Q&A with Daniel Karp, director, Cisco M&A and VC investments

Derek Idemoto, senior vice-president of corporate development and Cisco Investments, US-based networking equipment manufacturer Cisco’s corporate venture capital (CVC) subsidiary, said of Daniel Karp, a director mergers and acquisitions and venture capital investments: “Cisco Investments is proud to nominate Daniel Karp for the GCVI Emerging Leader Award, based on his successful, multi-year track record of venture investments across the globe.

“His strong business acumen, combined with his ability to sift through the noise to identify the most significant emerging trends, has led him to become a successful investor in areas of cloud, data management, silicon, SaaS (software-as-a-service) and security.

“Daniel has a strong reputation with startup CEOs as a trusted advisor who bridges their success with Cisco’s own goals, helping Daniel build a portfolio of disruptive, high-calibre companies, including Gong, Habana Labs [acquired by chipmaker Intel in late 2019], Elastifile, Lightbits Labs, MemVerge, Illusive and Sealights. Since joining the team, his portfolio has resulted in exits of over $2.5bn.

“Daniel is recognised in the industry as a thought leader in cloud-first enterprise deep tech. Within our own team, others often turn to Daniel for mentorship and coaching, and he never turns down an opportunity to share his insights on how to take a thesis-driven approach, the importance of relationship-driven investments, and how to tie strategic rationale to a holistic action plan. Daniel is a rare talent, and we know more great things lie ahead for him in his career.”

1. First, just give us a quick overview of who you work for, what you do, and how long you’ve been doing it for (along with any CVC appointments you may have held prior to your present one)?

I lead the Investments and M&A efforts for Cisco’s corporate development and investments group across two domains – cloud and compute and intent-based networking (datacentre, cloud and enterprise networking). Moreover, I lead our geographical efforts in Israel and Latin America.

I joined Cisco Investments and Corporate Development team in 2013. In the first few years, I led the team’s geographic efforts in Israel and Latin America. As such, I was focused on all relevant domains and technologies for Cisco, leading strategic investments in companies like Habana Labs (AI chipsets, acquired by Intel for $2bn), Gong.io (revenue intelligence, valued at $2.15bn) and Sealights (DevOps quality governance), and in funds like Team8 (cyber-focused venture creation platform) and KaszeK (Latin America regional fund).

Around 1.5 years ago, I have also started covering the team’s global efforts in a few domains – namely, the cloud and compute domain, which spans hybrid cloud management and systems like UCS and Hyperlfex, and then over the past year, I have also added a focus around datacentre and the enterprise networking domains (our largest product franchises, including products like SD-WAN, enterprise switches and routers datacentre switches and wireless). Overall, I have led roughly a dozen direct investments for Cisco as well as two fund investments and have been involved in a few acquisitions.

2. What attracted you to CVC?

Broadly speaking, there were three main reasons which attracted me to CVCs in general, and to Cisco Investments in particular. First of all, from an experience standpoint, I have spent most of my career honing different skills, from engineering skills and problem-solving as an ASIC team lead, through product management and business development and strategy at Microsoft, and lastly, venture investing as part of a financially driven venture capital.

When I realised that CVCs are organisations where those skills could be leveraged, in what seemed to be a role which combines those skills. Secondly, as part of Cisco Investments, those experiences are coupled with the opportunity to work with the best entrepreneurs and be part of an established and reputable team. Lastly, the ability to truly impact both portfolio companies and broader Cisco, by leveraging the access and reach of Cisco, added a compelling factor into the mix. You have the power of Cisco as an organisation behind you, while still applying the outside-in lens.

3. What have been your greatest successes at your unit?

To me, being a strategic investor is about balancing your company’s strategy and the right set of opportunities, so that the investments you make are strategic, but also financially compelling and market-driven. It is super rewarding when you identify a market trend, create a hypothesis around that trend, identify the right teams to pursue those opportunities and tie that back to the strategic needs of Cisco. So, I am proud to say that when the organisation buys into that vision, it typically translates into high-value outcomes. Examples like that include:

  • Habana Labs: AI processor innovator. Series A round investor, acquired by Intel for $2bn.
  • Gong.io: Revenue Intelligence category defining company. Series A round investor, company valued at $2.15bn after series D round.
  • Elastifile: Cloud scale Data management. Acquired by Google Cloud Platform as the foundation for Google Elastic File Storage.
  • Team8: cyber venture creation studio founding investors, where we doubled down to co-invest in portfolio company illusive Networks, and acquired another studio created company, Portshift.
  • Newer investments aiming to disrupt the cloud-native space like Isovalent (co-invested with A16Z and Google), the DevOps space like Sealights (category-defining company in quality governance) and the memory space like MemVerge (Storage-class-memory pioneer).
  • Outside of direct and indirect deals led, I am also proud of being part of acquisitions that have impacted the direction of Cisco, including Viptela (SD-WAN), Leaba Semiconductors (Networking Silicon, a process which actually started as an investment discussion) and recently Portshift (K8s and Application Security).
  • Moreover, as my charter grew, an opportunity presented itself in working closely with other portfolio companies like Cohesity (valued at $2.5bn, NS1 (managed DNS and DDI disruptor) and Ctera (File Services SW). The opportunity to continue prior efforts and find new facets to get these better aligned with our company strategy and to accelerate their market traction is also something I take pride in.

4. What have been your biggest challenges?

We spend a lot of cycles in trying to net out opportunities that are both strategic to Cisco and financially viable. The process of determining the strategy and making sure the financial and market-facing diligence all tie-in well together takes time, as we want to be deliberate in what we do. We aim to back companies that represent an opportunity for broader Cisco and go through the lengths of making sure we can also build a hypothesis and an acceleration plan for companies. Many times, for earlier stage companies, we have to convince the organisation to take a leap of faith in sub-scale businesses based on limited information. Convincing the organisation to make longer-term, future-shaping bets is much harder than to invest in later-stage opportunities, but many times, those also represent higher reward. Those processes, where we make bold future-leaning bets, whether they come to fruition or not, are the biggest challenges I have.

5. What is your main professional ambition for the future?

I have been privileged to be working with some of the best entrepreneurs and learn from accomplished mentors about how to make financially motivated investments while having a highly strategic compass. My hope is to continue to be in a position to positively impact the entrepreneurs I partner with and help them as they take on bold challenges. I am energised by trying to be an organisational change-agent, and my hope is to help Enterprise-focused companies become category leaders and hopefully, make a small contribution in helping shape the way Enterprises consume technologies.

6. What do you think all CVCs could do better to make it a stronger industry?

One of the things we try to do at Cisco, and which to me represents something we should be doing more as an industry (i.e. CVCs), is to think about how you enable portfolio companies programmatically, so that the investment does not just serve the strategic value of the organisation you work for, but also consistently better the passage of the portfolio. If CVCs can truly focus on the consistent value-add to the startups, then our impact on invested company can meet the hypothetical differentiated value we can provide, above and beyond what any financial investors can bring. It also helps offset the more fluid nature of CVCs (where there is more churn than in financial VCs).

7. What are some of your corporate parent’s technology needs and corporate strategy amid the pandemic, as well as your CVC unit’s pain points?

The pandemic has accelerated procurement behaviour with customers, solidifying the need to be a must-have solution in the IT stack, as well as accelerated the technology shift to cloud-native and more flexible consumption models. We are looking for solutions that help us re-imagine a stack that is highly flexible, through an interface and consumption units similar to public clouds, while also being secure and TCO efficient (for example, by using a delivered as-a-service approach). Those include building blocks like data-management, new frameworks of compute, and obviously networking. Moreover, we are looking automating and simplifying the full life-cycle of environments, from planning of environments, through declarative/automation of stack, all the way through the ops and monitoring of workloads. It is a pretty broad mandate, which makes sense, since we are a $50bn turnover company that looks to be relevant for all workloads and all customers, whether those are consumed in public or private cloud environments.

8. And, finally, for colour, what did you do prior to CVC or in your spare time?

Prior to CVC, I spent three years in the Israeli Defense Forces Intelligence unit (unit 8200), I then did an undergrad in electric and electronic engineering, spent four years as an ASIC and hardware engineer and team leader, one year as an associate in a financial VC, did my MBA in the University of Chicago’s Booth School of Business and worked for three years in Microsoft across roles in strategy, business development and product manager in the Azure team and the company’s startup business group (incubations).

In my spare time, I enjoy hiking and exploring the Californian outdoors with the family, I also swim and have a rapidly growing collection of Bourbons and American and Spanish wines.