How To Sell A 22-Employee Company For $125 Million

June 28, 2019 |  

About this episode


Altia Systems has just crested 20 employees and was fine tuning the latest version of its camera system. So how on earth did it sell for $125 million?

To read a transcript of this episode, click here.

Aurangzeb Khan’s company, Altia Systems, created a product called Panacast: a panoramic view of a conference room which made conference calls more enjoyable for remote dial-in.

When Khan and his partners went looking for venture funding for their business, they only had 22 employees, and received a valuation for $78 million.

Yet not long after, they found a strategic buyer who was willing to purchase the company for an incredible $125 million. How did they do it?

In this episode, you’ll learn:

·       How to get the “Good Housekeeping” seal of approval when raising venture capital

·       How to value a company when you only have a prototype and a few employees

·       The difference between raising funding for a lifestyle company and an accelerator company

·       Why you can benefit by giving your employees a stake in the company

Altia Systems’ Panacast products fixed a seemingly unfixable problem—how to get high resolution, wide angle video conferencing without distortion. Along with some quick adoption by big-name customers, that kind of Monopoly Control made them masters of their own destiny. Figuring out how to leverage Monopoly Control in your own business is explored in Module 6 of The Value Builder System™. Get started for free right now by completing Module 1.

About Our Guest

Aurangzeb Khan was co-founder, President & CEO of Altia Systems through March 2019, and is now SVP, Intelligent Vision Systems at GN Jabra, following the merger of Altia Systems with GN Jabra. He helped grow Altia Systems’ unique PanaCast multi-camera array real-time, immersive intelligent vision system products to serve more than 1,600 companies, including 200+ universities, around the world.


John Warrillow:                Next up, Aurangzeb Khan. Where do I start with Aurangzeb? This dude is smart. Let’s start with that. He is a really, really smart guy. He’s got five degrees, most of them from Stanford. He created a number of companies. The one we talk about in this episode is a company called Altia, which has a product called Panacast.

John Warrillow:                Think of a conference room where if you’re on a Zoom call you could only see one person, but what he wanted to do was create basically a panoramic view with a special video camera making a conference call with multiple people so much more enjoyable on a platform like Zoom.

John Warrillow:                Started out and sold it within seven years. Get this … $125 million dollar sale. It was a 22-employee company at the time of the sale. I can’t even say it without laughing. Here to tell you the rest of the story is Aurangzeb Khan.

John Warrillow:                Aurangzeb Khan, welcome to Built to Sell Radio.

Aurangzeb Khan:              Great to be here John. Thank you for including us.

John Warrillow:                Yeah, now you are a four-time entrepreneur. How did you get the idea for Altia? What was the genesis for this product?

Aurangzeb Khan:              Back in 2012, when we were a Series A, we built a plan. In 2011, we were experimenting with immersive video experiences. Video conferencing is one use case. AR and VR is another use case. You can think of so many things now with AI, self-driving cars, and so on, that need to bring in a lot of visual information. Pretty much everybody before us had done it, and even today are doing it, primarily using a single camera with an ultra wide-angle lens or a fisheye lens.

Aurangzeb Khan:              Those devices have very well-known limitations in terms of the level of distortion. You know, you look like in a fish bowl-like distortion, scale distortion, objects looks like they’re getting pulled, and so on? We felt that the right approach was to invent a whole new class of technology for synchronizing, stitching, and optimizing a multi-camera array.

John Warrillow:                Who’s the “we” at this point? It’s not just you in your garage. There’s a group of you that started this company?

Aurangzeb Khan:              There is. We were three folks that had background, and also deep background in imaging science in the semi-conductors used for digital imaging and imaging signal pipeline. Then I had done earlier work in my first startup for building the graphics chip for the Sony PlayStation 2. We built several steppings of that chip and also a chip for a video super computer used for movie making.

John Warrillow:                You are like a tech guru. You are deep … I obviously would look at your bio before we started. It was like … You have five degrees. I was trying to figure out where all the places you went to school, and I’m like oh yeah, I think it was Stanford and Berkeley, and there were a lot of letters after your name.

Aurangzeb Khan:              Well thank you. I’m a slow learner, so I had to go to many different-

John Warrillow:                No, it’s not that bad. Okay, so you built this. You had this idea that video cameras, if I can dumb it down, were not providing a great experience for all of the use cases-

Aurangzeb Khan:              Right.

John Warrillow:                … and you had this idea that if you were to provide a more panoramic view that it would provide what you refer to as kind of immersive, meaning you feel like you’re there more.

Aurangzeb Khan:              That’s right.

John Warrillow:                Is that it?

Aurangzeb Khan:              That’s exactly it, and I think, just to kind of … Right now, we’re having a one-on-one conversation, and we know a single camera is just about the right field of view, but imagine you had one or two more folks on your side, and I had one or two more folks on my side, right? Pretty much you start bobbing and weaving trying to get two people in or you get really uncomfortably close to each other.

John Warrillow:                Yeah, yeah, yeah.

Aurangzeb Khan:              That’s not a good experience, and we felt that our eyes give us about a 180. When we talk to people or talk to a group, we instinctively engage with that group by reading the room, reading the group, seeing who’s engaged, who’s lost, how to present and talk and stuff. I thought that was very weird that cameras, really hundreds of years being around, had just given us this tunnel view of the world.

John Warrillow:                And are you a tinkerer? Do you get in and actually like to play with the technology, the lenses of the camera, the aperture and so forth? Or are you the money guy who raises the money, sells the idea, and then hires the-

Aurangzeb Khan:              A little bit of both, right? I mean, growing up I had my own dark room. I did a lot of work with cameras. I was not a good photographer, but I was certainly an amateur photographer, right? Then, of course, growing up in the valley, which has been a phenomenal place to build a career and work, did a lot of work with high-performance video, and, actually, in our case, the challenge for real-time communications is even more difficult because it’s real time.

Aurangzeb Khan:              If it takes much more than a few hundred milliseconds for me to get to you and back, it doesn’t feel like a real-time conversation. The bar we had set was very high, which was to create a real-time synchronization stitching technology so we can take any size array of cameras and create any size field of view.

John Warrillow:                Love it. Who are the other two founders? What are their names?

Aurangzeb Khan:              Atif Sarwari. He was the guy who built imaging chips earlier, and Lars Herlitz. Lars had built an encoder chip. Had sold his previous company and had built what’s called an H.264 encoder chip. When you have a lot of video data, you sometimes compress it to send it out, and H.264 was the popular standard.

John Warrillow:                I mean, you’ve been involved in a lot of startups, and I wonder, were you tempted to do this without your two co-founders? Meaning, were you ever tempted to say enough of the co-founders, the other shareholders, the nonsense of getting everybody together. Maybe I’ll just do this one on my own.

Aurangzeb Khan:              No. I, personal belief, right? Engineering is one of those … It’s a team sport, and I’m very lucky we built a phenomenal team. Like any great team, we didn’t try to build. In fact, in the beginning we deliberately tried to keep the team very small, but kind of hand picked each person. The nice thing when you build a company is you can give everybody a stake in the deal, and that just aligns everybody, right? We’re all in the same boat. We’re all rowing together. We either all win or nobody wins.

John Warrillow:                So they were shareholders in the company?

Aurangzeb Khan:              Oh, everybody in our company is a stockholder since the beginning. As soon as they join, they have options that vest over time, but, basically, they have a stake in the deal.

John Warrillow:                One of the questions I always wonder, a founder’s philosophy too, is how big of financial stake would a rank and file, not a founder, a “rank and file” employee get in terms of options? Is it the kind of thing where if the options were to be successful and you would have the exit you were hoping for, that an employee might earn, for example, one years’ salary or two years’ salary? Is there any sort of benchmarks that you would help give other entrepreneurs?

Aurangzeb Khan:              Yeah. My kind of belief, and you mentioned this earlier, is that I’m fine to have a small piece of a big pie rather than the whole pie, right? We definitely built the company with the idea of venture scale business. We knew, and you were seeing evidence around us. You know, Zoom has had a phenomenal IPO. They were a Gartner Cool Vendor in 2014. We won that in 2015.

Aurangzeb Khan:              Hundreds of companies are using us together, so we were to see this wave for huddle rooms coming up, and how people work now, how modern real collaboration works, and we felt that there would be plenty of wealth creation to happen. I just wanted to make sure we brought the right team with the right depth of knowledge and expertise and kind of the right attitude too to work well together.

John Warrillow:                How do you avoid them always sort of asking, how’s our valuation, and when are you going to sell, and all this–

Aurangzeb Khan:              In fact, we didn’t have a plan to sell, so we’ll get to that I’m sure, but the valuation … Of course, we were also … and, again, it’s kind of your DNA as a company, right? Our DNA has been to be very open and very transparent, so when somebody is in, they really are in. They know all the good, the bad, and the ugly.

Aurangzeb Khan:              I find that that’s actually very powerful when you work with highly motivated, self-directed people who want to win. If you give them good information and you lead by example … you work at least as hard as everybody else around you, it just builds a healthy culture, right?

Aurangzeb Khan:              Our culture was to let our product and let our software do the talking, not market ourselves so much as just let the product get out there and show what it could do.

John Warrillow:                Got it. It certainly did get out there and won a lot of support early by raising an initial venture capital round. Maybe talk a little bit about what that was like to raise your first kind of tranche of money, and in particular, I’d be curious … I think a lot of listeners would be answering that same … Is it better to get 100% of a small pie or a small piece of a big pie? Maybe we could talk a little bit about your philosophy on when it makes sense to raise money and maybe some thoughts around how you go about raising money.

Aurangzeb Khan:              Yeah, two things I’ve kind of tried to be consistent on this. One is to be very frugal in terms of cash burnout. I’ll talk about that hopefully later here, but to answer your question, I was fortunate to be an entrepreneur earlier and knew some of the folks in the valley who had done well. Some had done phenomenally well, so they wanted to invest in Series A or seed stage. We didn’t do a seed stage. We just did a Series A, but we raised $3.5 million from a handful of folks who had just done well and were aware of and fine with taking risky investments like a new venture.

John Warrillow:                This is basically on your reputation at this point?

Aurangzeb Khan:              Pretty much, yeah.

John Warrillow:                You’re not a big business plan per se?

Aurangzeb Khan:              No, actually, I mean we had a business plan. We had a statement and a vision. We said that with the growth of the cloud and the scalability through companies like Amazon and so on, services like the one we’re using, Zoom, would flourish and emerge, and that millennials naturally were doing text and video and not phone calls.

Aurangzeb Khan:              We saw that as that workforce came forward, distance would kind of get annihilated by great bandwidth and these kinds of technologies, right? I mean you are in Canada. I’m here in the valley, and I literally pitch to all over the world sitting right here, and it’s a very normal thing now. 10, 12 years ago, it was not that common. You could see it could happen. It wasn’t that common.

Aurangzeb Khan:              We raised it based on a very solid business plan. It had risk, and we were very open about the risk. We also had technical risk, and we showed how the team members we brought in, the first 10 people, could nail those risks, right?

John Warrillow:                You had no product at this point? You didn’t have a physical camera to point to?

Aurangzeb Khan:              We had prototypes, so, again, having done it once before, I took about a year actually off and spent time prototyping some stuff ourselves. Very crude, but enough to show that it worked. Naveed Alam was another early guy, so we had this technology. We could showcase it. It was crude, but it kind of showed that it could be done.

Aurangzeb Khan:              The really hard problem we needed to solve was how do you synchronize and stitch and optimize video from cameras in real time? We built now I think the world’s fastest stitching pipeline. It’s a five millisecond stitch, and to calibrate you, a blink of an eye is about a hundred and fifty milliseconds.

John Warrillow:                Wow.

Aurangzeb Khan:              Pretty fast, and it’s so fast that it can actually be used for all kinds of applications like self-driving cars and so on. It’s been a great platform technology.

John Warrillow:                You raised this money, and, I’m always curious, how do you put a valuation on the business where it’s just a prototype and a couple of guys working on an idea?

Aurangzeb Khan:              Well, it’s a negotiation, right? There are some benchmark metrics in the valley, and of course we’re lucky that I knew other founders and so you had some ranges, but we ended up … I think we had a 10 million valuation, and we raised about three and a half at that first stage-

John Warrillow:                Got it.

Aurangzeb Khan:              … and then we had two more rounds after that, but, still, a very frugal deal. We raised about ten and a half with Series B, and at that point, very happy and very fortunate that Intel Capital came in. They are a phenomenally successful investor, very tech savvy, and getting them to invest is actually a high bar, but if you surpass that bar, it also expands your horizon as an enterprise-grade company. That actually helped us also in customer outreach and then did another about a 10 million round after that.

John Warrillow:                Got it, so Intel Capital being the division of the chip maker-

Aurangzeb Khan:              That’s right.

John Warrillow:                … who invest in technology companies, and they gave you the Good Housekeeping Seal of Approval that, hey, if Intel Capital is in, then this must be good.

Aurangzeb Khan:              That’s how it was viewed I think in the market, right? Then, of course, they also were connected to the Fortune 2000 worldwide, and so they could help us just get introductions and get connected once we had a product, right? We brought out a first product. We won lots of awards with it, put ourselves on the map. Got about 400 companies starting to buy the product, and then the second gen product, Panacast 2, we ended up with 1600 companies, from Fortune Five through startups, all using the product because it was unique and it solved a hard problem at the right moment in time.

John Warrillow:                What’s the distribution strategy? I mean, I was doing a bit of research before the interview, and as I shared with you before we started, I Googled it, and I found it on Amazon, the Jabra Panacast 3, and I sent it to our IT person, saying, hey, we should get these for our office. We’re doing that, yeah, but is that how people buy them on Amazon, or are they buying them through-

Aurangzeb Khan:              No, what happened is, in the beginning, we were selling directly, and then over the last four years we started to build out a network of distributors and resellers. A lot of them actually came to us because end customers, major corporations, were saying they want to buy this product, and they heard about us I think in the best way, which is from end customer demand, and we were always out on the road evangelizing, demoing, pitching, showcasing, and just trying to build that flywheel of demand outside in.

Aurangzeb Khan:              Then, in the last year, we went essentially all through the channels.

John Warrillow:                Who would be a typical channel partner of yours then?

Aurangzeb Khan:              Stampede and Starin are the two in the U.S. There’s AVT in Australia, NEC in Japan, so there’s just a range of them that are especially distributors in AV technology and then of course back in 2017 we started pioneering using the same array as a set of AI sensors to create data, and that opened up an ecosystem. We opened up an API so other people could write software on our processor, and it opened up an ecosystem of companies now using it to not only have a great audio video experience, but also for it to generate information.

John Warrillow:                Okay, so I want to see how the cash moves. I’m going to pick a company out of the air … Procter & Gamble calls you up and says “Aurangzeb, this is great technology. We want it for all of our board rooms.” They would not buy it directly from you.

Aurangzeb Khan:              No.

John Warrillow:                They would, through an AV distributor, someone who–

Aurangzeb Khan:              Actually, typically, they would buy it through a reseller, who’s like a specialist AV reseller, and then the reseller would procure it from the distributor.

John Warrillow:                And when do you get paid? How would you guys get the money from that sale from Procter & Gamble?

Aurangzeb Khan:              We just typically actually got paid the discounted amount at which we sold it to the distributor.

John Warrillow:                I see, okay.

Aurangzeb Khan:              The distributor made some margin, and the reseller made some margin, and so the final transaction happened between the, let’s say, P&G in this example, and the retailer.

John Warrillow:                But distributors are notorious for stringing out OEM manufacturers and paying slowly. How did you deal with that cash-flow gap?

Aurangzeb Khan:              Yes, that’s exactly … In fact, for a startup, that’s a pretty serious consideration. Part of the criteria we used was timely payments and sort of reference checks and some conversations with their exec management to say, “Look, we are a startup, and we live on a very thin cash balance sheet, and so the cash burn and cash flow is important to us.” We were fortunate that the product moved quickly, so I think also distributors, if they find that a product moves quickly, then they have confidence that their capital won’t get tied up for a long time.

John Warrillow:                Got it, got it, and so when you took that original Series A, what did you say, it was three and a half million dollars of a 10 million dollar valuation? A lot of people say, the moment you take outside capital, you are in essence building to sell. You have to get a shareholder return for the people that have invested you, so you lose the luxury of building a lifestyle business or building a forever legacy business. The train is going down the track. Do you share that view?

Aurangzeb Khan:              I would say, certainly, when people invest in you, then I very strongly felt the obligation that, look, they’re invested, then they deserve a great return, and so does the team, right? I mean people are working. We all took pay cuts. We were working for relatively low salaries, but with a big equity stake, right? The only win is if the equity goes toward a good event, and it turns out to be in many cases a life-changing event, right?

John Warrillow:                How big of pay cut did you take on a percentage basis would you say, relative to your “market rate”?

Aurangzeb Khan:              Mine was big. I mean I took the biggest and then others took less, but mine was 50%.

John Warrillow:                50%, so you figure, if you were the CEO of another company, you’re basically earning half of that as your Altia-

Aurangzeb Khan:              Half of the base level and then actually even less because, typically, the total comp had MBO components and other things, RSUs, so I didn’t have any of that. I had a big stake in my company and so if it succeeded it would be a great outcome, and it has been.

John Warrillow:                What advice would you give other entrepreneurs who are dealing with investors for the first time? I know you have done it for many startups, so this is old hat for you, but they’ve raised their first tranche of outside money, maybe it’s a million or two, and they’re just dealing for the first time with outside investors. What advice would you give?

Aurangzeb Khan:              I think one thing, and this is really crucial, is when you raise the money, make sure you have raised enough money to achieve a meaningful milestone because the whole valuation cycle then says, okay, if you build the first product, you get the first sort of customers, you get the first million in revenue, there are a handful of metrics that you …

Aurangzeb Khan:              Maybe you negotiate them up front, but you generally need to know, and sometimes people don’t raise enough money or they have unprecedented things happen that they hadn’t thought about that they kind of just burn through the money or get very close to the edge. Then it’s a very difficult negotiation, right? Because you’re in a much weaker position, so we tried to raise a meaningful amount of money that we could get to that milestone. As you said earlier, we had a track record that allowed us to have a more equitable value discussion, right? We’ve gone through that.

John Warrillow:                I’ve heard of this thing called a down round where essentially you’re going and you’re raising money in what is essentially a lower valuation.

Aurangzeb Khan:              Lower valuation, right, or sometimes will give up more than half of their company at Series A, so we actually were kind of on the best case outcome of that, the reason being is we, again, had shown a track record of building companies and achieving outstanding value, and of course the market opportunity, to your question … We were building a venture scale company so those are the companies I like to build. Not meant to be a family lifestyle type company, but meant to be a company that can really accelerate out. That’s where Intel Capital and folks of that standing or any of the Sand Hill VCs here, those are the kind of companies they would like to invest in, right?

Aurangzeb Khan:              Indeed, if you want to build a company that is a family lifestyle company or a legacy company, that’s a fantastic kind of company to build, but then the funding cycle is different and the way you grow it is different.

John Warrillow:                If the aspiration is to attract money from a Sand Hill venture capital firm or the likes of Intel Capital, what is the bar for someone like that to invest? What are they looking for? It sounds like it’s a much higher bar than the Series A, sort of friends and family.

Aurangzeb Khan:              It is. I think the expectations range depending on if they’re coming to you as A, B, or C, but I think on the low-end side is they want to make sure they get their money back, that it’s not a total write-off. On the high side, it can be a 10X multiplier, right? Anywhere between that one and 10, and, typically, two to seven is a more typical range, but anywhere between one to 10. Some are even more than 10 times return, right, but the general expectation is that it’s a multiple of the amount invested, many multiples preferably, and then the horizon typically is seven years is actually a fairly average number. That’s kind of ours, and it could be five. Some companies now actually are more like 10, so seven is a pretty typical kind of a number.

John Warrillow:                In your case, you started this back in ’14?

Aurangzeb Khan:              2012. The first time, 2012, and so March 2018, we had the deal, so roughly six and a half, seven years.

John Warrillow:                Great. Let’s get into the deal itself. At one point, you raised a Series C I think you called it-

Aurangzeb Khan:              Yes.

John Warrillow:                … which was at a seventy-eight million dollar evaluation?

Aurangzeb Khan:              That’s right. The Series C was evaluated at seventy-eight, and then GN Jabra came in and did just a preemptive offer at $125 million.

John Warrillow:                Got it. How many employees did you guys have at that stage when you got the hundred and twenty-five million dollar offer?

Aurangzeb Khan:              We were 22 employees.

John Warrillow:                That’s going to be mind blowing for a lot of people to hear, right? For some people to think that you sold a 22-employee company for a hundred and twenty-five million dollars is kind of mind blowing!

Aurangzeb Khan:              You know, it’s not that crazy for–

John Warrillow:                I guess it’s pretty mind blowing. What is that per employee, I mean in terms of valuation? It’s a lot. It’s about six million dollars of value per employee.

Aurangzeb Khan:              A little more, yeah. I mean, but just to calibrate you, the folks who were-

John Warrillow:                Is that a nice way of saying get your head out of your ass? Is that what–

Aurangzeb Khan:              No. It’s-

John Warrillow:                Calibrate me!

Aurangzeb Khan:              … they are highly accomplished individuals on the team, and then products in the market that were generating … Well, we grew revenue 4X over a three-year period, and 1600 customers around the world, 40 countries, and the top brands. I mean, Zoomtopia, we had a story out with Uber, Zoom, and us, how we enabled Uber to use Panacast and Zoom for Google. I mean they operate in hundreds of cities around the world with our product, right? It’s amazing. 35 patents, 15 issued patents.

John Warrillow:                How important was the protection of the IP, the patents, and so forth in the overall valuation?

Aurangzeb Khan:              I think the fact that we had solved a hard problem and many companies are trying to solve this problem, and there’s so many smart people, they will, but we were just ahead, and we’d done it first, and that we had the patents to then protect our core IP, right, and also a way to scale it forward.

Aurangzeb Khan:              Now we are on our third commercial generation of products in about six years, so moving very fast, innovating, leading the industry in our space even compared to the very big players. Of course, yes, the IP was very important and the fact that I think, Rene, the leadership at GN Jabra really could see how combined … Because they had built a phenomenal expertise in audio and in audio AI, and we were doing video and video AI, and it was like these two trains running on parallel tracks, and you could easily see how combining them … That’s the other thing, by the way, the complementarity of fit was very powerful, right?

Aurangzeb Khan:              Sometimes, as you know, companies come together to save like 10 percent cost. This isn’t one of those. This is like really a chance to be one plus one could be 10 because you’re just reaching that much deeper and higher into the opportunity.

John Warrillow:                Yeah, that’s what I want to get into next. The offer was from GN Audio as I understand it which is a division of a larger company called GN. Maybe describe what GN does-

Aurangzeb Khan:              Yeah sure.

John Warrillow:                … and why they saw you as strategic.

Aurangzeb Khan:              Yes, so GN itself actually is a storied company. It celebrated 150th anniversary this year. Very, very successful early Danish company, and the founder of that company laid telegraph cables through Russia and China and also to through Hong Kong, so phenomenally far-reaching impact and pioneering founder and team.

Aurangzeb Khan:              A company of that longevity of course reinvents itself and looks at the opportunities. They had built a phenomenal business in audio products, particularly from our interest, enterprise-weight products, actually they’ve been also winning a lot of market share for consumer. Both companies have won CES Innovation Awards. For example, they had really nice product launch this year.

John Warrillow:                CES being the Consumer Electronics Show. Would I have heard of anything? Did they have any headsets that they’ve heard of?

Aurangzeb Khan:              Exactly, very well known headsets, noise-canceling headsets for communications.

John Warrillow:                Oh, cool, okay.

Aurangzeb Khan:              Market opportunity that recognizes that when we all now work in open offices, it’s hard for people to sometimes concentrate because of the general level of sound around you, so the headset and with noise canceling, you’re like in your own private space. As a knowledge worker, you can concentrate, right?

Aurangzeb Khan:              Well we saw the other side of that, which is that in those same open offices, people are building hundreds of tiny conference rooms, three, four, or five-person conference rooms, and the architecture of these rooms is really different than old style videoconferencing. They are for practical everyday work, and they are in use constantly.

Aurangzeb Khan:              If you go to an Uber or to an Indeed, the literally are constantly in use, and that’s just how people work, right? Like how you and I are talking, this is a normal way for people to work now, and so we concentrated on this opportunity, and they realized that these are very much a complementary set of capabilities and a market expansion opportunity, and so did we.

Aurangzeb Khan:              We had a strong engineering team, I mean, 90% of the company is engineering, but a relatively very weak sales and marketing, two folks in sales, one in marketing, so we needed help on that side.

John Warrillow:                I love it, but GN had a big stable of six marketing folks.

Aurangzeb Khan:              Yes.

John Warrillow:                Did they sell through the same channel that you did, meaning the audiovisual?

Aurangzeb Khan:              Yeah, so in addition to having deep engineering expertise in audio, then they had this complementarity in terms of sales and marketing capacity, same channel, exactly right. Some augmentation for the specialty channels maybe, but largely the same, and a lot of depth in manufacturing, right, and so when we wanted to scale business … The nice thing with the manufacturing depth is when you buy more volume you get a better deal, so it could help with reducing cost in the product.

John Warrillow:                So there was some cost savings as well. You guys are 20 employees, some great customers in Indeed and Uber and so forth. Were you on the road? I may have missed this earlier, but were you on the sort of road to an IPO when GN made their preemptive offer?

Aurangzeb Khan:              We were actually searching for a partner to build … There’s a new class of product coming out where basically customers wanted products that are combining the video capability with audio, so imagine our device as microphones and input, then you want speakers and you have whole solution, right?

Aurangzeb Khan:              Then of course we had a particular view about how AI would improve that experience like when I’m talking to you right now, I’m on a Panacast. You’re not seeing the 180. You’re seeing a reduced view because I have a capability in this device. It detects me as a person. Doesn’t know me by identity, but knows that there’s a person, and just frames the shot, reduces the field to view it automatically.

Aurangzeb Khan:              These kinds of things were a big improvement to the user experience, and they were similarly making improvements. They had invested in a company in Germany using AI to automatically adapt the audio experience. We both felt like we had an alignment on the vision. We had alignment on the market opportunity.

John Warrillow:                Got it, and you were looking for a partner to help with the manufacturing and to-

Aurangzeb Khan:              And product design.

John Warrillow:                … Product design, and how did the acquisition come up? I mean did they pull you aside and say, hey, how would you feel about if we bought you or did they … Like, How did-

Aurangzeb Khan:              Pretty early … I mean other companies approached us earlier, and we were actually not going down that road, but what happens, and it was definitely the case here, is when I met the team, and I met the key folks, I flew out to Copenhagen. I was going to Europe for some meetings, so I just took a day, flew up, and I felt very good about the cultural fit and about the complementarity and about the alignment of the vision, right, because then you have to say, look, I’m going to be here, and I’m going to be trying to …

Aurangzeb Khan:              I’ve got commitments to my investors, but also to my team and to myself, and is it an environment where we can all flourish and see the big multiplier? We did, but to answer your question, yeah, they broached it very early on, soon as I think they figured out, okay, the technology is sound and market leading, and that we can build leadership products, and they broached it very early.

John Warrillow:                Then where did it go from there? Did they say well what do you want for the company and?

Aurangzeb Khan:              I brought it back to my board, right? I mean, as you said-

John Warrillow:                Brought what back? You said, just they’re interested. Did they actually write a letter of intent?

Aurangzeb Khan:              The interest and did we want to open the door?

John Warrillow:                Okay.

Aurangzeb Khan:              I had raised about 27 million, and for me the next thing was to go do a big round, like a 30 million round, and then, as you said, put us on the road towards an IPO, and that probably would have taken another three years, maybe more, right? Because I had investors and investors had a big stake and they’d been with us for six years, the normal governance process kicks in.

Aurangzeb Khan:              I brought it to the board, and I said, “Look, this is the …” and so then the board set some parameters around the conversation.

John Warrillow:                What does that mean?

Aurangzeb Khan:              I’m sorry?

John Warrillow:                What do you mean by they set some parameters?

Aurangzeb Khan:              Just some ideas, okay, well, what is the minimum valuation that would be acceptable for example. We talked about getting an investment banker, right, and we actually did bring an investment banker in to facilitate the conversation because the GN folks had an investment banker, and then there was some other interest out there potentially. The investment banker did what they do, which is that they try to scope the market out and see if this was the right deal and the best deal.

John Warrillow:                They checked temperature with other companies other than GN, and I’m assuming that the GN offer continued to be the best?

Aurangzeb Khan:              They did. They were very purposeful and decisive in their action, and also the strategy, and then I’m sure you know there’s like this whole strategy of association, right? They moved quickly, which then preempts in a sense opening the door too wide to too many people. It was a smart strategic move I would say on the GN part, and the reason we opened the door and we moved forward was that the DNA and the fit felt right, and, knock on wood, that’s continued to be true.

Aurangzeb Khan:              We just had a big launch in Monaco last week at an Infocomm for the Jabra Panacast, which is built from Panacast 3 from our third-gen product, but with a new very high-volume manufacturing pipeline behind it.

John Warrillow:                That’s great! The offer … I’m curious to know, so the board said, look, Aurangzeb, this is the bottom line, like if you’re going to enter into these conversations, this is the minimum number. We’ve just put in money. We’ve got to see an appreciation for that money that you just … You had a valuation of 78 million, so, clearly, they’re looking for an increase in the investment they’ve made.

Aurangzeb Khan:              Right.

John Warrillow:                They give you a number. At any point, do you share that number with GN and say, look, guys, it’s got to be this or more?

Aurangzeb Khan:              We didn’t need to. I mean, conceivably, you could do that, but I mean I think they, again, being quite sophisticated … I mean they’ve had acquisitions in the past and a very sophisticated team on their side. In fact, I found out obviously now, they built a very sophisticated model about the company, what they thought the financials looked like.

Aurangzeb Khan:              They asked us for our financials, actually went through an incredibly deep and exhaustive diligence process. Everything from bringing in outside experts, looking at the technology, looking on financials, and so had a pretty good sense, but before they did all that, they made a preemptive bid, and I think they had done enough homework that the bid was a strong bid, right? It met the board’s expectation. It wasn’t going to be … You know, some companies try to do this at the lowest kind of price, and then they kind of grind on, and typically I would say it’s generally not a good outcome, right?

John Warrillow:                Mm-hmm (affirmative).

Aurangzeb Khan:              Whereas, I think the GN folks were clearly see that, hey, if this asset comes in, there is a market that is at least 10 times bigger behind it that we can together access. You know, the whole video collaboration market is exploding, particularly this modern style of huddle room collaboration, right? You’ve seen … I mean Zoom’s had a phenomenal IPO. I think they’re at 27 million today, so there’s a lot of opportunity in this space. Of course, they have an advantage being a SaaS provider. We’re more of a device provider, but we need devices in all the rooms where the service is being delivered.

John Warrillow:                Yeah, absolutely. Was there any part of you that feared handing over the financials because we talked before we hit record, and I said, “Can we talk about how much revenue you guys had,” and you said, “No, that was never made public, so we can’t,” but I’m reading between the lines and saying 22 employees. It can’t have been that much. Maybe it was.

John Warrillow:                Again, I don’t need you to comment on that, but I guess what I’m going at is, and the reason I’m asking this is I’m imagining other founders when asked for their financials, may get a bit squeamish and think, oh, man, is this going to shoot myself in the foot if they see that I only had x amount of revenue or y amount of profit? Were you squeamish at all about it or a little hesitant?

Aurangzeb Khan:              John, let me say it this way. We actually had very good revenue for 22 people because the product scales without people, right? Because I have a third party, so I can get into large, many multiple millions relatively quickly.

John Warrillow:                I see.

Aurangzeb Khan:              The other thing that I could show was a very nice trajectory to the revenue growth, right?

John Warrillow:                Hmm, okay.

Aurangzeb Khan:              Then the third part, that certainly I focused on as a CEO was repeat business, recurring customers because that’s a level of validation about the product and its need and that we’re solving an important problem. We were a premium priced product. We were not the lower … I mean you can buy hundred dollar cameras. We were nine ninety-five for Panacast 2.

John Warrillow:                Yeah, I think it’s over a thousand dollars; it says it had been.

Aurangzeb Khan:              Yeah, but it was delivering value, and the easy way we could explain the value was, you know, having any device other than us, any conventional camera would leave two out of the five people invisible. If you had five seats in the room, you couldn’t use two. That’s 40% real estate wasted, and like in San Francisco, $72.00 a square foot times 40 square feet wasted. You can do the math. It pays for itself very, very quickly. People got that once you explained it, and then of course the whole AI road map.

Aurangzeb Khan:              We weren’t hesitant about the revenue, but some companies get valued at one x multiple of revenue, sometimes they think it’s a great outcome at three x multiple of revenues. We were in excess of those numbers because of the market opportunity and because of the IP protection around the product.

John Warrillow:                Yep, that makes sense. I love the fact that you were zeroing in on repeat customers. Is that a data point that GN asked you for and you started to track it? Were you tracking it all along?

Aurangzeb Khan:              No, we had tracked it all along, but, interestingly, and this is like where you then start to find a resonance, right? How do the folks think? They picked up on that, and they recognized the power of that because they themselves are in that same mode that customers stay loyal to the product and to the product portfolio for a long time.

John Warrillow:                Yeah, so a company like Uber would buy a half dozen, and they’re like, wow, these are amazing, and they’d buy another fifty, another hundred, and-

Aurangzeb Khan:              That’s right. That’s what was happening is that the … You know, there’s a bit of a metric effect because we found that, and in fact they found also similarly, many customers found that once the customer participated on the remote side, received the feed, they’re like, what is that? How are you doing that? How can you bring everybody in, and they don’t look like they’re in a fish bowl. They look normal, right? That helped us scale even faster.

John Warrillow:                I mean it sounds like an amazing run, an amazing seven-year journey. At what point … How do you personally feel at this stage in your career, having sort of wrapped up and put a bow on this business? You sound like a startup guy. Is there another business plan in your back pocket? Are you on to the next thing?

Aurangzeb Khan:              I definitely like doing startups. I mentor in the Technology Mentors Program at Stanford, and I’m also a charter member for an Organization of Pakistani Entrepreneurs. I was born and raised in Pakistan, but also tie with the India-Stan Entrepreneurs, which is Indian and Pakistani entrepreneurs who started that.

Aurangzeb Khan:              We spend a lot of time. You know, when I did my first startup, it was not that common, and we kind of just learned by doing, but now there’s a network of people who help just voluntarily and freely, also as angel investors.

Aurangzeb Khan:              I’m definitely very active in that community because I find, as you probably know, entrepreneurship creates new jobs and new opportunity and uplifts a whole country and a whole region and a whole economy in a very powerful way, right? I was very, very fortunate to be in Silicon Valley where I love working here with people from all over the world.

John Warrillow:                How did you get to Silicon Valley? What was your upbringing and what landed you in the valley?

Aurangzeb Khan:              Yeah, a bit of a, as you said, technical geek. I had a first-class first in Pakistan from one of the good schools in physics and mathematics. Berkeley had this incredible pedigree in physics, so I came to study physics and actually ended up doing electrical engineering, computer sciences, and nuclear engineering.

Aurangzeb Khan:              Semiconductors were just exploding around that time, right? My core technical expertise was as a circuit designer and in building system on chip, large-scale semiconductor devices. I stayed with that for a very long time. I was at Tandem building the massively parallel computer systems that are used to run nonstop systems, running most of the world’s banks and stock exchanges and so on, and then pioneered system on chip devices for hard discs, for gaming consoles, things of that … networking equipment like what Cisco produces.

Aurangzeb Khan:              Just really have always maintained a deep technical knowledge, but then along the way, when I was at Stanford, my second was a business degree rather than a PhD because I actually felt like I needed to learn more about how businesses are put together, and how do you build them.

Aurangzeb Khan:              I attended a class at Stanford in the business school there I really enjoyed, which was just called Entrepreneurship, and Professor Johnson, “Pitch” Johnson, he was one of the very early VCs who started asset management. He’d give us these gigantic business plans and kind of just say, “Okay, analyze this and decide if you’d fund it,” and then actually would bring in the founder or the CEO, and those companies in those days were like the star companies that had gone from being founded to being multi-billion dollar revenue-making companies.

Aurangzeb Khan:              It just was an incredible eye-opener to say, you know, these are real people who took risks, and they don’t all work out, but in these cases they did, and it was just a very, very inspiring experience.

John Warrillow:                Hmm. What’s been your biggest failure as an entrepreneur?

Aurangzeb Khan:              A couple of times losing some of the key guys that I wanted to bring on board, not being able to get the right guys in at the time, and it delayed us in getting products out I think, looking back. Then, certainly, in the very beginning of our company we took on more than building a device. We were building a full cloud service. We prototyped it. We built it, but realized after having done all that, that although technically we could do it and it was phenomenally exciting to do, we didn’t have the funding to go kind of take that all on.

Aurangzeb Khan:              One of the cardinal rules in a startup, right, is be laser focused on one thing and nail that. Make sure it’s worthwhile, so we kind of deviated from that, and it cost us time and money. We built that technology and it’s still on the shelf. We haven’t been able to commercialize it. Maybe down the road. One thing with good technology is if it doesn’t go out right away, you just never know when there might be another moment in time when it can flourish. Biting off too much I would say, and then some of the team composition things in the beginning.

John Warrillow:                Yeah, yeah, well, it doesn’t sound like you did much wrong because a hundred and twenty-five million dollar exit in seven years is a pretty good way-

Aurangzeb Khan:              Oh, thank you.

John Warrillow:                … to spend a few years of your life. Aurangzeb, I know we’re going to have lots of requests for people to reach out to you. Can we point people? First of all, where do they buy the Jabra Panacast 3? Where do you want to point people to? Is there a website?

Aurangzeb Khan:              Yeah, they can to or, one or the other, just get back to us, and we would love to enable them and see the product flourish. We’re very passionate about transforming how people connect, and we think this will help.

John Warrillow:                Yeah, that’s fantastic, and then-

Aurangzeb Khan:              Oh, by the way, sorry … and our distributors like Stampede and Starin, and there will be more being announced, so if you go to Stampede or Starin, and their reseller subsystem. B&H carries it. There’s AVI-SPL. There’s a bunch of them out there in the U.S. and Canada, and then if you’re international, of course, there are local … If you Google it, you’ll typically find the local reseller.

John Warrillow:                The reseller, great, and the power of Google will get you to this product if interested. I know we’re going to have requests. Is there … On social media, do you accept LinkedIn connections? Do you have a Twitter feed? Are you on Instagram? What’s the best way to reach you on social?

Aurangzeb Khan:              Yeah, I do. I mean, it’s sometimes bad because I’m traveling so much, so forgive me if I take too long to respond, but LinkedIn is awesome, and then we’ll circle back.

John Warrillow:                We’ll put this in the show notes, and if you’re watching on video, you can see Aurangzeb’s … the unique spelling of his name. It’s A-U-R-A-N-G-Z-E-B. Okay, is that correct, Aurangzeb?

Aurangzeb Khan:              Perfect. That’s awesome. Thank you for getting the name right.

John Warrillow:                Well, listen, it’s been a real pleasure, and thank you for your candor, and it’s a great product that I wish you all the best with it. It’s great.

Aurangzeb Khan:              Thank you so much, John. Pleasure talking with you today.


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