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Smolin: When you brought the product to market for the first time, what was, would you say, the biggest problem that you faced in getting it rolling from the time you decided you were going to make Federation a product until you were ready to sell the first, or install the one Capistrant: I think the biggest problem was realizing that it s going to have to be modular, and people are going to have to be able to turn things on and off It s all going to be the same code The only way to pull this off was to make everything table driven So we had to rethink a lot of our menuing system to be a completely table-driven thing with parent and child relationships and be able to configure it quickly for a customer.

Livingston: Did you ever suggest to Kim that she stop talking to the press van Hoff: Yes, we did, but she ignored it. Kim was a good CEO in the startup

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phase, but as startups grow it can get more difficult. Marimba went from 0 to 40 people in the first year and grew to 300 people during the IPO. Anybody can run a company up to 100 people. You just have to be intelligent and have good intuition. There s a lot of tedious work you need to do, but it s not that hard. But there s a point when the company gets bigger that it just becomes a management problem; it becomes something that you have to have experience in. Managing people and motivating teams requires a very different skill; it s not something that you can do by the seat of the pants. So the lack of experience eventually begins to show if you don t have somebody who can make decisions, for example. We had this really funky power balance in our company where we had a really strong VP of sales and a really strong CFO and a really inexperienced CEO. And whenever there was a decision to be made, she couldn t break the tie. And what do you do Once Kim got replaced by John Olsen, he was completely different. John had run big companies and it was really easy for him to make decisions that were very hard for us to make. And that tells you that as a founder, you have the skills to start companies from scratch, but it doesn t necessarily mean that you have the skill to grow it till they re larger.

van Hoff: Well, every business plan has an exit strategy and ours was IPO. That was the right choice at that time. Right now, you d aim for an acquisition. Everybody that joins a startup hopes to get rich. They also do it because it s fun, but you re taking a bet on winning a lot of money. But the odds are skewed against you because not a lot of startups actually succeed in fulfilling that bet. We exceeded our own expectations in the end. But a business plan is a tool that you use to sell the idea to VCs. The VCs look at it and say, There re no spelling mistakes and the math seems right. But I like the people so let s invest. A lot of the decision-making is very emotional. There s no formula that identifies good business plans versus bad business plans. So I think it s not really a fair question to ask Did you execute on your business plan because every business plan is just a wild guess, right You could easily add a couple of zeros everywhere and sell the same thing to people. Instead of 10 percent market growth you make 20 percent market growth, and suddenly you make $200 million more in the fifth year, but so what They re marketing tools. Livingston: What big turning points occurred in the first year van Hoff: We did a first release of the software, which was a really important thing. We hired some executives and lots of great people. We hired some really bad people too we had to fire somebody in the first year. We had our first lawsuit filed. Livingston: Was there any time when you wanted to quit

van Hoff: Marimba is an unfair case because we were willed on like crazy by the investors We really had an unfair opportunity because when we got funding, the VCs were calling us They all wanted to invest because they had heard about us and wanted to find out what we were doing So we got a really good first round of funding $4 million from Kleiner Perkins Though I thought they wired the money in these situations, they actually gave us a check So we had two checks from the Kleiner fund and the Java fund and Sami goes, Let s go to Kinko s and make copies! So he takes the checks to Kinko s and comes back with the photocopies, and he forgot to take the checks out of the copy machine! Luckily they were still there.

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