By Jon Auerbach
Today, Microsoft announced it’s acquiring CRV portfolio company Affirmed Networks. The deal, unveiled amid the economic and social turmoil of the global coronavirus pandemic, is a terrific outcome in an otherwise gloomy period. But more importantly, it is a tale of entrepreneurship, why great companies grow out of recessions and the power of perseverance.
Hassan Ahmed created the idea behind Affirmed when he was working out of our offices in Boston in 2009 as an Executive in Residence. When Hassan joined the firm, he was already the most successful CRV entrepreneur of all time, having run engineering at Cascade Communications, a networking company sold to Ascend for more than $3 billion in 1997 and then subsequently running Sonus Networks, a highflying communications company that had gone public in 2000. Hassan had the magic touch.
After leaving Sonus, our partner Bruce Sachs convinced Hassan to hang around our offices while he considered what to do next. I had done a lot of wireless investing and the two of us began talking about problems that could be solved in the space. In fact, I had an idea of a company to start aimed at reducing costs for mobile operators and asked Hassan to tag along meeting with operators in the U.S. and Europe to vet the idea. Cardinal Rule #1 for venture capital is that a VC should never conceive a company. We’re too far removed from the action and the ideas have to come from the entrepreneurs. But Hassan was a gentleman and humored me as we criss-crossed the world talking to carriers. Eventually, Hassan developed an idea of his own and that became the seed of Affirmed Networks. The idea, simply put, was to replace hardware with software at the core of mobile networks. It was basically a cloud for mobile operators before the term was even widely used.
In my Series A investment memo to the CRV team in April 2010, I listed three pillars of my investment thesis: 1) the opportunity to back a strong team, highlighting Hassan’s experience and the skills of co-founder and engineering head Anand Krishnamurthy (who now runs Affirmed); 2) a belief that network operators would be more open to novel approaches to cut costs and improve performance; and 3) a thesis that key relationships with mobile operators including AT&T, Vodafone, and Softbank would make the sales and development processes easier.
Hassan had hatched the idea for Affirmed in 2009, amid the global financial crisis. Big companies were shedding employees, stocks were falling and it was a time of doom and gloom. And those factors made hiring an early team at Affirmed much easier. Talented employees were recruitable because they were either sitting on what they thought were worthless stock options or concerned about the technology roadmaps of their employers amid the downtown. So we assembled a dream team, including a lot of talent from Starent Networks, a very successful startup in the space that I had previously backed.
Ten years and a lot of blood, sweat, and tears later, the original investment thesis back in 2010 proved spot on. The team at Affirmed was both clairvoyant and stubborn. They were experienced domain experts and knew how to work together, through good and bad times. The move to more open networks, as well as pressure to reduce costs, made global mobile operators much more open to embracing novel ways of building a network. And finally, the team’s relationship with the mobile operators proved critical. In fact, all of the operators in my memo are customers today.
Ten years after its creation, Affirmed is the leading provider of virtualized software for global mobile operators. The company has more than 100 customers in the U.S., Europe, Asia, and Latin America. The company’s virtualized software is literally at the core of its customers' networks, carrying voice and data traffic.
When Hassan, Anand, and the team started the company in 2010, Hassan was pretty clear that he wanted to get it off the ground and move on. Amazingly, he stayed almost 9 years before handing the reins over to Anand last year. Hassan’s three companies will generate more than $1 billion for CRV, making him the most successful entrepreneur in the firm’s 50-year history.
For Anand and the incredible team at Affirmed, we are so proud of being a small part of their incredible journey. And we are thrilled to see how Microsoft and Affirmed together can profoundly impact the next generation of wireless networking, so-called 5G. We can’t wait to see what they both have in store for us under the Microsoft umbrella.
