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What is Meraki and why did Cisco pay $1.2 Billion for it?

Let me share my perspective on this question.  (Full disclosure:  I run the enterprise  networking business at Cisco, and signed the check for Meraki).
The Meraki story is one of classic entrepreneurial success. The recipe for that success included three great founders, a strong team around them, great investors, and a passion for a new vision of networking. 

That new vision was to bring all the great attributes of consumer and cloud based software models to networking. In building their platform, they focused on customer experience, ease of deployment and ease of use.  They leveraged the cloud development model to rapidly iterate their offering.  Additionally, they focused on the business model for the company and innovative ways to go to market.  And they focused on building a great company, with a unique culture, awesome development team, strong sales and marketing leaders, and a committed supporting cast.

So why did Cisco pay $1.2B for Meraki? That is the easiest part of the question to answer.

1.      The market for networking technology in small and medium sized enterprises is nearly $5B.   Meraki brings a compelling offer, including wireless, switching, routing, security, along with services such as mobile device management and WAN acceleration.   They are at a $100M run rate and essentially doubling year over year.  We are convinced their technology provides significant advantages for customers in this segment.   And they had demonstrated a viable business model for rapidly scaling the business.

2.      Meraki (now the Cloud Networking Group at Cisco) has spent six years thinking about how to build cloud managed networks.  While the Meraki offer is focused on the mid-market, it is easy to see ways to leverage Meraki technology more broadly within Cisco.  So we believe Meraki technology can impact not just the $5B mid-market, but the $20B+ large enterprise market.

3.      The Meraki founders have built a great company, and a great team.  We believe they will add new talent and capabilities to Cisco in both development and go-to-market.  They are staying in San Francisco, will maintain the Meraki culture, and form a new hub for cloud based software development.  In fact we have signed a new lease on a large space in Mission Bay, so we can accelerate investment and hiring.

Now that the acquisition is done (we closed December 20th), the Meraki founders – Sanjit Biswas, John Bickett and Hans Robertson – are signing up for their next challenge:  building a $1B cloud networking business for Cisco.

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