0
 Startup as Tolerant Systems
 1989 $0
 “Restarted” from Tolerant Systems (12 employees)
 Established industry standard file and disk
management software
 Novel OEM business model
 1990 $95K
 Renamed Veritas, ML as CEO

3. Copyright M. Leslie 3
Parachuting in as New CEO – 2/90
 The Standard VC transition plan
 4:00 PM: VCs fire current CEO
 4:30 PM: VC’s meet w/ management team
 5:00 PM: VC’s + ML meet with management
team
 5:05 PM: VC’s leave
 5:10 PM: ML meets with management team,
announces we are changing our name

4. Copyright M. Leslie 4
The new name…
 Anything but “Tolerant”
 Company-wide contest
 My wife proposed…
… “Intolerant Software”
 Being more marketing aware, I proposed…
… “Belligerent Software”
 We gave the attorneys three to check out
…VERITAS was the “cheapest to defend”
 VERITAS means TRUTH in Latin, and also
decorates the Harvard University crest

5. Copyright M. Leslie 5
A Brief History of Veritas
 1993 $10 M
 Initial Public Offering
 $16 million raised, market cap of $64 million post-money
 1996 $36 M
 1997 $121 M
 Acquired Open Vision -- Entered Backup / Recovery business
 1998 $210 M
 1999 $700 M
 Acquired Seagate Software -- Established leading position in
Windows NT market

6. Copyright M. Leslie 6
A Brief History of Veritas
 2000 $1.2 B
 F1000 company (5,500 employees)
 2001 $1.5 B
 New CEO

7. Copyright M. Leslie 7
$95K  $1.5 Billion
12 employees  5,500
Startup  Fortune 1000
--In 10 years

8. Copyright M. Leslie 8
What do investors hate the
most?
 Re-starts
 “The last idea crashed and burned, so let’s sift
through the smoking debris and see what we
can salvage”
 Mergers of equal size companies
 “A collision of two garbage trucks”

9. Copyright M. Leslie 9
Tolerant Systems
 Start up in 1982
 Fault tolerant computing
 Too many companies
 Tolerant System fails in late 1988
 200 people  12
 Changed company name to “Tolerant
Software”

10. Copyright M. Leslie 10
Tolerant Software and the
AT&T Deal
 An opportunity to “rent space” in the AT&T UNIX
monopoly
 Develop next generation file and disk technology
 AT&T agrees not to develop these strategic products
 Both companies market/sell, share revenue 50/50
 Underwrite customer risk of Veritas as start-up - if failure:
 AT&T would get source code
 AT&T pick up support of customers
 UNIX taking off as THE commercial workhorse

11. Copyright M. Leslie 11
A New Business Model
 Develop UNIX OS component
technology
 OEM distribution through systems
companies (Sun, HP, etc)
 Long term relationships (design-out
could take 2+ years) = Very nervous
customers

12. Copyright M. Leslie 12
The First Vision
 Become an OEM supplier of OS components to
UNIX systems companies
 Make UNIX more available and robust – suitable
for commercial data center usage
 Ride the UNIX wave into the ’90s, establish a
strong strategic position
 High IP content, high margin, but…
…Limited scale

13. Copyright M. Leslie 13
1990 Strategy ~4 yrs
 Establish new identity
 Tolerant Software  Veritas
 Develop FS/VM products
 Close AT&T deal
 Become de-facto industry standard
through broadest distribution
 Demonstrate profitability
 IPO

14. Copyright M. Leslie 14
Setting the Culture
 IP intensive company, knowledge-worker based
employee population
 Highly open communications
 We changed the question from “what should we tell them?” to “Is
there any good reason not to tell them?”
 Weekly meetings, accessible executives
 Employee participation in key decisions
 1991 3:1 reverse split
 1996 merger with OpenVision
 Articulated values generated from the “grass roots”

15. Copyright M. Leslie 15
The First Four Years 1990 - 93
 Closed, AND renegotiated AT&T agreement
 Completed 1.0 releases of products in 1991
 Licensed our products to over 60 UNIX system
companies including all industry leaders – Sun,
HP, Digital and IBM
 Set up “annuity” revenue stream
 Became profitable in 1992, IPO in 1993

16. Copyright M. Leslie 16
The IPO
 Had our initial public offering on December 9, 1993
 A “micro” IPO: $16 million raised, $64 million market cap
after the money
 My message to the employees:
 Like a college graduation – marks the achievement, but…
 Commencement – the beginning of the next, new phase
 Future value will be far greater than current value
 i.e., Microsoft, Cisco, etc.
 Keep focus on execution

17. Copyright M. Leslie 17
The Next Vision -- 1994
 Expand the scalability of the company
 Create reseller / end user products and
presence
 Leverage the strong industry standard
position through acquisition
 Initiate a Veritas Brand

18. Copyright M. Leslie 18
1994 Strategy (~5 years)
 > $100 million revenue run rate
 Develop additional OS technologies
 Product segmentation of existing products
 Develop integrated higher level products
 Editions (Oracle Edition, MS Exchange Edition)
 Build direct and reseller channel capability
 Acquire backup technology
 Use VERITAS OS technology for enduring competitive
advantage
 Platform build-out: Develop equally strong position in…
(…Netware, …OS2, …NT).

19. Copyright M. Leslie 19
The OpenVision Merger – 4/97
 Both companies ~ $36 m / year, prior year
 Veritas 180 people, OV 240 people
 Entered Backup business
 ~$20 million / yr
 Shed other lines of business
 Huge distribution channel win
 OEM
 Global 2000 end user direct
 reseller/distributor
 Established first “End-to-End storage management”
company – changed the paradigm
 Used “franchised” OS components to leverage competitive
Backup/HSM apps
 Difficult integration w/ very different cultures
 18% EPS, accretive on Veritas 1997 operating plan
 THIS WAS THE COMPANY MAKER

20. Copyright M. Leslie 20
The Seagate Software (NSMG)
Merger 5/99
 Largest independent NT “enterprise” channel
 Each company ~ $200 million
 Each company ~ 1000 employees
 Veritas gained dominant backup and dominant
NT channel position
 Critical mass in the industry – clear leader
 Pioneered “virtual pooling” pro-forma for
“purchase transaction” style merger
 Seagate II – financial engineering transaction in
2000

21. Copyright M. Leslie 21
Six Years Later…
 FY 2000 reached $1.2 billion in revenues
 Which IS > $100 million!!!
 F1000 Company
 Segmented products to light and full
 Successfully re-wrote ALL major agreements
 Created very successful “editions” business, with focus on
Oracle market, expanding to NT
 Developed world class end user / reseller sales force
 Acquired FirstWatch product, high availability failover
 Ended up with >75% of Sun HA installed base
 Entered and came to dominate backup market
 1996 = $20 million (#6+)
 2000 = ~ $660 million (33 X in 4 years), clear market leader with
40% share.
 Went from 1/3 Legato to 3 X Legato
 Gained massive channel in NT space

22. Copyright M. Leslie 22
And Some Things I Learned…

23. Copyright M. Leslie 23
Software Is a Great Business
 Making money in high-tech is all about getting
paid for your IP
 The better (and more unique) the IP, the more
valuable
 In the hardware business the IP is embodied
and delivered in the form of a “machine”
 The business of making and shipping machines is
error prone, which can sap the profit from the
business
 In the software business you just deliver the IP –
sometimes in the form of bits transmitted over
the ether…
 At the extreme, Veritas delivered a $1.50 CD in
exchange for $20 million

24. Copyright M. Leslie 24
The More Grandiose the Plan,
the Less Likely to Succeed
 Tolerant Systems, OpenVision, Go Computing,
General Magic, WebVan were “grand plans”…
… and so many others
 But many of the great companies started out
with small goals, and became overnight
successes…
…after many years
 Like HP, Dell, Apple, Oracle, Microsoft, eBay,
Yahoo (and of course, Veritas…)
… and so few others

25. Mergers are Risky
 Over 10 years we probably did 25 mergers /
acquisitions
 Three worked
 FirstWatch
 OpenVision
 Seagate
 The rest quietly disappeared
 But this is OK – the few big winners pay many
times over for the rest (not unlike the VC
business)
Copyright M. Leslie 25

26. Merger Integration is Really
Hard!!!
 Our most success came when the merger
integration was…
…LIFE OR DEATH!
Copyright M. Leslie 26

27. The OpenVision Merger
 The OpenVision Merger was the most difficult
 It involved the creation of a new exec team w/ 4 from
OV, 3 from Veritas
 It took a full year.
 When it was over it was the most difficult thing I had ever done in
business
 Physically / Mentally / Spiritually Exhausted
 It started with a key person meeting of Veritas folks,
three weeks before signing
 Key event was lunch with the EVP Sales immediately
after the close
 It ended at an offsite – one year later
Copyright M. Leslie 27

28. Each Merger is Different
 OpenVision – creation of a new company,
new team, new values, BEST of BOTH
 Seagate – Total Takeove -- We fired ~ 22
of 25 senior execs
 FirstWatch – Product team integrated into
engineering, product sold through existing
distribution (Cisco model)
Copyright M. Leslie 28

29. See the Discontinuity -
Bet the Farm!
 Veritas from the beginning was a bet on UNIX
becoming a dominant factor
 We figured we would find a way to leverage it in the
future
 Discontinuity:
 Transition from Glass House IBM Mainframe to Unix
 Transition from “DP Manager” to “CIO”
 Transition from data processing to information
technology / internet
 Of course, you have to see it before everyone
else does!
Copyright M. Leslie 29

30. It’s all About Great Strategy!
No, It’s Only About Execution!
 Strategy with no execution can end in
disaster (early OV)
 Execution without strategy is getting all the
trains to run on time…
…but with no place to go
 Great companies need both!
Copyright M. Leslie 30

31. Copyright M. Leslie 31
Only Those Who Are Both Paranoid
and Courageous Will Survive
 You never know where and how the world
might change
 Great companies make transformational
changes
 You may have to put your whole company at
risk in order to save it
 Microsoft, Oracle, Intel, HP, Cisco, Apple
 You need the courage to stay the course
in spite of great risk, great effort, and the
many who tell you otherwise

32. Copyright M. Leslie 32
There is Life after Death
 In the course of events there WILL BE black
days
…days so black that all you will see is
despair
 Dark days are “leadership opportunities”
 When things are great, remind people that there
will be dark days again

33. Copyright M. Leslie 33
There is No Finish Line…
 Building a great company is like building a
cathedral
 those who start it hopefully will not see its
completion
 Each accomplishment is a prelude to the
next challenge
 The IPO is not a “harvest”, simply one
step on the long road

34. Copyright M. Leslie 34
Values and Culture make it
worthwhile
 We spend more time “at work” than any other single
activity in our life
 The outcome of our efforts is not always predictable so
the quality of the daily experience is important
 Values and culture define the character of the company
 Values and culture permit us to do our work with
integrity, and to conduct business in a civilized and
honest environment
 Values and culture help the organization to recruit the
best, the brightest, and the principled
 Values and culture do NOT sap the competitive
capability

35. Copyright M. Leslie 35
One Final Thought…

36. Copyright M. Leslie 36
If you want a friend…
…Buy a dog
ROXIE

37. Copyright M. Leslie 37
The Story of Veritas
And Some Things I Learned…
mleslie@leslieventures.com