How Lew Cirne Created a New Category, Sold his Company for $375 Million, and Got the Chance to Have a D0-over
Lew Cirne always had it in him. In 2008, right in the middle of the global recession, he launched New Relic, an application performance management (APM) company. New Relic’s growth has hardly ever slowed down since it opened its doors in 2008.
Today, thousands of customers, including Fortune-500 companies like Airbnb and Nike, now rely on the company’s technology to create great digital experiences for their customers.
In April 2020, Gartner recognized New Relic as an industry leader for the eighth consecutive time in its “Magic Quadrant for Application Performance Monitoring” report.
In the Christmas of 1982, Cirne received his first computer as a gift, a decent piece of hardware with only 3KB of RAM. The gift, though an unremarkable relic by today’s standards, confirmed what he already knew; creating software was something he couldn’t resist doing.
Cirne was born and raised in Port Hope, Ontario, Canada, where his parents had migrated from Manchester, England. He went to Trinity College and later, Dartmouth College in Hannover, New Hampshire, US, where he majored in Computer Science.
Selecting a Major at Dartmouth was easy for Cirne who was already passionate about creating software before joining the Ivy League institution. But Cirne didn’t just want to build great software. He also wanted to ensure it always functioned perfectly. This became something of an obsession and the cornerstone of his eventual success.
Cirne first got an opportunity to work at Apple as an intern in the summer of 1992. Apple then sent him back to campus with a bunch of computers to write code for them, which he did in his senior year before returning as a full-time employee after he graduated in 1993.
When Cirne joined Apple in 1993, it wasn’t the prominent company that it is today. It was going through a tough period and was ostensibly missing the leadership and guidance of Steve Jobs who’d left the company a few years earlier.
But Cirne had already left Apple by the time Steve Jobs returned and in 1998, he set up Wily Technology, a company he would eventually sell to Computer Associates for $375 million in 2006. During this period, he honed his leadership skills, which prepared him to run an even bigger company.
The Beginning of an Entrepreneurship Journey
Cirne has enjoyed remarkable success with New Relic in a relatively short period of time. However, it was his first company that set the groundwork for the eventual success of New Relic.
In the Winter of 1997, Cirne had an exciting new idea that he almost drove off the road. What if he could make Java self-diagnostic? he thought. What if he could make any Java application report itself as it runs?
Java was a relatively new technology, still in its early adoption stage. These questions eventually led Cirne to set up his first company in 1998, and to create the Application Performance Management category as we know it today.
Founders Never Sleep Lew Cirne is often referred to as “the coding CEO.” But he’s also the perfect embodiment of the expression “founders never sleep.”
Barely three years after he sold his first tech company to CA, Cirne went on to start New Relic in 2008, a company that has played an important role in something of a software renaissance. “I have been fortunate enough to start this company that’s participating in the revolution of software technology,” he said at the AWS re:Invent 2017
However, Cirne had serious doubts about his ability to rise to the top of the tech field. In a 2014 interview, he conceded to having suffered “serious impostor syndrome” back at Dartmouth College. He couldn’t believe he could get paid to write code and build software.
The Idea for New Relic
Cirne started working on the idea behind New Relic as a prototype back in 2007-08, often referring to it as a “teach-myself-Ruby-on-Rails-Project.” He was looking to keep himself busy during his sabbatical after he’d sold his first company in 2006. He worked for CA as a CTO for around one year before taking a sabbatical.
However, Cirne’s aha moment had come in the summer of 2007 when the first iPhone launched. When he received his first iPhone, Cirne was stunned by the fact that Apple put so much R&D into the first minute of the product. He was fascinated by the crucial first minute, that is, the unboxing and the self-activation of the iPhone. Previously, the A.T.&T guy would activate the phone for you. But Apple considered this first-minute interaction to be the most important.
And then suddenly, a light bulb lit up. That’s precisely what’s missing in enterprise software, he thought. “You have about 180 seconds to wow the new customer, and the timer starts as soon as they sign up or come across your product.” Cirne would later say.
He began to think about how far he could go with the idea of New Relic. As it turned out, the idea was viable enough to attract venture funding right from its early days. Cirne turned New Relic into a platform that made it easier to measure software, infrastructure, and digital customer experiences in real time.
As Cirne would later explain in a 2017 interview, one has to be incredibly thoughtful on how you launch your company. “It just can’t be all product,” he said. As he acquainted himself with Ruby, Cirne reached out to some of the thought leaders in the Rails community as he sharpened his ideas. So when he finally had a working prototype, a few of the players in the Rails community, including Basecamp, the project management platform, and 37 Signals were already willing to try it out.
Therefore, by the time New Relic launched in 2008, it already had credible references, including a partnership with a Rails hosting company that brought 400 customers to the platform from day one. New Relic was effectively headed to the apex of the APM space, a fete it would accomplish in a remarkably short period of time.
By the time CA acquired his first company, Cirne had garnered a lot of management experience and an understanding of the industry. He decided to join Benchmark Capital in January 2008 as an entrepreneur-in-residence so he could learn more about what he would have done differently with his first company.
He planned to stay at Benchmark Capital for six months and learn everything he could about running a strong business entity. But he barely lasted a week as his friend and Benchmark Capital General Partner, Peter Fenton, persuaded him to take funding and launch New Relic sooner than he’d planned.
In 2010, New Relic secured an additional $10 million in venture funding, bringing the company’s total investment to $20 million. Allen & Co and Tenaya Capital ran the round of financing, with initial investors Trinity Ventures and Benchmark Capital also chipping in. This validated the powerful SaaS model that New Relic had adopted.
The company was no longer just a tool for its clients. “We are a strategic platform for managing the success of their modern digital initiatives,” Cirne said in an interview. Within eight months of launching, New Relic had snapped up around 85% share of the APM in the Rails space.
New Relic raised a further $100 million in funding in April 2014. This time the financing was led by Passport Capital and Blackrock Inc., with Wellington Management and T. Rowe Price Associates Inc. chipping in.
In December 2014, Cirne, accompanied by members of his management team, rang the NYSE opening bell to commemorate the company’s IPO at the New York Stock Exchange.
CA Returns … with a Lawsuit
By 2012, New Relic was fairly well established in the APM space while the ever-acquisitive CA hadn’t quite gained a lot of traction. This was perhaps unsurprising, given that the core talent had left the company to start another company that would eventually become a key competitor.
In November 2012, CA threw a patent sue ball at New Relic, seeking an injunction and “undisclosed damages” for lost profits. CA wanted a judge to shut down New Relic for infringing on its patents and misusing its intellectual property.
Cirne had been a co-inventor in two of the three patents in contention and CA would not allow any of its patents to be infringed on, particularly by “those who have already profited by selling to us the very patents in question," said Richard Donoghue, CA’s chief counsel for litigation.
It’s unclear how the matter was settled but Cirne, who himself held nearly 20 patents, said that he was “confident that New Relic had conducted itself with the utmost integrity.”
New Relic’s Footprint Today
Around two decades ago, I.T. leaders thought of software as a ‘defense’ mechanism. How do I reduce the cost of billing using software, or how do I reduce the cost of handling a support call?
But today, Cirne notes, the approach is offence. “Software is now the growth engine for most companies. Digital customer experiences are now driving top line customer growth,” he said in an interview.
New Relic is now one of the most important, purely SaaS, APM platforms. 17, 000 customers and nearly half of the Fortune 100 companies now rely on its platform to move faster, make better business decisions, and to create great in-class digital experiences.
The company is based in San Francisco, California, and now has about 5,000 employees on its payroll.