{"id":143326,"date":"2024-08-03T14:42:22","date_gmt":"2024-08-03T21:42:22","guid":{"rendered":"https:\/\/www.lankaweb.com\/news\/items\/?p=143326"},"modified":"2024-08-03T14:42:22","modified_gmt":"2024-08-03T21:42:22","slug":"meet-the-founder-who-built-and-sold-a-600m-enterprise-software-startup-from-sri-lanka","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2024\/08\/03\/meet-the-founder-who-built-and-sold-a-600m-enterprise-software-startup-from-sri-lanka\/","title":{"rendered":"Meet the founder who built and sold a $600M enterprise software startup from Sri Lanka"},"content":{"rendered":"

https:\/\/techcrunch.com\/<\/em><\/span><\/h2>\n\n\n

Sanjiva Weerawarana is a Sri Lankan success story. He founded enterprise software firm WSO2 in 2005, got it close to $100 million in ARR, then sold it to private equity firm EQT for $600 million in May.

He sometimes drives for Uber, too.<\/h3>\n\n\n\n

Sri Lanka isn\u2019t renowned for its startup ecosystem, but one company has been something of an outlier in the South Asian island nation these past two decades. An open source enterprise software provider with customers<\/a> such as Samsung, Axa, and AT&T, WSO2<\/a> recently agreed to be<\/a> acquired by private equity giant EQT<\/a>, at a valuation TechCrunch reported at the time to be north of $600 million. (We can now confirm that the valuation was in fact exactly $600 million.)<\/p>\n\n\n\n

The transaction, which remains subject to regulatory approvals, means that EQT will become WSO2\u2019s sole owner, procuring all outstanding shares including those of WSO2\u2019s investors and current and ex-WSO2 employees \u2014 30% of the proceeds will be going<\/a> to those employees.<\/p>\n\n\n\n

This liquidity event could also create significant wealth among those inclined to start their own ventures.<\/p>\n\n\n\n

This shows that equity is important \u2014 one of the things that we have insisted on from day one is that every employee has been a shareholder,\u201d WSO2 co-founder and CEO Sanjiva Weerawarana<\/a> told TechCrunch in an interview. That\u2019s very important, and it\u2019s a concept that has not been understood here before, because there haven\u2019t been companies that exited and gave any amount of meaningful financial return. Seeing is believing, right? Talk is cheap.\u201d<\/p>\n\n\n\n

Thriving through war and unrest<\/h2>\n\n\n\n

Founded out of the Sri Lankan capital, Colombo, in 2005, WSO2 is a middleware stack constituting tools such as API management, similar to Apigee which Google acquired for $625 million<\/a>; and identity and access management (IAM), along the lines of $15 billion publicly traded Okta<\/a>. The main driving force behind this has been its founding CEO Weerawarana<\/a>, a computer scientist and key figure in the open source community over the past 25 years, both as a member of the Apache Software Foundation and more recently as the creator of Ballerina<\/a>, a cloud-native general purpose programming language for integrating distributed systems.<\/p>\n\n\n\n

Prior to WSO2, Weerawarana worked within IBM\u2019s research and development team in the U.S., where he helped develop web service specifications such as WSDL<\/a> and BPEL<\/a>. And it was there that the seed for WSO2 was sown.<\/p>\n\n\n\n

I actually tried inside IBM to build a new kind of middleware stack, but IBM wasn\u2019t interested,\u201d Weerawarana said. So the only option was either start a company, or give up on the idea.\u201d<\/p>\n\n\n\n

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So in August 2005, Weerawarana spawned WSO2 alongside two co-founders: Davanum Srinivas<\/a>, who left after two years; and Weerawarana\u2019s former IBM colleague Paul Fremantle<\/a>, who would go on to serve as CTO until stepping down in 2015<\/a> (he later rejoined and then left again, but remains an advisor today).<\/p>\n\n\n\n

Notably, WSO2\u2019s center of gravity has remained in Sri Lanka, despite a longstanding civil war<\/a> and external pressure to relocate to the U.S. where Weerawarana had lived previously for 16 years.<\/p>\n\n\n\n

I came back [to Sri Lanka] in 2001, and two weeks before I landed in Colombo, the airport was attacked<\/a> by a terrorist group \u2014 there were still pieces of planes on the ground,\u201d he said. In 2005, the war was still going on. Sri Lanka as a country has not been able to maintain a consistent calm environment for us, but that\u2019s okay.\u201d<\/p>\n\n\n\n

Today, 80% of WSO2\u2019s 780 employees are in Sri Lanka, with the remainder spread across a smattering of hubs<\/a> in the U.S., Europe, and Asia.<\/p>\n\n\n\n

I wanted to show we could build a product-oriented tech company from Sri Lanka,\u201d Weerawarana continued. There had never been a company like this, and at that time there wasn\u2019t even a company out of India like this. Indian companies were very services-oriented, as were Sri Lankan companies. But one of the big prices [for staying in Sri Lanka] was that at pretty much every funding round, the majority of investors would ask when I was moving back [to the U.S.]. And my answer was always the same: \u2018I\u2019m not moving back<\/em>.\u2019\u201d<\/p>\n\n\n\n

Investors weren\u2019t the only ones who pressured WSO2 to move: Customers and competitors have also used its location against it at various junctures.<\/p>\n\n\n\n

Some of our competitors fought against us, saying, \u2018do you know where they are located<\/em>?,\u2019 and that becomes a challenge,\u201d Weerawarana said. Then we\u2019ve had customers saying \u2018you\u2019re located way over there, why are you charging us these prices<\/em>?\u2019\u201d<\/p>\n\n\n\n

On the flip side, WSO2\u2019s geographic setting gave it the pick of technical talent, owning mostly to the fact that it was a product-based business in a sea of services.<\/p>\n\n\n\n

We\u2019ve never had a problem with engineering and technical talent \u2014 we\u2019ve been able to hire the best people in Sri Lanka for the last 19 years,\u201d Weerawarana said. If you are a creative engineer, would you rather work for a services company, or be in a role where you could be creative and work on top-of-the-line technology?\u201d<\/p>\n\n\n\n

\"WSO2
WSO2 CEO Sanjiva Weerawarana speaks to media during a product launch in Colombo on February 26, 2014<\/figcaption><\/figure>\n\n\n\n

Intel inside<\/h2>\n\n\n\n

After WSO2 raised a small round of angel funding in 2005, Intel\u2019s VC arm emerged as its earliest backer, investing in 2006<\/a> and through several follow-on rounds<\/a> in subsequent years.<\/p>\n\n\n\n

Intel Capital\u2019s initial $2 million cash injection was critical to WSO2\u2019s early growth, and was the result of fortuitous timing. Pradeep Tagare<\/a> was a senior investment manager at Intel Capital at that time, and met Weerawarana through their associations with the Apache Software Foundation. Tagare was looking to invest in an open source startup to complement a duo of other open source investments it had made \u2014 one into Java-centric application server company JBoss<\/a> (which Red Hat later acquired<\/a> for $350 million), and another into database company MySQL<\/a> (which Sun later snapped up<\/a> for $1 billion).<\/p>\n\n\n\n

We were looking at a bunch of open source investments as a strategic initiative for Intel, essentially to build an alternate stack on Intel hardware,\u201d Tagare explained to TechCrunch. We had invested in JBoss, and we invested in MySQL. So we were now looking for an open source middleware company, and WSO2 fit the bill exactly.\u201d<\/p>\n\n\n\n

Tagare\u2019s thesis was that countries situated in Asia would not only stand to benefit from the open source movement, but would also be likely to contribute a lot. Open source software development is naturally distributed, opening up the coding and collaboration process to those who didn\u2019t work at the big tech companies of those times.<\/p>\n\n\n\n

Now they could contribute \u2014 before, it was all really controlled by the Microsofts and the Oracles of the world,\u201d Tagare said. Its location wasn\u2019t necessarily a requirement, but being was based in Asia just made WSO2 even more interesting.\u201d<\/p>\n\n\n\n

Much has changed in the 20 years since WSO2 arrived on the scene. With the advent of cloud computing and microservices<\/a> \u2014 software built from smaller, loosely connected components that can be developed and maintained independently and which conveniently rely on APIs \u2014 WSO2 has been well-positioned as enterprises transition from legacy monolithic applications.<\/p>\n\n\n\n

Now with the AI revolution in full-swing<\/a>, WSO2 is also set to capitalize given that APIs and and IAM are key components of the AI stack \u2014 from integrations through authentication and beyond. Moreover, WSO2 is integrating AI into its own products, recently debuting a new API manager<\/a> that allows developers to integrate an AI-powered chatbot into their APIs to allow non-coders to test APIs using natural language.<\/p>\n\n\n\n

According to Crunchbase data<\/a>, WSO2 had raised $133 million since its inception, however Weerawarana clarified only $70 million was primary capital. Other rounds, like the $93 million Series E round two years ago<\/a> led by Goldman Sachs, consisted of equity and debt.<\/p>\n\n\n\n

But however the funding is sliced and diced, there\u2019s no ignoring the fact that WSO2 was a startup dinosaur by the time EQT came calling \u2014 most successful VC-backed companies reach an exit within 10 years.<\/p>\n\n\n\n

So what gives?<\/p>\n\n\n\n

We\u2019ve had multiple people wanting to buy our company through the years, but I resisted because I always wanted to build a company that would reach an IPO \u2014 an independent business, basically,\u201d Weerawarana said.<\/p>\n\n\n\n

That all changed in May, when WSO2 accepted an offer from EQT Private Capital Asia<\/a> (formerly Baring Private Equity Asia), a private equity firm EQT acquired in 2022 for more than $7 billion<\/a>. The difference this time was simple \u2014 one of WSO2\u2019s controlling shareholders wanted to get liquidity,\u201d according to Weerawarana.<\/p>\n\n\n\n

Because they had more than 50%, it becomes a control transaction,\u201d he said.<\/p>\n\n\n\n

That shareholder was San Francisco-based Toba Capital<\/a>, a VC firm set up by Vinny Smith<\/a> in 2012 after he sold Quest Software to Dell<\/a> for more than $2 billion. Quest had previously invested in WSO2<\/a>, equity that transferred to Dell through that acquisition \u2014 but Toba bought that stock back from Dell, and went on to make further investments in WSO2 including buying Intel Capital\u2019s portion. Toba Capital partner Tyler Jewell also replaced<\/a> Weerawarana as CEO for a two-year period, with Weerawarana returning to the hotseat in 2020.<\/p>\n\n\n\n

Weerawarana says the company has been cash-flow positive since 2017, and profitable since around 2018,\u201d but it hasn\u2019t had the luxury of vast pools of capital that would allow it to look at multiple year strategies.\u201d This is something it will be able to do under EQT \u2014 one of the<\/a> world\u2019s biggest private equity firms<\/a>.<\/p>\n\n\n\n

Indeed, WSO2 says it will hit $100 million in annual recurring revenue (ARR) by Q3 this year, one of the key reasons EQT came calling.<\/p>\n\n\n\n

WSO2 really has all the ingredients we look for in a software business,\u201d EQT partner and global co-head of services Hari Gopalakrishnan told TechCrunch. Deep and long-lasting enterprise client relationships, successful product-led-growth, technically robust products, and prudent financial management. Pick a strength, WSO2 probably has it.\u201d<\/p>\n\n\n\n

From the outside, selling to private equity might not seem like the dream outcome for a founder with ambitions to go public and who values his company\u2019s independence. But Weerawarana insists that this outcome will better enable it to do just that.<\/p>\n\n\n\n

I started the company to make something that lasts \u2014 one of the reasons we didn\u2019t sell it previously is that we knew that would be the end of it,\u201d he said. EQT doesn\u2019t have any other businesses in this domain, they\u2019re trying to build around WSO2, not merge it with something else. Their goal is to build the company for five years, which aligns with what I wanted, and gives us five years to get to an IPO.\u201d<\/p>\n\n\n\n

Driving force<\/h2>\n\n\n\n
\"Uber
Uber logo on top of car<\/figcaption><\/figure>\n\n\n\n

While running WSO2 is a time-consuming endeavor on its own, Weerawarana keeps busy with other initiatives such as a philanthropic effort called the Avinya Foundation<\/a>, which he established in 2022 to support economically disadvantaged children via vocational education programs.<\/p>\n\n\n\n

However, in 2017 Weerawarana also started driving<\/a> for Uber, a move he says was designed to make it more socially acceptable in Sri Lanka to work in such jobs \u2014 if a successful businessman like him can do it, then anyone can.<\/p>\n\n\n\n

I would be coming home from work and I would just pick somebody up along the way,\u201d he said. The main point I was trying to get across was that somebody who does a driving job is no different to somebody who does any other job \u2014 they\u2019re just offering a service and you pay for it. We have this mindset here that people who do certain kinds of jobs are not the same as other kinds of people. And breaking that is very important \u2014 doing Uber-driving is part of it. The Avinya Foundation is also focused on that problem, trying to support all our skilled workers, such as tradespeople.\u201d<\/p>\n\n\n\n

The pandemic, among other global events, put a temporary halt on Weerawarana\u2019s Uber driving exploits \u2014 because people were doing it for survival, he didn\u2019t want to take money from people who needed it.<\/p>\n\n\n\n

I will do it again \u2014 things are getting much better,\u201d he said. Tourism is almost back to normal, so the demand will be there, and it might make sense for me to drive \u2014 but I don\u2019t want to take any business from somebody else.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

https:\/\/techcrunch.com\/ Sanjiva Weerawarana is a Sri Lankan success story. He founded enterprise software firm WSO2 in 2005, got it close to $100 million in ARR, then sold it to private equity firm EQT for $600 million in May. He sometimes drives for Uber, too. Sri Lanka isn\u2019t renowned for its startup ecosystem, but one company […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-143326","post","type-post","status-publish","format-standard","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/143326","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=143326"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/143326\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=143326"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=143326"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=143326"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}