a return to value: building real businesses

W O R L D W I D E L E A D E R I N S E C U R I N G T H E I N T E R N E T

A Return to Value: Building Real BusinessesA Return to Value: Building Real Businesses

Gil Shwed, Chairman & CEO

Presented by

Marius Nacht, SVP

©2000 Check Point Software Technologies Ltd. - Proprietary & Confidential --22--

AgendaAgenda Evolution of the IT Start-UpEvolution of the IT Start-Up

GoalsGoals Fundamentals Fundamentals Creating valueCreating value

The Check Point CaseThe Check Point Case Market and technology growthMarket and technology growth Financial resultsFinancial results Creating customer valueCreating customer value


The Tech Start-up:The OpportunityThe Tech Start-up:The Opportunity

Innovation and low cost of entryInnovation and low cost of entry Significant entrepreneurial opportunity Significant entrepreneurial opportunity

The Entrepreneur The Entrepreneur Innovate & Make a difference Innovate & Make a difference Be A LeaderBe A Leader Achieve Financial SuccessAchieve Financial Success


How Is This Achieved?How Is This Achieved?

Customer NeedCustomer Need Products/Services that fills a real needProducts/Services that fills a real need

Customers are willing to pay for thisCustomers are willing to pay for thisThe Start-up AdvantageThe Start-up Advantage

Focused & CreativeFocused & Creative Expertise – Market & TechnologyExpertise – Market & Technology Fast & FlexibleFast & Flexible


The Start-Up’s Plan: Pre-1995The Start-Up’s Plan: Pre-1995

1.1. Created an Innovative Product, Technology or Created an Innovative Product, Technology or ServiceService

Lean (2-4 people) “garage operation”Lean (2-4 people) “garage operation” Spent cautiously and operated on limited resources Spent cautiously and operated on limited resources

2.2. Found the Early AdoptersFound the Early Adopters Made “real world” productsMade “real world” products Started selling!Started selling!

3.3. Built a companyBuilt a company Grew sales first, then grew companyGrew sales first, then grew company Evolved the technology just ahead of marketEvolved the technology just ahead of market


The Start-Up’s Plan: 1998 - 2000The Start-Up’s Plan: 1998 - 2000Identified a HUGE Opportunity (or jumped on a “hot” bandwagon)Identified a HUGE Opportunity (or jumped on a “hot” bandwagon)

Hoped for big money rewardsHoped for big money rewards Challenge was to gain mindshareChallenge was to gain mindshare

Created MindshareCreated Mindshare Spent $$$ (before a real product)Spent $$$ (before a real product) Built a company that fit a HUGE opportunityBuilt a company that fit a HUGE opportunity

Focused on internal growthFocused on internal growth Built a big company prior to proven market/productBuilt a big company prior to proven market/product

RESULTRESULT: You’ve just lost your start-up advantages: You’ve just lost your start-up advantages Not as fast, focused or cost effectiveNot as fast, focused or cost effective


What does the Plan for a Post-2001 Start-Up Look Like?

What does the Plan for a Post-2001 Start-Up Look Like?

A Pre-1995 Start Up Plan…A Pre-1995 Start Up Plan…


The Start-Up’s Plan: Post-2001A Return to ValueA Return to Value

The Start-Up’s Plan: Post-2001A Return to ValueA Return to Value

1.1. Create an Innovative Product, Create an Innovative Product, Technology or ServiceTechnology or Service

Lean (2-4 people) “garage Lean (2-4 people) “garage operation”operation”

Spend cautiously; operate on Spend cautiously; operate on limited resources limited resources

2.2. Find the Early AdoptersFind the Early Adopters Make “real world” productsMake “real world” products Start selling!Start selling!

3.3. Build a companyBuild a company Grow sales first, then grow Grow sales first, then grow

companycompany Evolve the technology just Evolve the technology just

ahead of marketahead of market

The Start-Up’s Plan: Pre-1995The Start-Up’s Plan: Pre-1995

1.1. Created an Innovative Product, Created an Innovative Product, Technology or ServiceTechnology or Service

Lean (2-4 people) “garage Lean (2-4 people) “garage operation”operation”

Spent cautiously; operate on Spent cautiously; operate on

limited resourceslimited resources

2.2. Found the Early AdoptersFound the Early Adopters Made “real world” productsMade “real world” products Started selling!Started selling!

3.3. Built a companyBuilt a company Grew sales first, then grew Grew sales first, then grew

companycompany Evolved the technology just ahead Evolved the technology just ahead

of marketof market


A Return to Value:Focus & EfficiencyA Return to Value:Focus & Efficiency

1.1. SalesSales2.2. Customers/PartnersCustomers/Partners3.3. TechnologyTechnology

Pre-Sales (PS)Pre-Sales (PS) Early Sales (ES)Early Sales (ES) More Sales (MS)More Sales (MS)No. of No. of PeoplePeople

<10<10 1:100K1:100K

1 Person for 1 Person for $100,000 in sales$100,000 in sales

1:200K1:200K

RatiosRatios 60% in R&D60% in R&D Sales > R&DSales > R&D Sales + R&D > Sales + R&D > 60%60%

Efficient – Invest in the right placesEfficient – Invest in the right places


The Check Point Case:Creating ValueThe Check Point Case:Creating Value


Check Point Case: From Start-Up to World Class CompanyCheck Point Case: From Start-Up to World Class Company

1993 – 1994: Launching Company 1993 – 1994: Launching Company The Israeli version of a “garage operation”:The Israeli version of a “garage operation”:

Headquarters = Grandmother’s apartmentHeadquarters = Grandmother’s apartment Staff = 3 Founders (3 Developers added towards end of Staff = 3 Founders (3 Developers added towards end of

1994)1994) Undercover development Undercover development Guerilla Marketing Guerilla Marketing

1995 – 2001: Building a World-Class Company1995 – 2001: Building a World-Class Company Worldwide Operations – Sales & Services Worldwide Operations – Sales & Services From $10M to $0.5B SalesFrom $10M to $0.5B Sales Global OrganizationGlobal Organization

300 R&D, 300 Sales, 200 Services300 R&D, 300 Sales, 200 Services


FirewallsFirewalls

19941994

VPNVPN

19971997

20012001

• Stateful InspectionStateful Inspection• First shrink-wrapped First shrink-wrapped

firewallfirewall• IntegratedIntegrated

VPN/FirewallVPN/Firewall• OPSECOPSEC

AllianceAlliance

• Gigabit PerformanceGigabit Performance• VPN Enterprise ScalabilityVPN Enterprise Scalability• Security DashboardSecurity Dashboard

Check Point Case:Setting Technology StandardsSetting Technology StandardsCheck Point Case:Setting Technology StandardsSetting Technology Standards

• End-to-end Internet security End-to-end Internet security platformplatform

• Desktop/Client securityDesktop/Client security• eBusiness application eBusiness application

securitysecurity

19991999


Creating Value:Check Point Revenues & ProfitsCheck Point Revenues & ProfitsCreating Value:Check Point Revenues & ProfitsCheck Point Revenues & Profits

$1.20

$0.00

$0.80

$0.40

Mill

ion

s

$

$100

$200

$300

$400

$500

$600

1995 1996 1997 1998 1999 2000 12 Month

EPS

Net Income

Revenues


When starting – try to findWhen starting – try to find ““Exploding” MarketsExploding” Markets

Hard to predictHard to predict Enough for manyEnough for many

PartnerPartner Can’t do it all (and well)Can’t do it all (and well)

InnovationInnovation TechnologyTechnology UtilizationUtilization MarketingMarketing


SummarySummary ““Economic Value” is backEconomic Value” is back

Companies are measured on revenues Companies are measured on revenues and earningsand earnings

Grow only as much as you can afford / as Grow only as much as you can afford / as much as is financially justifiedmuch as is financially justified

““Start-up and Innovation” culture is back Start-up and Innovation” culture is back (“Get rich fast” might not work that well)(“Get rich fast” might not work that well)


How Is This Achieved?How Is This Achieved?

Customer NeedCustomer Need Products/Services that fills a real needProducts/Services that fills a real need

Customers are willing to pay for thisCustomers are willing to pay for thisThe Start-up AdvantageThe Start-up Advantage

Focused & CreativeFocused & Creative Expertise – Market & TechnologyExpertise – Market & Technology Fast & FlexibleFast & Flexible

a return to value: building real businesses

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