reykfloeter – blog

Why I put my startup Esdenera on hold

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Reyk Floeter
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Looking back after this year, I’m grateful for many things that happened. After we shut down the operation in September 2017, I worked for six months as a contractor in an amazing cloud project at SAP, where I learned that it is truly one of the best workplaces in Germany. Somehow I took the bait and moved on to join a startup in Switzerland. It was one of our best family decisions to move to Zurich. We love our new city and I like working at ARCATrust.

But it’s still a shame that I had to shelf Esdenera. I really enjoyed our creative company culture, the great team, our products, and our office with the K14 space side project where we even hosted the n2k15 OpenBSD network hackathon once.

Now I’m sitting in front of an Esdenera Firewall, the DIN rail version that was intended for industrial applications, and I’m amazed about the command line interface and about how well everything works. I took it out of the storage because it is a small fanless box that includes two SFP slots - something that I can use to connect my new Gigabit FTTH (Fiber-to-the-Home) connection at home in Zurich. Did I mention that Zurich is great? I’ll probably just reinstall it to run plain vanilla OpenBSD 6.4 instead of the 6.1-based Esdenera release.

We had many good things in the product, in our cloud firewall and the physical appliances. I’m especially proud of my appid implementation that made it a true NGFW cloud firewall. We had features and flexibility that weren’t matched by Checkpoint, Cisco, or PAN. I had the proof when I used the cloud version of the Esdenera Firewall in a large project bringing thousands of servers into Azure; where it worked such much better than the other, well-known vendors.

So why didn’t Esdenera take off? First of all, I was depending too much on a major customer. Of course they weren’t our only customer, but by far the most significant revenue stream for my little startup. This worked very well for over four years until they changed the responsible manager and dropped us for no comprehensible reason.

Secondly, I was proud of bootstrapping a company that was doing financially very well from the beginning. We never had any real bottlenecks or financial problems; from the first day until the last day four and a half years later when we moved out of our office and dissolved the team. But I realized too late that it is almost impossible to build an enterprise product vendor without major financial backing. I always dreamed big and I didn’t want to create a SOHO company selling boring appliances for boringly small companies - I was always interested in targeting the enterprise firewall market that is dominated by dinosaurs like Checkpoint, Cisco, PAN, and Fortinet, whose are now being challenged by Huawei and other government-backed vendors from China.

My first attempt at looking for investors was three years after founding the company. I already had experience with VCs from my previous startup, .vantronix, where we raised a little A round which was actually not much more than a seed funding these days. In July 2016, I pitched Esdenera at an event in the Microsoft Accelerator Berlin. And I won, my whole team won, due to our outstanding presentation. Like most of those pitching events, there was no financial price, but just press coverage and meetings with important people. I actually found a “founder advisor” who arranged some meetings with renowned angels and VCs in Berlin and the San Francisco Bay area.

Flying to the US meeting VCs near the Sand Hill Rd in Palo Alto and Menlo Park was one of the lasting experiences of my startup life. I sometimes felt like in HBO’s “Silicon Valley” TV show: Sitting on a large table in a meeting room with a large investor logo on the wall, surrounded by arbitrary artwork, just me on the one side and the VC’s partner on the other side. I also met investors “for a coffee” at blue bottle coffee in SAP’s HanaHouse in Palo Alto.

While I got very good feedback and many open doors, I didn’t succeed in finding an investor. The Berlin-based investors didn’t really like that my company was located two hours away in Hanover, and that I didn’t do something that they could grasp: an ecommerce company, a copy cat, or an app. The German startup scene is not necessarily known for their successful companies in the enterprise networking area. The Silicon Valley-based investors understood my product a bit better, but I was located in the wrong country because it is supposedly too hard to invest in German startups due to all the red tape.

Despite being interested, all of them were afraid of the fact that Esdenera was not the “Next Big Thing”, no unicorn, and no flying car from their point of view. I should rather have founded a trycicle sharing company or a de-delivery company that comes to your home and picks up all cardboard boxes from your online orders. Disrupt! Or, at this time two years back, something with blockchain or IoT?

This year I’ve joined a startup in exactly that area: a company that is building crypto custody solution for blockchain, IoT, and digital assets.

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