In at the deep end, twice

In 1999, two teams of two, Peter Marte and Thomas Pellizzari as well as Wieland Alge and Klaus Gheri, from Innsbruck formed the company phion, specialised in net security on the one hand and medical software on the other. The latter was spun off in 2001, phion became a firewall expert. One of the first large phion projects was the implementation of an IT security system for Allgemeine Rechenzentrum in Innsbruck – it was the largest firewall project in Europe at that time that controlled and managed more than 500 firewalls from a central location. In 2009, the Tirolean software provider was taken over by the American IT security company Barracuda, the European headquarters of the corporation with 1400 employees worldwide remained in Tirol. Company founder Wieland Alge takes a look back.

Phion, the predecessor company of Barracuda, was founded in 1999. People didn't refer to it as a "start-up" in those days …

Wieland Alge: Well, not in Tirol.

You once described founding your company as jumping in at the very deep end …

Wieland Alge: … which was also very dark. We jumped in and didn't know if we were going to land on a pointed rock and die.

Was there funding for young entrepreneurs at the end of the 90s like there is today?

Wieland Alge: There were a few programmes but they were completely nontransparent – and the funding landscape today is still suffering from the fact that there so many instruments but you need a funding consultant to guide you through the jungle of funding initiatives. I have also become slightly sceptical of funding schemes because a lot of start-ups are tempted to do things that will get them funded instead of doing things customers actually need. It seems to be easier than looking for customers. Technology and production-oriented start-ups in particular tend to make this mistake.

Did you also have to learn how to do what customers needed?

Wieland Alge: We were funded by customers right from the start. In retrospect, maybe it was wrong that we picked out good customers, which we thankfully had, and did everything for them.

In these early days we developed things that only these customers needed and couldn't buy anywhere else. But that doesn't mean that other customers also wanted it. In this way we became regular suppliers. It cost us a lot of time – and ultimately money – to continue with this kind of support for many years. When you're a small company, you simply don't have the courage to say to a key customer, "Too bad, we're not doing it like that anymore." So we continued to drag them along.

Even today?

Wieland Alge: No, but we certainly did extras for five, six years and these customers' systems are still working today. The great risk for start-ups financed by individual customers is that these kinds of "birthing assistants" can't let go. The push at the beginning was very welcome but at some point it starts to slow you down.

But money flowed into the company?

Wieland Alge: Finance is always a problem for product companies. When it comes to funding, you have people interfering who per se barely understand what has to be done. When it comes to financing via pilot customers, you risk being held back by them. This is why product companies prefer equity.

But you first have to find it.

Wieland Alge: That's right, whereby it seems to be getting better in Tirol. There are a few initiatives, which give hope of being able to obtain initial financing of up to 500,000 euros.

The company went public in 2007 – a planned flotation?

Wieland Alge: No, in 2006 we had a turnover of about six million and 50 to 60 employees, we were actually a dwarf. But it was obvious that we – if we wanted to continue growing and get onto a notable international stage – would have to do more. One option was to sell, a second to look for new equity, and the third was the stock exchange.

Your flotation was a year before the crash.

Wieland Alge: In fact, it was only a few days. The Lehman crash was more like the endpoint of a state of shock, which had started in the financial market in July 2007. For a good year, people believed they would get through it somehow until it became obvious that it was on a completely different scale and billions were destroyed. Stock market investors then, however, still behaved in a very "sporty and aggressive" way, at that time it all looked

very attractive – and it was, we received 16 million euros at conditions, which we would never have received on the private equity market. In hindsight, the behaviour of these stock market investors was a signal for a bubble climate.

You were taken over by Barracuda in 2009, as a "dwarf" you were suddenly part of a large company that had 600 employees then.

Wieland Alge: It was, obviously, very new for us, it was the next deep end. There are numerous examples of how takeovers can ultimately fail. They mainly fail because the people who were taken over didn't really want it. We thought about the takeover at length, should we do it, yes or no. And if yes, then at full throttle from the very first day, even if we are going to hit a wall. Joining Barracuda was, therefore, our second start-up concept, with all the risks.

A personal risk?

Wieland Alge: Yes, we didn't know whether we or the location in Innsbruck would still exist in one or two years' time. We only knew that standing still wouldn't work at all. As Wayne Gretzky says, "You miss 100 percent of the shots you don't take." The management team at Barracuda was also surprised at the "brutality" we showed. We had a concept, the integration was supposed to go in this and that way, we wanted it done in three months, we had a timetable for renaming the company and our products. However, we also benefited from the fact that certain parameters – ratio of the size of the companies, products, geography, etc. – were a good match.

You are now in the tricky seventh year with or as Barracuda. How is it going?

Wieland Alge: Someone recently worked out that I have been the EMEA head at Barracuda for longer than I was the CEO of phion, put that way, I can't really remember the phion times. Practically the entire former phion management team is still working at Barracuda. Barracuda has grown as a whole, there are now 1400 employees worldwide. The European headquarters with 110 people is in Innsbruck, there are another 50 in Vienna.

Are you personally still directly involved in developing software?

Wieland Alge: Not for ten years, I don't miss it either. I miss – and I can't really get used to it – the close customer contact, selling something to the customers, making them happy, organising support. I'm in Berlin today, I'm going to meet three customers, arrange something that someone else will then carry out.

Back to 1999 again. Did you ever think about where you would be in 15 years' time?

Wieland Alge: Not in 1999, but certainly in 2001. In 1999 we stumbled out of university, we didn't think about where we would be in five or ten years, more like in five or ten weeks. After a few months we realised that we had a good chance of succeeding with our first few customers, that we could develop a standardised product, we knew then at the end of 2000, beginning of 2001 that that could be it. Undeserved because it wasn't planned, but a true once-in-a-lifetime opportunity. We then considered in quite concrete terms what could happen and whether we also really wanted these scenarios: were we prepared to go bankrupt; be successful and then let someone else carry on; take equity and be thrown out of our own company; sell the company? Or were we not prepared. This process took a very long time, it was different for everyone. We then went through with it in 2002 and received equity funding. Put in a nutshell: we weren't well-prepared at all when we started our business.

But you took part in adventure X, the business plan competition in Tirol?

Wieland Alge: Yes, but we were already a company then. We dropped out of the first round, annoyed we didn't make it to the top ten. One jury member, a business professor, thought there wasn't a market for IT security.

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