Diane Greene (VMWare Co-founder) – Startup School 2013 (Oct 2013)

Chapters

Abstract

Revolutionizing Computing: The Story of VMware and Diane Greene’s Visionary Journey

Founding VMware: A Leap into Virtualization

In 1998, Diane Greene, along with a small, dedicated team, embarked on a revolutionary journey as they co-founded VMware. Their goal was not just to start a company but to pioneer an entire industry. Virtualization software, the cornerstone of VMware’s technology, allowed multiple operating systems to run on a single computer or across computers, redefining computing efficiency and versatility. By 2008, VMware had achieved a staggering $2 billion run rate, boasting a 54% year-over-year growth and employing 6,000 people globally.

VMware’s Impact and Founding Vision

VMware’s virtualization technology not only enhanced efficiency and simplified usage but also laid the groundwork for the now-ubiquitous cloud computing. This success is a testament to its enduring impact in the IT industry. At its founding, VMware had a clear vision: to reduce constraints and foster innovation for both system builders and computer users. The company aimed to make virtualization ubiquitous by 2000, a goal achieved albeit with a six-year delay.

Building a Unique Team and Culture

VMware’s founding team was an eclectic mix of minds, comprising Greene’s husband, who was a computer science professor at Stanford, two of his graduate students, and an undergraduate research project member. One of the graduate students returned to Stanford after starting a family and completed his PhD, becoming a professor in Switzerland. The team started their journey in a modest office above the Cheese Board in Town and Country Shopping Center, initially focusing on practical necessities like desks. They later invested in improving the office’s appearance with the help of a capable office manager.

Integrating Family into Business

Greene’s ability to juggle entrepreneurial pursuits with family life stands out. Her children were not only aware of but involved in VMware’s milestones. This integration of family and business had a positive impact, as evidenced by her daughter’s enthusiasm for Greene’s third startup.

Securing Funding and Developing a Product Strategy

VMware’s initial funding came from self-funding and immediate family members. The company later sought angel investors, carefully selecting individuals with technical expertise in computer science, including Andy Bechtolsheim, John Hennessy, and David Sheridan. VMware’s decision to go public led them to seek strategic partners and investors from hardware vendors, specifically targeting Dell. Michael Dell, the CEO of Dell, became a lead investor, valuing VMware’s potential in the server market.

The product strategy was equally innovative, focusing on a desktop product that allowed users to run Windows on Linux and vice versa. The company aimed to leverage existing Windows device drivers and avoid developing them themselves. To enter the market, VMware initially positioned its product as a Linux tool, targeting developers and the Linux community. The pricing strategy was initially uncertain, leading VMware to release the product as a fully functional, free 30-day trial. Commercial users were charged $299, while hobbyists could purchase the product for $99 with unlimited use.

Market Entry and Product Launch

For their product launch, Diane Greene and her team chose to attend a Startups Demo conference. Initially advised to hire a marketing person, they decided to handle marketing themselves. During their audition for a stage presentation at the conference, they demonstrated their product’s features and capabilities. In a creative twist, one of the founders staged a keyboard malfunction to switch computers, showcasing their innovative technology. Their presentation was met with a standing ovation, particularly for their creative handling of a Windows blue screen error.

When VMware launched their beta product on a Sunday to avoid traffic, they faced an unexpected high demand that led to bandwidth issues. Despite limited resources, they gained significant media attention, including a feature in the Wall Street Journal. An incident during the launch, where they ran out of bandwidth, was resolved when a Cornell student temporarily hosted their website. This student later joined VMware as an intern.

Overcoming Early Challenges and Gaining Publicity

VMware demonstrated problem-solving ability and resourcefulness early on, particularly during a bandwidth issue at their beta launch. This issue was cleverly resolved with the help of a Cornell sophomore. The company quickly gained significant media attention, including a feature in the Wall Street Journal.

Strategic IP Protection and Board Formation

From its inception, VMware was proactive in filing patents to protect their intellectual property, an essential strategy against tech giants like Microsoft and Intel. The formation of their board, which included influential figures such as attorney Larry Sonsini, further strengthened their position. Greene emphasized the importance of patents for protection against monopolies, a critical move for a small startup. Needing external expertise, she sought the most able individuals to help navigate the competitive landscape dominated by Intel and Microsoft. Greene approached Larry Sonsini, the managing partner of Wilson Sonsini, a powerful business-minded attorney, and persuaded him to join the board. Sonsini’s involvement, secured through Greene’s offer to move the company’s law firm for a meeting, was pivotal. His extensive experience in deal negotiations proved invaluable, especially in dealing with large corporations like Intel and Microsoft.

Pivotal Expansion into the Enterprise Market

Diane Greene faced skepticism from engineers and tech bankers regarding VMware’s ability to enter the enterprise market. To avoid building an in-house sales force, VMware decided to partner with hardware vendors for product distribution. A notable partnership was formed with IBM, who recognized the potential of VMware’s virtualization technology. This led to the development of a preferred hardware vendor program. However, IBM’s initial plan to resell VMware’s product, which utilized GPL Linux, was halted due to legal concerns about GPL contamination. VMware cleverly devised a solution to this issue by having IBM’s resellers sell directly to VMware, thus navigating the legal complexities and solidifying their presence in the enterprise market.

VMware’s Growing Success and Industry Recognition

VMware’s success continued to soar, with pivotal moments at conferences leading to increased opportunities and market presence. Customer appreciation and positive feedback were significant, with users comparing their product to monumental events like the moon landing and praising its stability compared to competing software. This profound impact was further underscored by industry recognition, including accolades from prestigious publications like the Wall Street Journal.

Diane Greene’s Encouraging Words for Aspiring Entrepreneurs

Greene concludes her story with a message of encouragement for aspiring entrepreneurs. Her journey with VMware exemplifies that while startups pose challenges, they offer rewarding experiences. This narrative isn’t just about a company’s rise to success; it’s a testament to vision, innovation, and perseverance in the face of adversity.

Notes by: oganesson