VMware’s $1.26 billion acquisition of tiny startup Nicira was as much about grabbing talent as grabbing technology, Valley insiders say.VMware has been the target of much raiding because the timing is right. The company went public about five years ago. Early employees have likely fully vested their shares.
So says Jedidiah Yueh, CEO of Menlo Park-based Delphix. (He has a history with VMware’s majority share owner, EMC, who acquired his previous startup Avamar in 2006 for $165 million. He stayed at EMC for about a year.)
His current startup Delphix is now at 100 people, many of them from VMware, he says, including VMware’s former vice president of product management, Karthik Rau.
“[Why did] VMware buy a company with under $10 million in revenue for over a billion dollars? It’s a talent problem,” says Yueh.
There is a major and “vicious recruiting” war going on in the Valley, says Big Switch cofounder Kyle Forster. Big Switch now has 44 employees and is hiring as fast is it can. But it hasn’t been easy.
Forster says he turned down six of Cisco’s distinguished engineers interested in working for him because they only knew hardware. A DE is the highest technical honour a Cisco employee can earn. When Forster found a DE that also knew VMware, not only did he hire the guy, but the company is “paying him more than we pay the CEO.” (Big Switch’s CEO is cofounder Guido Appenzeller.)
Meanwhile, Insieme, a Cisco-backed startup, has been raiding Nicira, VMware, and other companies for talent, too, and offering insane amounts of money—reportedly up to $2 million as an eventual payoff.
Why don’t they hire from within Cisco? They do, but they are also in desperate need of software engineers. Insieme is run by an engineering team well-known to Cisco: Mario Mazzola, Prem Jain and Luca Cafiero. Cisco has backed them before with what’s called a “spin-in” strategy, where Cisco has an option to buy the company but employees can earn startup-like paydays.
This team was responsible for Cisco’s super successful server product, UCS, and its next-generation Nexus switches from a previous spin-in called Nuova Systems. But Nuova had a secret weapon: VMware cofounder Ed Bugnion. Bugnion was the guy that knew software, while the Mazzola, Jain, and Cafiero knew hardware. Bugnion left Cisco to get his PhD at Stanford about a year ago and a source close to him says he’s got no plans to join Insieme.