Zscaler seeks to transform enterprise security through its cloud-based multitenant gateway…and it now has $38M in strategic funding to accelerate its plans

By Editor September 17, 2012

Zscaler_logoA Q&A with Zscaler founder and CEO Jay Chaudhry. The San Jose–based company was founded in 2008 and raised its first round of outside funding in late August—$38 million from Lightspeed Venture Partners and EMC.

SUB: Please describe Zscaler, and the value proposition you offer to the enterprise.

Chaudhry: My vision for Zscaler is to become the secure solution for users everywhere. We’ve already built the world’s largest security cloud with over 100 data centers, and currently secure over eight million users in 160 countries worldwide. Our current customers are large global industry leaders that are trying to solve the difficult challenges of securing users beyond their corporate network. Our largest customer is National Health Services with 1.6 million users. Other customers include British American Tobacco, which uses Zscaler to secure users in over 180 countries, as well as Society General, RalCorp, Pitney Bowes and VMware. We also offer Zscaler through relationships with Internet Service Providers such as BT, Verizon, Telefonica and Swisscomm.

SUB: Who do you consider to be your competition?

Chaudhry: There are hundreds of companies in the IT security space, and typically we get evaluated alongside companies like BlueCoat or Websense for web security. Those companies typically offer security appliances that are hardware and software based, and designed for on-premise network security—to protect users and data that reside inside the corporate firewall. Zscaler is a new kind of solution—a pure, multitenant secure cloud gateway built from the ground up to enable users doing business beyond the corporate network.

SUB: What differentiates Zscaler from the competition?

Chaudhry: There are hundreds of companies in the market offering some form of IT security. The difference Zscaler brings is that it is a pure cloud solution that requires no hardware or software. And unlike competitor appliances that are static and sit at the server or corporate network, Zscaler is built from the ground up to enable businesses for mobility, cloud applications and social media. Zscaler is already the world’s largest secure cloud gateway with over 100 datacenters worldwide, and it doesn’t require IT organizations to purchase expensive hardware and software to secure mobile users or remote offices around the globe. We’re transforming the market for IT security in much the same way that Salesforce.com transformed the CRM market.

SUB: When was the company founded and what were the first steps you took in establishing it?

Chaudhry: Zscaler launched in 2008 and the company is headquartered in the Silicon Valley. To date, the company has been self-funded and is cash-flow positive. Being self-funded allowed us to invest in developing the unique cloud platform and multi-tenant security architecture from the ground up without the typical pressures to meet outside investor targets. We focused on that first, then launched the company to the market when we were ready.

SUB: What was the inspiration behind the idea for Zscaler? Was there an ‘aha’ moment, or was the idea more gradual in developing?

Chaudhry: Zscaler was founded on the philosophy that the world of IT security is undergoing a transformation brought on by the consumerization of the enterprise through mobile devices, cloud applications and social media. While traditional security solutions focus on limiting the impact of these trends, Zscaler wants to enable businesses to embrace innovation securely, while delivering a superior user experience. Appliance-based network security solutions designed to protect corporate networks cannot scale to address these challenges, and often slow traffic to an extent that negatively impacts the user experience.

SUB: How did you come up with the name? What is the story behind it?

Chaudhry: We wanted a name that reflected the power of our solution to securely enable millions of users in the cloud without incurring the high costs of buying and adding more hardware and software. The name Zscaler is meant to convey that massive scalability, which also enables our ability to secure users everywhere with a zero latency performance.

SUB: What have the most significant obstacles been so far to building the company?

Chaudhry: Our biggest challenge to date has been in growing our sales and marketing capabilities fast enough to keep up with the demand for our solutions. We spent our early years focused on building out the product and infrastructure for the solution, and we deliver security services now to eight million users in 160 countries. We’ve built a successful business from the ground up, we’re serving large enterprise customers and we’re cash-flow positive.

SUB: You just raised $38 million in your first round of funding. What do you plan to do with the new funds?

Chaudhry: The goal of the funding is to align Zscaler with funding partners who share our vision of building a lasting public company, and we will be using this funding to put the infrastructure in place to achieve that goal. That means expanding our sales and marketing teams, raising our visibility in the market, and investing in continuing to build out our security offerings, particularly in the area of mobility. Another goal of the funding was to expand our channel sales and marketing capabilities through a strategic partnership with a global leader in our market with strong expertise in the security space.

SUB: The company has been around since 2008. Why was now the right time to raise outside funding?

Chaudhry: As a self-funded company that is cash-flow positive, Zscaler is in a strong position and has resisted outside funding to date. The market for IT security is undergoing a rapid transformation as enterprises face the challenge of transitioning from static, network-centric security to securing users doing business beyond the corporate network on mobile devices and by directly accessing cloud applications and social media. Zscaler has built the world’s largest secure cloud gateway in order to help companies address these challenges, and is uniquely positioned to capitalize on this market. We chose these funding partners to raise our profile in the market, accelerate our global go-to-market capabilities and align ourselves with partners who share our vision of building a strong, lasting company.

SUB: How does the company generate revenue?

Chaudhry: Zscaler is a cloud-delivered solution and offers its service on an annual subscription basis. The company is cash-flow positive and has experienced 100 percent year-over-year growth for the past year, and expects the same 100 percent year-over-year growth in the coming year.

SUB: What are your goals for Zscaler over the next year or so?

Chaudhry: Zscaler’s Secure Cloud Gateway is the industry’s only solution built from the ground up to secure users doing business beyond the corporate network, on mobile devices such as tablets and smartphones, as well as securing users directly accessing cloud applications and social media. Going forward, we will continue to build out specific solutions and features to expand on these capabilities to provide advanced security for mobile devices and applications.

Zscaler – www.zscaler.com