Dec 30, 2019 · 45m · 20vc
20VC: Inside The Acquisition Decision-Making Process at Cisco, How To Measure True Success in M&A Evaluation & Why By Not Speaking To Corp Dev Teams You Are Closing The Door On The Biggest Potential Accelerator To Your Business with Rob Salvagno, VP of Co
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The 20 Minute VC, host Harry Stebbings interviews Rob Salvagno, Vice President of Corporate Development and Cisco Investments, to explore Cisco's strategic M&A evaluation framework, founder engagement with corporate development, deal governance, and post-merger integration practices.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 25% of the talking time here. How this is scored →
Harry as informed peer 3.3 Guest teaching 5.1 Guest disagreement 1.6 Harry pushing back 2.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 13:23 Rejecting Paul Graham's Corp Dev Rule
Rob explicitly rejects Paul Graham's blanket rule against talking to corp dev, arguing it is shortsighted for enterprise tech founders.
Hardest push from Harry ▶ 27:57 Challenging Portfolio LoyaltyHarry directly confronts Rob on whether acquiring non-portfolio competitor Viptela over portfolio company VeloCloud represented a breach of trust or lack of loyalty.
Biggest teaching moment ▶ 17:31 Reframing High M&A MultiplesRob educates Harry on why high sales multiples are secondary in strategic M&A, demonstrating that Cisco's most expensive deals were its most successful due to value creation.
Harry holds his own ▶ 13:23 Citing Paul Graham's Contrarian AdviceHarry uses Paul Graham's well-known startup doctrine to challenge the premise of Rob's role and ecosystem engagement.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Rob Salvagno's Career Journey & Lessons from Market Cycles | 3 | 4 | 1 | 1 | Harry sets up the background by asking how experiencing market booms and busts shaped Rob's investing mindset, citing Josh from First Round. Rob explains how managing through downturns teaches an investor to focus on unit economics and capital durability during 20x-30x sales multiple environments. | |
| Cisco's Corporate Development Strategy & Value Creation | 2 | 5 | 1 | 2 | Rob outlines Cisco's strategy-first corporate development model, contrasting it with deal-centric teams at other tech firms. He details how value creation happens through distribution scale and balancing business unit requests with external market signals. | |
| Ecosystem Engagement & Addressing the 'Don't Talk to Corp Dev' Advice | 4 | 6 | 3 | 3 | Harry presses Rob on Paul Graham's famous advice that founders shouldn't talk to corp dev. Rob reframes the advice, arguing that while consumer startups might avoid corp dev, enterprise startups close the door on their largest growth accelerator if they ignore acquirers like Cisco. | |
| Distribution Ownership & M&A Valuation Sensitivity | 5 | 5 | 2 | 3 | Harry brings industry knowledge into the valuation question, referencing Henry Ward's thesis on distribution ownership and roleplaying a acquisition negotiation. Rob explains that paying top-of-market multiples is justified if Cisco can unlock exponential value creation. | |
| Inside Cisco's M&A Decision-Making & Governance Structure | 2 | 5 | 1 | 1 | Rob demystifies Cisco's internal deal approval process, splitting it into GM-level strategic conviction and board-level financial governance. He uses the pre-IPO acquisition of AppDynamics to demonstrate how pre-baked strategy enables rapid execution. | |
| Private Equity Dynamics & The Viptela Acquisition Origin Story | 4 | 5 | 2 | 5 | After Rob tells the origin story of acquiring Viptela while having invested in competitor VeloCloud, Harry pushes back hard on potential conflicts of interest and lack of loyalty toward portfolio companies. Rob defends Cisco's reputation by stressing transparent communication and long-term ecosystem trust. | |
| M&A Integration Strategies & Preserving Entrepreneurial Mindset | 3 | 6 | 1 | 2 | Rob details Cisco's integration playbook, emphasizing that a one-size-fits-all approach causes M&A failure. He cites preserving Meraki's San Francisco culture and promoting OpenDNS founder David Ulovich to GM of Cisco Security as key examples of founder retention. | |
| Quickfire Round: Books, Cloud Transition, VC Advice, and Recent Deals | 3 | 5 | 2 | 2 | In the quickfire round, Rob offers sharp commentary on venture capital dynamics, pointing out that VCs often give biased advice pushing for $1B outcomes when a $100M exit might be life-changing for the founder. |
Statements from this episode (17)
Growth tech companies are trading at 20 to 30 times sales
“And look, if you look at the multiples that are going on today, these growth companies are trading at 20, 30 times sales. And those used to be P multiples in our business.”
Corp dev success means enabling outcomes targets could not achieve alone
“I think the best measure for success or corp dev is, have we been able to get the company to accomplish something that left to its own wouldn't have been possible?”
Cisco operates strategy-first corporate development, unlike transaction-focused peers
“A lot of corp dev groups, I think they're all about the transaction. They get a call. I want to buy this company. And that's what they do for Cisco. It really starts with the strategy.”
Refusing to engage corporate development closes doors to major enterprise growth
“If you ignore that because you don't see A Cisco as a potential partner or investor or potentially a future acquirer. What you're doing is you're really prematurely closing the door on what may be the biggest potential accelerator for your business.”
Cisco's Meraki, AppDynamics, and OpenDNS deals originated through corporate development
“So when I look at just the partnerships or investments or acquisitions that I've been involved with, Meraki, OpenDNS, AppDynamics, Investments like Cohesity, Turbonomic, all of those relationships, they actually began with corporate development. And when those…”
Founders fundamentally need to own their own independent distribution channels
“A company needs to own its own distribution. And I consider that sort of fundamental to what you need to build as a founder or CEO.”
Acquisition multiples matter less if the buyer can create post-merger value
“If you're in a position that you can see an opportunity to add value, the fair multiple is actually less relevant.”
Cisco's highest multiple acquisitions like AppDynamics and Meraki were its most successful
“In fact, if I look at some of our most Strategic or financially successful acquisitions, moves like AppDynamics, moves like Meraki, they, in fact, were some of our highest multiple deals.”
Cisco requires board approval for billion-dollar acquisition deals
“For a certain level of acquisition, that could be approved by our CEO and CFO, and then if that acquisition begins to get into the billions, that's something that we'll want to involve our board directly on.”
Cisco acquired AppDynamics one day before its scheduled IPO
“In AppDynamics' case, we acquired the company a day before it went public, and I think what that showcased Is when Cisco decides to do something, we can move faster than anybody else.”
Private equity firms are paying unprecedented multiples for tech acquisitions
“We are seeing PE firms get more and more involved in technology companies that had profiles that they normally wouldn't go after, and because of the sheer amount of capital that's out there, being willing to pay multiples and valuations that also are unprecede…”
Cisco invested in VeloCloud while simultaneously developing a competing internal product
“Cisco saw that we also should be willing to invest in one of those startups, despite the fact that we were also trying to build something ourselves, and so in addition to our internal program, we went out and invested in one of those startups. That company was…”
Cisco acquired non-portfolio startup Viptela over its own portfolio company VeloCloud
“When we made the decision on who we were going to make part of Cisco, we acquired a company that was not a Cisco investment. We acquired a company called the Viptela. And since that time, Viptela has come onto Cisco. It has become our lead SD-WAN offering. And…”
M&A deals fail when acquirers apply rigid, one-size-fits-all integration models
“I do think the reason that a number of acquisitions fail with other acquirers is taking a one size fits all type of approach.”
Cisco made OpenDNS founder David Ulevitch GM of its overall security business
“OpenDNS was a relatively small company. It was less than a hundred million dollars when it came inside Cisco, but we wanted to embrace that philosophy that David had for security, and so shortly thereafter, David Ulovich actually became the GM of Cisco's overa…”
Most hardware companies fail when transitioning to cloud and software models
“If you look at companies that have been able to make that transition, most people have failed.”
VC incentives diverge from founders on $100 million versus billion-dollar exits
“Entrepreneurs are often surrounded by venture investors, perhaps very successful venture investors, that may have motivations that somewhat differ from that of the entrepreneur, but the entrepreneur may be going through it for the first time. The VC may have d…”