The “Billy Bean of Data” and the “Bill Gates of Singapore,” serial entrepreneur Serguei Beloussov goes by many names. But how has his company married cyber protection to motor sports?
Jordan French: We’re back again. This is Jordan French. I’m here with Serguei Beloussov, known in some circles as the Bill Gates of Singapore. He goes by many names. Serguei, thanks for joining us.
Serguei Beloussov: Yes, thank you but I don’t like to be known as the Bill Gates of anything. I prefer to be known as myself.
JF: Great, I can appreciate that.
SB: Even though I really think Bill Gates is an amazing guy – still – I’m not him.
JF: Let’s talk about that. You had a chance to meet Bill Gates. I know. You spent some time with him.
SB: Very little time. In 1996 in Singapore we started writing our first software application which we invented. It was a financial-derivatives evaluation package. We used the latest Microsoft technologies.
At that time, Microsoft was becoming a server company, so they shipped Windows NT in the early 1990s but then they shipped Windows 2000 in the year 2000. In ’96 they were sort of in transition. They added to NT 4.0 some new features which are typical features of advanced server software such as a transaction monitor, message queue, and some sort of a framework for building component applications.
Specifically, we used Microsoft Transaction Server, Microsoft Messaging Que, Microsoft SQL Server and Microsoft Distributed Component Object Model (DCOM) technologies.
The application itself was quite advanced but perhaps its undefined market for it – so what it allowed us to do is make a visual model of financial derivatives for mathematicians. So they can actually build the financial derivative and evaluate its price and decide at which price you should sell it in such a way that it would be profitable. It was very advanced.
When Bill Gates came to Singapore, Microsoft introduced us and Bill told us that we had a great architecture. That made us feel very special and from that point onward we decided that we wanted to build software.
JF: That’s a great quote. One thing we’ll do for the audience is – we’ll back up a bit. For those who don’t know Serguei Beloussov that well, he’s a Singapore citizen. He started out in the transition period that he mentioned in the mid 90’s and is now co founder and CEO of Acronis and Acronis Foundation, among other things.
Serguei, Singapore itself was also in a transition in the mid-90s. From what I’ve been told, you’ve been a big part of that evolution of its place in the build out of technology globally. Tell us about that experience – when you arrived in Singapore – what that whole scene was like for you..
SB: You know, I wasn’t very thoughtful at the time. I was quite young when I came to Singapore. I was 22 years old and you’re not super thoughtful when you’re 22, especially if you were born and raised in the Soviet Union. The Soviet Union was a country where business was perceived to be criminal activity — and so people who had tried to do business in the Soviet Union would go to jail and so you had a very limited understanding of how to do business. I was mostly consumed with my first business and my first business was about building computers. Singapore became a base from which we could source components from Asia and it offered financial support that enabled us to buy those components, ship them to Russia, and assemble computers from them.
In 1996 we accidentally decided to build our own software, called Cassandra, as a side project. It was quite helpful that Singapore had a program that was a joint program between the National Computer Board of Singapore (Ministry of IT) and Microsoft. This program provided grants and offered assistance to companies willing to build advanced applications. When we started, Microsoft noticed us and invited us into the program. We then made the application and received some financial support. The support wasn’t huge but it forced us to come up with a business plan. It made us think about how to go to market and it connected us to Microsoft so it was helpful.
I don’t think at that time that I really thought much about the scene in Singapore or anything like that. Also, I was never really in one place for very long. Back in 1994 we also opened an office in San Francisco, California and we also had a significant presence in Switzerland — as we used Swiss banks for our global operations — so I was always travelling.
JF: So up until that point in ’96 you were more so on the hardware end. Is that right?
SB: That is right but it’s very easy for the media to think about me as a person but I’m not really one person. I really represent a team. So there is a group of people who are actually working together with me. Some of them have been working with me since 1992. They are all graduates of Moscow Institute of Physics and Technology and they all graduated with degrees in either physics, applied mathematics, software engineering, computer science, or cybernetics.
Practically all research in modern science requires software, so most of the time when you do research, you’re doing something new and for that you need to write new software. All of us were trained to write software and whenever we had businesses — for example, the first computer assembly business we had — we wrote our own automation program and the second business — consumer electronics — involved manufacturing. We had lots of different manufacturing equipment that we needed to make it operational. So we wrote software for the manufacturing equipment–for plastic molds and production lines. There were always software engineers involved.
JF: Thanks for correcting me on the plural “you.” You’ve had a core team now for 25 years so you must be doing something right.
SB: Yes. Some of the people on our team joined in July 1992 like our CTO. I’m not sure whether you should be proud of an old team. It is always better to have some new people and old people but we still have in our company three people who were hired in July, 1992.
JF: I see that consistently with entrepreneurs. Often times they’re able to put a team together and build multiple companies. Let’s go back to Cassandra as a pivotal time because it was your move — almost accidentally — into software.
SB: Yes, it was a bunch if things that came together. First of all, I always kept close with my classmates from my university. My classmates from university all either went into business or went to work abroad in science – so at the moment I have friends in most of the universities of the world: Caltech, MIT, Stanford, Harvard, Carnegie Mellon, Oxford, and Cambridge. Specifically, I kept in touch with people at Stanford; one of them is currently a professor at Harvard: Eugene Demler. He told me a couple of stories about successful professors who would leave academia for business. Most of his stories were about how it’s beneath professors to go into business and how some professors–having made hundreds of millions–buy Ferraris and then come back to be professors but would not be accepted by other professors because they drive Ferraris.
JF: They’re sell-outs.
SB: About how much better it was to just focus on pure science and drive a Toyota Celica or Toyota Camry versus driving a Ferrari. Stories about how those poor and unhappy professors would then have to go and build another business and milk more hundreds of millions of dollars, instead of being real scientists like my friend.
I specifically remember two stories. One was about a professor who build a computer security company. Another story was about a professor who evaluated financial securities and I decided to build software for financial securities, the software Cassandra, which is a funny combination of the two stories. That’s just one coincidence. Another coincidence — in fact — I was able to find people who understand financial mathematics. I mean I have a good understanding of mathematics but financial mathematics is quite specific and there are a lot of different results in this area. So we found some people from the University of Illinois and from Stanford University and we started writing this software. At that time, it was still a very interesting field, with lots of people contemplating doing financial derivatives and making tons of money.
When we started, it was a coincidence that Microsoft noticed. They also noticed us for another funny reason. Our head of engineering, Stanislav Protasov, was working for us in our Moscow office. I didn’t realize at the time that he was there and I thought I should write the software myself. I then started looking for somebody to write it and our CTO, who worked with me for 26 years, said to me “Oh, I have this guy, Stanislav. He’s good at writing software. You should talk to him.”
So I talked to him on the phone — I was in Singapore — and I told him “Stanislav, do you want to write this software?” and he says: “Yeah, ok, but only if we use the latest Microsoft applications.” He wanted to use all the technologies that I mentioned above, and also Visual Basic for Applications, since it was now available to license.
He had to explain that to me as I didn’t understand software too much at that time. So it came about that we were the second company in the world that used licensed VBA. VBA is what you use when you use Excel and Pivot Tables. Microsoft initially included it as a part of MS Office. Right around 1996, they started licensing it separately. At that time there was multiple companies who wrote scripting languages and licensed scripting languages but here, he was able to license it from Microsoft and it was the complete Visual Basic Suite, which was nice. Microsoft noticed us because we were the second company in the world to adopt VBA. Microsoft noticed us and then approached us and as a coincidence, there was this grant program.
Bill Gates visited Singapore multiple times. Twice I think. The second time he visited was in ’97 and we had something that we could show him.
JF: And that’s when you met?
SB: And that’s when we met but “meet” is a very strong word. He spent maybe 20 minutes with us that day. Also to give a quote for our press release.
JF: That’s the key and we can quote him again here, too, from what you said earlier.
JF: You are best known as co founder and CEO of Acronis but following Cassandra and leading up to Acronis, you did a number of things that a lot of people see as building blocks to what you’re doing today.
SB: Possibly. Yes, I mean what we did was quite simple. After that, we started thinking of ourselves as great software engineers. At the same time we were also a franchising distributor of ERP software, called Solomon Software — and because we thought we were the coolest in the world — we started convincing this, at that time, 15 year old, established and mid-size software company from Findlay, Ohio, that they had the wrong architecture. We obviously showed them the quote from Bill Gates saying we had the right architecture.
There was another coincidence inside Solomon Software. As they decided to move to a new architecture for some future product, the old architecture product was given to a guy who decided that he wanted to rewrite it. He then approached us and hired us to do it. Because we thought that we were experts in architecture — we thought we were but we weren’t — we quickly bought and established a 50 – 60 people strong engineering office in Singapore. Very quickly, we went to not just Solomon Software but also to another company — Pervasive Software — and we also convinced them that they had the wrong database management system.
We went ahead and built Database Management Tools for Pervasive and acquired some great expertise doing that. Later on, we tried to sell it to MySQL, which was founded and led at the time by Michael “Monty” Widenius. You know, MySQL is part of everything right now.
SB: Yes, however, if Pervasive were executed well, MySQL would not have existed now.
So we ended up convincing more companies and we ended up with 60 to 70 people in the office in Singapore, building software. This was during ’97, ’98, and ’99. We build software for Solomon and we sold software in Asia. We built software for Pervasive and we built software for Be Operating System. We even built software for some company called HAL. The company was founded in order to build the next generation SPARK Architecture and they needed somebody to write their operating system, so we had a bunch of engineers on that project.
Around 1999, even though the bubble hadn’t burst yet, it was clear that it was coming. Companies started doing crazy things. Our partners, Pervasive Software and Solomon Software specifically, started doing crazy acquisitions. They bought a bunch of internet companies. They already had very real and profitable businesses but in order to make them more attractive, they’d also acquire other Internet related businesses. These companies soon started running out of money. Even though they were trying to be dot-com, they didn’t really have dot-com in their DNA. Mostly, they just wasted money and so it was clear to us that we had to do something else in 1999. We couldn’t really sustain business with the partnerships we had.
It was kind of outsourcing but it wasn’t really outsourcing because, in our case, I came up with the ideas of what Pervasive and Solomon needed to build. We sold them ideas and they would compensate us for the cost of developing those ideas, with minimal profits, through license fees — if the product we built for them proved to be successful.
This lead us to the need of founding a new company, who would build a unique technology, which was Parallels. We founded Parallels in the beginning of 2000. Initially, what we wanted to build was a complete platform for application service providers which includes, storage, network, computing, automation and includes basically — virtualization of storage, networking and computing. It was a very big vision and we were a small team at the time, about 70 people in Singapore, with a limited amount of money. Very quickly, we realized that we couldn’t do all the things that we’d set out to do so we split Acronis in 2003 from Parallels.
JF: And the reason was resource constraints?
SB: Yes, resource constraints. The reason was that we needed to focus. Parallels’ main focus was virtualization automation and primarily virtualization automation of computing, while Acronis focused specifically on a backup storage applications for many-many years.
JF: It turns out that Acronis has grown into a much larger company, correct?
SB: No. Parallels was larger in 2015 when we started selling it off. So Parallels was split into four companies. Two companies were sold. Plesk – by the way — key people from Plesk were here in the audience today — I’m still a minority shareholder in Plesk. Another, is Odin. Odin was sold to Ingram Micro. What remains is www.parallels.com – which includes Parallels Desktop for Mac, Parallels System Management for Mac, Parallels Toolbox, and Parallels Remote applications server, as well as www.virtuozzo.com (virtualization), which is effectively a hyper converged infrastructure company.
When we started selling off, Parallels had about 1150 employees and had over $200 million in revenue. It was bigger than Acronis but now Acronis is bigger.
JF: Did you foresee the four-way split from Parallels with its four derivative companies?
SB: I actually ran Parallels from 2000 to 2010. In 2010 we hired a professional CEO and I focused on Runa Capital. It’s a complicated topic. It is very easy to discuss in retrospect. It’s very easy to pretend that you foresaw or to pretend that you could have done better. It is much more complicated do things in the future or even the present.
No. I did not foresee this split but at the end of the day. Any business faces the challenge of completeness vs simplicity. So you want to make something complete but you also don’t want it to be too complex.
Complexity and completeness are — sort of — two different and opposite things. Arguably the split of Parallels into four businesses made four, less-complete businesses but they also became much simpler and so easier to run.
JF: So one piece of advice you might have is: Always think about simplifying a business?
SB: I don’t know if that is a good piece of advice. I think it’s important that you have a strategy and it’s important that you have a plan. When you have a strategy, you should always think that it is the simplest thing.
So a good strategy is something which you can execute well — so you have execution capacity for you strategy. For example if I should try to become a ballet dancer, I cannot execute the strategy well anymore because if you want to become a professional ballet dancer, you need to start when you are four years old. So, that’s not going to be a very good strategy. Even if I had a very special training program, I cannot really execute it well enough, right?
Strategy also means that you have to do something different. It also means that you have to leverage your strengths. Strategy also means that you have to be able to, not do something. You might be able to a thing but you refrain from doing that thing in order to focus.
Once you have a strategy, you need to have a plan. Following the plan is hard because it’s much easier to operate without the plan since, when you’re building a new business, there’s a lot of uncertainty. So it is very difficult to figure out what the plan should be. Nevertheless you have to have a plan and follow it. Eventually you can adjust your plan.
So that’s what you need to do. Obviously, doing things which are simple is a good idea but something I should definitely say is — when you go and read books about building businesses, most of them are written by people who’ve never built businesses. Most of those books recommend to focus and recommend to have simplicity. It is important to understand that building a new business, even a medium-sized business like Acronis, is an inherently hard thing to do, so you can’t do it too simply. If you’re doing something that looks very easy, you’re probably doing something wrong.
JF: Fair point to make. It sounds like strategy and planning led to the installation of the professional CEO of legacy Parallels, is that right?
SB: It wasn’t legacy Parallels. We wanted to go public or sell the company. It’s hard to sell a company where the founder is also the CEO, because the founder/CEO would probably want to leave soon after the sale goes through, to enjoy his or her new-found level of autonomy. That’s why we installed a professional CEO — to make it easy for us to sell the company or go public.
JF: Are you referring to key man risk?
SB: No. Not so much key man risk. I’m referring to the fact that if I own the company and somebody else buys it, I get a lot of money and the buyer gets much less maturation, much less autonomy right?
So people are motivated by mastery, autonomy, and purpose. Many entrepreneurs are motivated by autonomy and by the fact that you can control things — you do it yourself. When you sell a business, you cannot control things. In fact, what you can control is your own money and so you can take your money and go do something else.
So it is a natural thing. Every entrepreneur who wants to prepare their business for a strategic transaction – would probably benefit from installing professional management.
JF: Right. Ok. That’s a great set of points.
SB: I mean I’m not sure if it was a good idea or bad idea. It happened. Probably in retrospect it wasn’t such a great idea but again, that’s just due to set of circumstances.
JF: And it presented some other opportunities for you and what you did was, take the helm of Acronis.
SB: For example. At that time, I was to lead Runa Capital and QWave Capital.
JF: Not many people know about Runa Capital. Runa Capital is essentially an early-stage venture capital fund.
SB: It’s a growth stage venture firm basically. So actually it’s a family of venture funds with slightly different limited partners with a slightly different focus. So one fund is focused on all technology, including hardware and science like quantum technology. Another fund is related to very early stage and seed stage. Yet another fund, is focused on growth stage. Altogether about $0.5 billion under management with close to 100 companies in the portfolio.
JF: Yes, so pretty big in that space and if it helps the audience — Runa Capital certainly helps companies that need funding to grow their business.
SB: Well venture capital funds don’t help companies. Venture funds are focused on making money for their shareholders (Limited Partners). Also, in the process of doing that — if the company’s goals are aligned with the goals of the fund — it could help companies.
JF: Incidental benefits. I appreciate the cynicism of investing in some cases.
JF: So, since you took over Acronis, it has grown a lot. Its footprint in the world has grown very much. One thing I want to touch on is – one angle through which a lot of people now do know Acronis – and that’s through Motorsports.
Serguei, tell us about that. Was it a deliberate move to go down a road marketing in that industry?
SB: Well, it’s a very common topic for which we always have a very simple answer. First of all, we have a very complete and very efficient product suite. Because it is very efficient, it is very useful in cases where businesses are suddenly experiencing explosion of data. So sports is such an industry. Sports is a $90 billion dollar industry — and I’m not just talking about motor sports. Today, sports is experiencing an explosion of data because suddenly they have computer vision, artificial intelligence, and clubs need to manage their fan communities and they have multimedia data about fan communities that they analyze and deal with, as data. So every sport — and you’ll see more announcements from us coming in the next week or the week after — has an explosion of data. This explosion is new. This means they don’t have the IT budget for it. They didn’t realize that — suddenly, to win in baseball, basketball or hockey — you need data — or that dealing with the fan community would require working with data.
So this is where we come in. We bring our software. It’s very efficient and what we do – we provide our software – and in return we get the marketing value. Now with motor sports, especially Formula 1, the explosion of data is outrageous.
If you go into a large bank — let’s say UBS here — banks employ thousands of staff but only store several petabytes of data. A motor sport team has 500 times fewer people but 5 times more data compared to some banks. It’s a disproportionally large amount of data per dollar of revenue or per employee. Teams would store 10 to 20 petabytes of data because such a lot of data is being generated by the engineers, who are constantly redesigning the car.
The engineers do not have enough time to test these cars in real time, so they test the cars with virtual simulators and they test the cars with virtual aerodynamics tubes and so they have a lot of data. Engineers generate in the vicinity of 3 to 10 terabytes of data per day, hence, up to 4 or 5 petabytes per year and they keep data for many years so the amount of data is growing. Also — the car — there is telemetry on the car so that generates more data.
That’s why we give the software and get marketing value. Now for us it is even more useful — though not as a fact that the largest industry for us is the automotive and manufacturing. Almost 40% of our revenue comes from automotive and manufacturing. That means every member of an organized motor sport team is typically involved with automotive companies and definitely in manufacturing companies. They are a target for our software — again they use our software on production lines primarily because it’s very very efficient, easy to use, and reliable. So we are working with motor sports, getting marketing value and then we’re working with sponsors, so you know. Nissan, for example is a customer of ours. One of our largest customers. Nissan is going to partner up with e.dams, so Sebastien Buemi will be driving a Nissan-e.dams car at this event, even while Nissan is our largest customer. The amount of money we’ll be spending on the e.dams team and the amount of software that we’ll be supplying is tiny in comparison with how much we get from partnership with Nissan.
JF: And on that choice of motor sports as an industry: Does it build an ecosystem that feeds on itself and also provides leads from marketing? Did that come as a consequence of a deliberate push into the industry or did you already have a significant toehold?
SB: Motorsports is a very funny industry where probably 80% of all revenue and data stems from Formula 1 alone. All the other motor sports combined, are much smaller than Formula 1. So Formula 1 is a huge motor sport. Now motor sport is a good word but most of the time people seem to associate that with drivers. In Formula 1, the driver contributes about 5 to 10 percent to the success of the team while, 90% of the success is attributed to the car. So, really it is an engineering sport. It is a competition between engineering teams and a very tight competition at that — we really think of Formula 1 as an engineering sport more than a motor sport.
JF: I can appreciate that as an engineer myself.
SB: It helps us with our brand but on the flip-side, let’s take your favorite soccer club as example?
JF: I’m a fan of Milan.
SB: OK, let’s take Milan. Let’s imagine that they need our software but simply don’t have the money to pay for it. They still need it, so what they can give us in exchange is branding, that’s it.
Eventually they will have money and they will pay us back because they are using our software but for now we can get some branding in return. That’s how we think.
JF: So this foreshadows this conversation about sports more broadly than just motor sports — which is very data driven — like you said. It is engineers, almost competing against each other, foreshadowing an ever bigger foray for your business into other sectors of sports where data is so valuable.
SB: Yes, but data is going to become part of every sport — even today, there is a company called Iceberg Hockey, you can look it up. They do computer vision for hockey. There’s also a company planning to do computer vision for Soccer. Sports is going to be aided by artificial intelligence and big data. Ultimately it goes towards how you win. In the Premier League, you get — for example in the UK — that Manchester United has a billion-dollar budget and say there’s a club which is bottom of the log, having a $100 million dollar budget. So the question becomes, how do you maximize a $100 dollar budget and get the maximum number of points?
JF: Certainly. Well, we’ll end on that note. I’m with Serguei Beloussov. We’re in Zurich, Switzerland for Formula E racing weekend.
Until next time.