Wednesday, August 22, 2018
Interview with Alex Kazerani and James Segil, Openpath
For this morning's interview, we have an interview with two of Southern California's most successful serial entrepreneurs, Alex Kazerani and James Segil, now of Los Angeles-based Openpath. Alex and James founded EdgeCast, which sold to Verizon for more than $350M in 2013. Alex is CEO and Segil is President of the new company, which is focused on access control and management. They sat down and told us a bit about why—after a string of successful companies—why they've gotten back into the startup game, and why they've decided to tackle the whole area of getting you into your office.
What is OpenPath?
James Segil: OpenPath is the easiest and most secure way to get into your office. We've taken the frustration out of legacy, access control methodologies, so you don't have to have a big batch of keys and pin codes. Your phone gets you in. We all carry phones with us every day, and we don't need one more thing to get into the office. At our prior life at Edgecast and Verizon, we had ten badges on a loop on our belt, kind of like a bunch of dog tags to burden you. All of that is now gone. It allows you to have a smart office, which is completely automated. When you walk up to an Openpath powered office, and there's a door there, all you do is touch the reader and it opens. It's a frictionless experience. Access control, as a whole, hasn't evolved over forty years, and we're bringing technology like the mobile cloud and software in the cloud, to create really disruptive innovation to how businesses respond to customers. We felt that pain ourselves, at our prior company, so we wanted to build great technology in a beautiful design, which was easy to use and deploy, which is how Openpath came to be.
You guys did pretty well selling Edgecast to Verizon. What drove you to start new company and get back into the startup game?
Alex Kazerani: We did our first company in the 90's, and sold it in 1999. In 2000, James and I started KnowledgeBase, which we sold in 2005. We then started Edgecast in 2006. After Edgecast and Verizon, we both took some time off. However, we are both entrepreneurs, and needed to build and do something positive. That's what got us to go about it. We took a look at problems we wanted to solve, looked at all of the companies involved in different industries, and thought here we had an advantage, because we'd be able to take an outsider's look into an industry which has been stuck in doing things the same way for years. We came up with a fresh perspective on this.
James Segil: As a team, we just like working together. We decided to do another startup together, and saw a lot of problems to solve, but this one seemed like the biggest opportunity.
What was the thought process on selecting this as the opportunity you wanted to pursue?
Alex Kazerani: There were several converging trends that we investigated, and this one had five things that we liked. One, was the transition of everything to the mobile side, including your keys, your wallet, cameras, almost everything to your mobile device. Why not your badge for your office? We think that made sense, because everyone loves everything on their phones. We surveyed millennials, and the next generation workforce, and it was very encouraging. The second item, was this was one of the few industries that has not been cloudified yet. We looked at some of these systems, and they are still installing Windows-based client/server environments for access control. We had noticed this challenge at Verizon, where you had to have multiple badges for multiple offices, until they could get an MPLS circuit, firewall, and network, and team to manage to synchronize credentials across those offices. This was literally the reality on the ground, which was even tougher as they would buy companies or dispose of real estate. Cloudification was really important to us, as cloud guys, who had build SaaS in the past. We though it was much better to build, secure, and manage a robust system and backup environment in the cloud, instead of deploying servers at every office, none of which were well maintained. The third component was revenues. Instead of big, upfront CapEx, we saw that the trend, we thought resellers and systems integrators would really appreciate avoiding that issue. We spoke to some of these system integrators, and we found they were literally having to buy all of this equipment using financing from a bank, and trying to sell their solution on a monthly basis, in order to build recurring monthly revenues. So, there were many converging factors, where it was the right place and right time.
James Segil: The other thing we found, is that there's been a transition between the traditional facility managers and IT. Security and the overall requirements for a business and landlord is changing. It's less about physical security and just cybersecurity, but instead a merger of the two. Facilities and IT are now looking at the security posture of a building in total.
Alex Kazerani: Traditionally in this business, there was the facilities manager, who was responsible for the exit signs, desks, and access control on the door, and literally some kind of badge system, and that was the extent of their attention. Now, with all the issues around cybersecurity, and employee data and information, credentials and security access and IT it's a much bigger initiative. It's more than those legacy systems were designed for, which are just in the dark ages compared to everything else.
James Segil: If a hacker can't get into your network, but can easily get into your office and steal a laptop, that's where you have to merge both that traditional security posture to include both cybersecurity and physical access.
So where is the product today?
James Segil: Our flagship launch was about nine weeks ago, Openpath Access. That's just the next generation access control part of this. There are a bunch of different constituents who are customers. There are those doing a new build, think of a developer of someone moving into an office who has no access control, and they want to future proof their build. They are adopting this so they can have a modern office. We also have clients who are retrofitting their existing spaces. They are upgrading because they want access to a cloud-based security profile. Maybe they are growing, and adding additional offices. We make that easy to do, to handle multiple sites with our solution. You can have multiple sites, offices in LA, Chicago, and New York, and it's easy to get our system installed without a ton of work. Those are the two business drivers across our portfolio today. We also have a ton of folks in the channel who are interested in this. Those are low voltage systems integrators, general contractors, consultants, locksmiths, and security consultants, who want to be able to differentiate their solution. They want to be able to offer cutting edge solutions to their customers. We launched nine weeks ago, with great attention and press, and we're now getting an onslaught of inbound interest. We're now ramping up the team and production and capabilities along that demand curve. We raised a Series B round pretty quickly after we launched, and are using those funds to take this access product and add additional features and capabilities, and to roll out new products to the portfolio.
Alex Kazerani: It's not like an app you can build in a few months. We have been working on this literally for two years. We had a good year prior to launch working with about 500 users in eight different companies around the country, capturing telemetry, optimizing the software, and monitoring usage to make the experience frictionless. All that work has paid off. What we're seeing as customers are installing and using our product, and the feedback we get from texts, emails, and things they post to LinkedIn are amazing, and has been an incredible experience.
James Segil: We've looked to build an emotional connection with our customers. We're building something that makes your life so much better, and really improves the quality of your work day. They haven't had that kind of experience with access control before. If you think about other products that make your life better, for example, Nest, before Nest you probably didn't care about your thermostat. You might set it if you were hot or cold. But when you have beautiful machinery which is responsive to your needs and adapts to you, and which you can control with your phone, it really improves the quality of your experience. Another example is the doorbell. Before Ring came along, you never would have thought you'd be able to check on the security and state of your front porch, who is coming and going, and talk to people when they come to your door. In the same way, no one thought about access control until we told them they could get such a better experience, without the friction.
Alex Kazerani: We've even had people ask how they can get this for their home.
James Segil: We're not there, just businesses, but we can see this portfolio expand beyond businesses. If you think about schools and their needs, hospitals, healthcare, and government, and even residential—not people's homes, but apartment buildings—there are a host of places where customers have asked us about which we haven't actively solicited. They've told us that this is exactly what they need to secure a school or apartment building, whatever. That's been a pretty cool experience.
What's the biggest lesson that you have learned from prior startups, that you are applying to this new startup?
James Segil: Getting the customer experience right. It's understanding what sets us apart in the market. Though maybe we could have launched sooner, we spent a lot of time working out the kinks on how to make it effortless to walk into an office, but where you have complete control of who comes and goes, to make it a better experience than you have today using a badge or a key. That really paid off. I think it's getting that emotional connection to your users, where they love using your product. That's been a big lesson learned.
Finally, as successful serial entrepreneurs, what has been the most important thing that has allowed you to be successful?
James Segil: Partnering with Alex was my number one strategy (laughs).
Alex Kazerani: I wish there was one magic formula. We think there is just hard work, there is luck, and there is a lot of ingredients that go into the mix. It's everything from picking the partners you can work with, making sure they're like family, to having trust, having convictions, and having a vision that you're able to stick with for years. It's understanding that version one might need to be refined in order for you to get to the final solution, and it's about raising the right amount of capital. It's about not hiring just the best people, but the right people. There are so many little ingredients you have to get right. My biggest recommendation is, don't do a startup. It's a big grind. Only do it if you can't sleep at night because you'd regret it for the rest of your life. That's when you have to do a startup. Otherwise, I don't think many people can see it through.
James Segil: The one thing that is most apparent to us in this latest iteration, is pattern recognition. In a meeting this morning, for example, we were able to refer to what we'd seen in the past. We could say, remember when this happened like ten times before? We can see that this is happening, we know this is happening, and are able to look forward three steps because of the experience we had in the past. That has been tremendously useful. We've been able to cut through potential failures, and get straight to where you need to get to next.
Thanks, and great catching up on your new startup!