Toronto-based PlateSpin Canada
was founded in 1999 with ambitions to build world-class
management solutions for the telecom data centre market.
Though the firm held considerable promise, in 2003 it filed
for bankruptcy losing $11mm for its investors. Shortly
afterwards, Stephen Pollack bought the assets of the company
and with a skeletal team and $1mm in seed financing embarked
on the journey to realize what he believed was its significant
potential. In March 2008, PlateSpin Ltd was bought by Novell
for $205mm in cash.
Bob Hebert sat down with Stephen Pollack to discuss this
If I understand correctly,
you were and weren’t the founder of PlateSpin?
correct. The original PlateSpin was founded in 1999 with
a focus on developing next generation management solutions
for the telecom data centre market. The firm ran into difficulties
and eventually folded early in 2003. I had earlier been
brought in as a consultant by one of the investors as they
explored options for the company. After the firm folded
we subsequently bought the name and assets and PlateSpin
was reborn. I am the founder of that company.
What did you see in the company?
PlateSpin was one of the first companies to use virtualization
in their solution. But it was very early in a market that
had yet to come into its own. To compound matters, their
telecom data centre market died with the tech burst and as
they tried to find alternative opportunities in the enterprise
space they ran out of cash. It was all quite unfortunate.
The firm however had very interesting technology and I was
convinced that virtualization would be a big winner. The
company needed to narrow down its focus and find a place
for itself in the market until the inevitable explosion in
virtualization took place.
What did you do?
PlateSpin’s investors stood to
lose $11mm with the bankruptcy of the firm. I went to them
and said that I thought we could find a way to recover
those funds. All I asked for was $1mm in seed money and
one year to find a way to re-vector the strategy.
I promised that we would operate on a
scaled down business model and focus all of our energies
on finding a way to leverage a subset of the original technology
into the market while we built out more appropriate solutions.
I had a pretty good track record of taking good technology
to market and one of the investors, who had a history with
me, championed my proposal. They agreed to fund me and
give me and the team one year to see what we could do.
What happened next?
As we talked to customers, it became evident that the biggest
impediment any firm had with virtualization technology was
the adoption into the data centre. There was no way to do
conversion from the legacy technology. It was akin to the
problem of migrating from Unix to Linux.
We figured that if we could make it easier
to bring new technology into the data centre then we would
have a chance so we spent our time developing a conversion
tool that would automate the process. Our technology guys
have to be commended because this is a complex world with
real generalization issues. They did a great job on the
technology and we quickly came out with a scaled down first
version of a tool leveraging the technology we bought from
the first company which allowed us to demonstrate the validity
of the market opportunity. This
also bought us the time we needed to develop the next generation
technology that better fit our longer term vision.
We immediately found a set of customers for this and by
the end of the year we had $250,000 in revenues. By the middle
of 2004 we released Version 2 which was a re-implemented
and scalable version and that also started to sell.
By the way, virtualization was not alone with its compatibility
issues. The world of blade servers was also struggling with
the same migration issues so we extended our original development
effort to automate some of the physical to physical conversion
problems that customers were encountering. That product also
did very well for us and helped to establish us as an innovative
vendor in a fast growing young market.
The short term market traction gave our
investors confidence allowing us to raise a $3.5mm ‘A’ round.
Presumably, others in the market were pursuing this
We were actually fortunate in a few ways. Microsoft
and VMware each came out with a competitive offering which
they struggled with. They were either embedded in a service
offering or impractical to use with any scale while ours
was an actual solution that fully automated the task at hand.
And more importantly ours worked. Integrators and channel
partners took immediate interest and we started to grow.
In addition, because the time gap in time between the old
Company and the new PlateSpin was short, the market did not
notice any disruption which helped us protect the brand that
had been established. We were thus able to leverage the good
work which previous management had done in building our brand
and positioning it as a leader in virtualization. Customers
gave us the benefit of the doubt and we were able to get
into the market quickly.
Were you content to remain a tools company?
As we grew and the popularity of virtualization
grew, we knew that we had to evolve into broader solutions
company. As we thought about this, we saw that we actually
had a flexible underlying technology that would be key
to the fluid computing strategies companies were beginning
to develop. Our
tools solved problems that these folks would need to solve
in their own solutions and we saw a path forward with much
Though we were approaching breakeven
by the end of 2005 as our vision grew, we needed additional
funds to make it happen. This lead to our ‘B’ round
of $7.4mm with Insight Venture Partners (now Open View
Partners) in late 2005.
As we grew, the potential only became larger and we discussed
our growth options on several occasions. The market we saw
would require a lot more money and would see us expand tremendously.
As we deliberated, Novell came along and valued us in a way
that we simply could not say no. We elected to sell the firm
earlier this year.
A running theme is that you have been able to correctly
identify the market opportunity which could be exploited.
Is that fair?
Yes. I have always been pretty intuitive
in this area. I
am able to look beyond today to see what is coming next in
the market and express the set of steps needed to achieve
a market goal.
People tend to think that product management
and marketing starts with assessing what customers want. I tend to
disagree. I tell people that if you identify current needs,
by the time you come up with a solution to address them,
the chances are they won’t be needed anymore to the
same degree as hoped. To me the more important skill is figuring
out what’s around the corner, what the market will
need and how do we get there. I enjoy those types of problems
and a company challenge like PlateSpin played very well to
At the same time though I am not just some pie in the sky
thinker. I have a pretty broad background and a lot of experience
executing. In fact I would define myself as first and foremost
pragmatic. This quality was essential as we had to accomplish
a lot without a lot.
Is there a risk of a company becoming overly dependent
on the intuition of a CEO who is skillful at it?
Actually that is an issue. I have spent a lot of time trying
to help others think through problems the way that I see
them. Everyone in a company has to be involved in its ongoing
change and it is dangerous to shape a company around the
problem solving methods of one person.
What was your background before you came here?
I spent 10 years at Fulcrum Technologies
in Ottawa where I had a variety of roles in engineering,
product management, product marketing and professional
services. I then worked for a company called ASI which
was bought by NCR. I ran that business as a P&L. I
consulted, worked at a company called Baker Street Technologies
for a while and then was VP Product Management at FloNetworks.
When that firm was sold to Doubleclick, there was really
no interesting role for me so I left and consulted for
awhile. One of my assignments was to take a peek at the
I think my background has helped me. I am solid technically
and cannot be fooled on what is going on in the product development
part of the house. I am pragmatic and yet very comfortable
with uncertainty. My product management background grounds
me on issues of lifecycles and roadmaps and I know what will
sell and how to get it into the market.
You went from a few employees to over 200 in a relatively
short period of time. Can you talk about the leadership
challenges in that kind of growth?
It has been quite a ride. The demands of managing the business
have changed dramatically as the business has grown and I
and the team have had to work hard to grow with it.
I have always known however that at some
time I might not be the best qualified person to take the
company to the next stage and I told the board that I want
to do what’s
best for the business. The last thing I ever wanted to do
here was mess things up by being the wrong guy at the helm
and so I have been aware that I need to evolve as the business
I would say this developmental part has
been the most challenging. There
really are precious few resources available to someone in
my position from which to get help. It was a real scramble
to secure mentoring and counsel while running 100 miles per
hour managing the business.
I think that overall the Toronto business community could
do a much better job of supporting CEOs in that respect.
What do you think the lessons are from PlateSpin?
I am a big believer in timing and luck and to some degree
the first PlateSpin suffered from a lack of both aside from
some execution challenges. But in their ashes there had been
a lot of money invested in some interesting technology and
ideas which needed to surface as the market emerged.
Finding a way to realize its potential with limited resources
required a lot of pragmatism nimbleness and focus. I think
we are a good example of a company that abandoned grand visions
to find bite sized opportunities which would generate revenue
now. We needed to find emerging pain points that could be
alleviated with our solutions. Too many companies get too
ambitious and kill themselves in the process.
I would also say we are a good example of the importance
of chasing global markets early. In some instances foreign
customers were easier for us to sell to than those in our
own backyard. Too many Canadian companies are reticent of
venturing boldly onto the international stage. I went to
a Silicon Valley event which compared a whole bunch of startups
on a wide number of criteria. I was surprised to see that
many of the well-funded silicon-Valley startups scored considerably
lower than our little firm from Toronto.
Finally, we are a good example of what can be done with
a frugal mindset. We only spent $5mm of the $11 we raised.
We were careful and frugal and we needed our engineers to
be clever and multitalented in solving complex problems without
a lot of resources. It is amazing what you can do in those
What are you proudest of?
I am proud of a number of things. Among them is the fact
that we were able to develop not only a successful first
product but also a second and a third product as well. This
is not insignificant. So many companies are founded on a
technology idea that came from a specific set of problems
recognized by the founder. Product number 2 is a lot harder
because this requires intuition and business sense. This
is where a lot of founders really struggle.
Any final observations?
Had we gone on, we could see that access to talent was going
to be an issue. I think we would have had to reach increasingly
into the US to get the talent we would have needed. That
in turn would have pulled us increasingly into the US as
I would also make the observation that there are funding
challenges in Canada. We had more funding choices in the
US and more understanding of what the business opportunity
was about. Lots of Canadian investors turned us down largely
on the lack of understanding of where the market would go.
The US market is large enough that VC firms can specialize
in certain areas of technology or even stages of growth.
That allows them to better understand the businesses they
invest in and in the process mitigate their risk and add
value to the businesses themselves. In Canada VC deals are
spread out among many technologies and it is uncommon for
them to be able to specialize. This is a significant handicap
in a lot of ways.
Will you do another PlateSpin?
Right now I am fully committed to Novell and seeing the transition
through so the team has a solid future in a Company that is
also looking for exciting growth and also supports the vision
we have for our business unit. But you never know.