When Ken Xie founded his third company, Fortinet Inc., in 2000, he couldn’t possibly foresee that within the first couple years he’d hit a downturn or that within the first decade he’d be facing one of the worst economies in history.
But because he put together a solid business model, he’s in a better position than most to deal with the difficult economic conditions.
“When you have the money, people will give you the money, but when you need the money desperately, people look at you as a troubled company, so you should build a good model on the foundation and a cash cushion there, and that will give you the freedom to look more at the long-term goal from the beginning,” the president and CEO says.
While Xie is fortunate in that his business provides Internet security, and there’s always an Internet threat out there so it makes his business more likely to withstand the current economic crisis, he says there are certain principles that you should abide by to make sure you have that solid foundation and are able to do the best you possibly can in turbulent times.
“The first thing really is try to be thinking long term instead of more short term — I need to deliver this quarter, next quarter, these results to the board,” he says.
Xie looks at the next two to five years in front of him and what positions he needs to move his company in to be successful in that time frame.
“Once you’re thinking long term, the benefit is you can avoid some kind of short-term, quick decision like laying off some people to do some other things that will hurt your long-term goal,” he says.
The way to think long term is to be willing to invest in your product, your people and your culture right now in order to position yourself for success when the market turns.
“There’s some short-term slowdown, but that’s the best time to invest in the technology and the people, and after a few quarters, things will turn around, and you have more resources, and you can grow faster,” he says.
Doing these things has allowed Fortinet, despite the recession, to stay cash flow positive, grow about 30 percent each year and bring in more than $200 million in revenue last year. Additionally, Fortinet has racked up numerous honors in its short history for its rapid growth and quality products, and Xie himself was named a Northern California Entrepreneur of the Year by Ernst & Young in 2006.
“You can look at the data and the awards that we have,” Xie says. “We keep growing quite fast, but the key is good people and thinking long term, and it’s better to invest in the technology right now.”
