Business

Sequoia told Meraki founder to 'piss away $5M in experiments' to fuel growth

Meraki Disrupt
Image Credit: VentureBeat

SAN FRANCISCOSanjit Biswas sold his company Meraki to Cisco for $1.2 billion last year, and primary investor Sequoia Capital made $400 million off that sale.

Sequoia partner Doug Leone and Meraki’s founder Sanjit Biswas sat down with TechCrunch founder Michael Arrington at TechCrunch’s Disrupt event this morning and discussed what it took to turn Meraki into a billion dollar company.

“At one point, we told them to piss away $5 million in experiments and try to do anything you can to grow as fast as you can,” Leone said.

Meraki provides cloud-controlled wireless networks for medium-sized businesses. The technology provides customers with solutions for Wi-Fi, routing, switching, security and mobile device management. Networking giant Cisco purchased the company as part of its evolution toward software-centered solutions.

“We are now doing a $250 million run-rate,” Biswas said. “Our business is growing significantly — our revenue has doubled since bought we were bought by Cisco.”

Ph.D students from MIT’s laboratory for computer science founded Meraki in 2006. At the time, the company installed antennae on satellite roofs in Cambridge, Mass., that connected to one of their boxes. The goal was to make Wi-Fi more accessible. Biswas said that the company had to “pivot” a couple times and find a business model that worked.

“We started with apartment complexes, and then we looked at emerging market carriers and got traction, but sales cycles are long,” Biswas said. “Then we looked at ad-supported Wi-Fi, and then 2008 came around and we got into enterprise.”

Meraki raised over $70 million, and Sequoia contributed $55 million of that. Leone said that when Sequoia first invested back in 2006, the firm believed in the founders and the technology, but it didn’t think the apartment complex business model was that strong.

“As investors and partners, the two options are to lay back or be more aggressive,” Leone said. “We decided to double down on the founders and stay out of the way and let them evolve and iterate until they found a plan that makes sense.”

Leone advised entrepreneurs to be careful about selling shares of their company, particularly in the early days. He said it “breaks his heart” when founders sell a significant chunk of their equity.

Arrington also asked Leone about his thoughts on the NSA and the grilled cheese restaurant The Melt he is a partner in.

“I grew up in Italy, where we ate bowls of pasta and not grilled cheese and soup,” Leone said. “If it were up to me, I’d have pizza for breakfast, lunch, and dinner, but I hear this is what Americans like.”


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