I tried to resign 4-5 times from Apptio: Co-founder Sunny Gupta on his entrepreneurial journey and the company he sold to IBM for $4.6 billion

"There were a few really dark moments for me at Apptio. I tried to resign four or five times through my journey. Around two years into starting it, I found creating a new category for a software product was really very hard," said the company’s co-founder and Chief Executive Officer (CEO) Sunny Gupta, who 15 years later turned the business into a success, recently selling it to IBM for $4.6 billion.

Having built and sold four tech start-ups through his journey as an entrepreneur for over two decades, Gupta was not new to hardships and was never a quitter. His journey from humble beginnings in India to building a life and career in the US taught him perseverance and survival, he said.

Gupta, 53, was born in Chandigarh to an IAS officer father who went on to serve as the secretary of education in the government of India and a homemaker mother whose family of entrepreneurs would have a great influence on him growing up.

Speaking to Moneycontrol, he said that though the family had the perks of his father being a bureaucrat, Gupta and his two older brothers were brought up in a humble household – a doting mother and a busy father. Outings and visits to restaurants were few, but life at his maternal uncle’s place was different.

"We used to go to Delhi to my mother’s house during summer vacations. And the chats with the family and exposure to my uncles’ businesses and how they were running these factories used to interest me. We used to go to nice restaurants on these vacations and trips outside Delhi. So at the age of seven, I knew it in my heart. I didn’t really know exactly what being an entrepreneur was, but I liked how they worked and their way of living," he said.

Gupta studied at St. John’s High School in Chandigarh for the first 14 years of his life before shifting to Delhi, where he completed his schooling at Delhi Public School (DPS), RK Puram.

After getting top scores in Class 12, he picked Shriram College of Commerce at Delhi University over St Stephen's College, where he pursued a degree in commerce.

"I got bored out of my mind in the first few months of college. I would take the bus to college and instead of going to class, go to a friend’s hostel at St Stephen’s and sleep," he said. Gupta didn’t pass his course that year.

But by then, he was already eyeing moving to the US and studying computer science. He cleared the SAT exam and got through to the University of South Carolina in 1988. His father, true to his Indian roots, was initially hesitant to send his young son to an unknown place but later agreed and gave him $2,000 and a plane ticket to reach there.

Starting up

"I paid up $1,300 in my college fees for the first semester. Another $200 went for books. So within the first week of arriving in the States, I was left with hardly anything, and that too without taking a car or any transportation," he said. He lived with an American family through his father’s connections, and food and lodging were taken care of.
Gupta was apparently one of the two foreign Indian students at the university, which made things even more difficult.

Ambitious and eager to start his career, Gupta hoped to squeeze his four-year course into three years while hunting for odd jobs to sustain himself. He worked at a cafeteria and labs and did yard jobs to sustain himself.

He was saved when he got an internship at another smaller university president’s office. It also came with a scholarship that could support him through the remaining semesters.

In 1992, after completing college, he got job offers from both Microsoft and IBM. He ultimately joined IBM as a software developer at their Seattle office. After over two years with the company, he moved to Boston for his second corporate job. By the age of 25, his calling to become an entrepreneur and innovate grew stronger.

In 1996, Gupta started Vigor Technology, an enterprise software-focused start-up that he refers to as "the easiest decision of his life because he had nothing to lose".

"I had nothing to lose. I was single and had no wife, kids, or family. Ironically, it was the easiest company to start. And a lot of people in their entrepreneurial journey live in fear of not being able to succeed," he said.

But the start-up was acquired by Rational Software for $3-4 million in the next two years. According to Gupta, he made a lot of mistakes in his first start-up. While it didn’t raise any venture capital (VC), he didn’t know how to scale the business or utilise the complementary skills of his team in the right way.

He added, "Then I realised I needed to go and learn at a larger company how to build and scale a business. I joined Rational Software after the acquisition. I worked with the CEO and the executive team very closely, and we ironically sold the company to IBM in 2003-04 for over $2 billion."

A similar fate awaited his second start-up, Performant, which was acquired within just six months of its launch. The software start-up helped Fortune 500 companies identify website performance issues. It was acquired by another large Israeli enterprise software company named Mercury. Gupta, too, joined the company and worked there for two years.

Trials and tribulations

His third start-up, iConclude, was a turning point in his career. Gupta was now aiming for the long haul, something that would be "extraordinary" and solve real problems. Starting in 2005, the software start-up offered solutions to solve technical issues at data centres. By 2007, however, this too was sold to Opsware, a larger data centre automation software provider founded by the co-founders of the venture capital firm Andreessen Horowitz. This venture, at that time, had $2 million in revenue and was acquired for $70 million. Opsware, in turn, was acquired that same year by HP for $1.65 billion.

In the same year, he was up again for his next venture, but this time the stakes were even higher, and he was not going to sell it off so easily.

When asked if being a serial entrepreneur rather than playing the long game was a conscious choice, Gupta said, "It was never a conscious decision.…this word ‘serial entrepreneur’ bothers me sometimes. I don’t consider myself a serial entrepreneur; I am an entrepreneur and an innovator. It just happened that in my first three companies, we built something of great value, and the technology industry is extremely inquisitive."

So, he started Apptio in 2007 along with Kurt Shintaffer, and three other co-founders. To put it in simple words, Apptio is a software-as-a-service (SaaS) company that helps client companies better manage their technology spends, providing insights on planning, forecasting and decision-making in those areas. It also provides estimations and insights on how rival companies are managing and allocating their tech spends.

"This time, I made a promise to myself that I wanted to do something extraordinary. I want to change the industry and innovate. I wanted to build something of scale and not get seduced by this selling business," he said. Gupta started coding for Apptio only after speaking to 40-50 CIOs and getting their perspective on the need for the solution they wanted to build.

Despite this, Apptio’s initial path continued to be rocky. In the first two years, the company struggled to find immediate VC backing and demand for a new software product category that didn’t exist before.

Apptio went on to raise $136 million until its public listing on NASDAQ in 2016. Again, there too, the start-up’s market cap halved after it missed its numbers and guidance to Wall Street in the first quarter itself. As employees panicked, Gupta tried to convince them of his long-term vision, and that they needed to focus on execution and work, and results would follow.

Two years into listing, while Gupta said that the company wasn’t looking to delist, it started getting interest from some strategic partners for an acquisition. And then Vistas Equity Partners came out of nowhere and offered a 60 percent premium to its stock price. In 2018, the company was acquired for $1.94 billion.

"They (Vistas Equity) believed Apptio could grow faster as a private company than a public company. I saw that opportunity as quite exciting, as I could focus more on strategy, M&A, and scaling the business faster. That was the only reason, but I knew my job was not done," Gupta said.

He added, "We created a lot of wealth for our employees and shareholders."

Under Vistas’ ownership, the start-up tripled its customer base from 600 in 2019, doubled its revenue, and acquired five companies around cloud and other capabilities, expanded to Europe and more Asian markets like Japan. "We were hardly breaking even around the time of the acquisition; now we are heavily profitable," he said.

What got IBM interested?

IBM has always been a partner of Apptio, and only two years ago Gupta met CEO Arvind Krishna. It was initially related to shared market insights and their partnership, which eventually became a natural synergy to do more transformative work for clients.

The discussions for the acquisition started only a couple of months ago, and IBM offered more than double the valuation Vistas acquired it at.

IBM believes the acquisition will advance its IT automation capabilities and help clients optimise their technology spends and budgets amidst a tough macro environment. "Apptio will bring to IBM $450 billion of anonymised IT spend data, unlocking new insights for clients and partners," the company had said in its statement.

Overall, Apptio will continue to operate as an independent business unit within IBM software, Gupta said. He and his business leaders will continue to operate as a separate entity within IBM.

Apptio has over 1,300 employees globally, of which over 25 percent are in India. The India team was set up during Vistas’ ownership, and now the company wants to continue adding more headcount.

After all this time and the last nearly seven years of a roller-coaster ride of listing, delisting, and acquisitions, when asked if Apptio finally received its due, Gupta explained, "Sometimes for categories to establish, it takes time. The market didn’t understand Apptio’s value five-10 years ago. But now that companies are becoming more digitally enabled, Apptio’s value proposition is more critical than ever. We have innovated, acquired, and grown."

On the hindsight, Gupta wondered if any of his previous startups could have scaled the way Apptio did. May be one of those could. For now, he cherished those experiences.

"If not for those experiences, I wouldn’t have had the stepping stones that made Apptio today. I did make new mistakes at Apptio. And I still continue to have that learning mindset," he signed off.