A Former Apple Employee’s $10B Company

Read time: 5 minutes

Good morning! It's Thursday, September 21st. Today we are examining entrepreneur Robert Pera who founded a $10.4B business after Apple rejected his product idea!

THE FEATURE

A Former Apple Employee’s $10B Company

While working as an Apple engineer in the early 2000s, Robert Pera realized the company’s Wi-Fi routers emitted signals that were significantly below FCC limits.

Pera believed that he could easily increase signal emission and maximize the range of these products, but he was completely ignored by Apple’s senior staff.

So, he spent $30K from Apple options and credit card debt to build a prototype in his apartment and set up a website. From these humble beginnings, Ubiquiti was born– a networking hardware and software company worth $10.4B!

What’s The Business?

Apple didn’t believe that there was sufficient market demand for more powerful Wi-Fi tech, but Pera knew they were wrong. He’d heard of people from rural Montana to the Czech Republic using jerry-rigged amplifiers and antennas to boost the router range.

Pera’s hypothesis was proven sooner than he expected. Shortly after launching his website in 2005, a $240K upfront payment for 3,000 units came in. To fill the order, Pera flew to Taiwan and found a contract manufacturer to handle the load.

His Wi-Fi tech was priced at just $82 apiece for distributors, making it an instant hit. However, competitors took notice and were copying his gadgets within 6 months. Luckily for Pera, he was just as much of an engineer as he was an entrepreneur. He had plenty of new software and hardware ideas, and he learned his lesson on the importance of patents.

By 2009, Ubiquiti was selling antennas, base stations, and other networking gear. In addition to creating cutting-edge products, Pera stole a page from Apple’s playbook. All of Ubiquiti’s hardware products run on proprietary software and will not function when used with competing hardware.

Today, Ubiquiti has expanded its product offerings, but the bulk of its $1.94B in annual revenue comes from selling Wi-Fi hardware to internet service providers and enterprises.

How They Win: Lean Operations

Despite being a billionaire with a $7.6B net worth from his 75% ownership of Ubiquiti, Pera is a known minimalist. Even when his company began generating millions, he refused to check luggage at the airport, lived out of a one-bedroom, and leased his car.

With almost complete ownership of Ubiquiti, Pera runs his company the same way he runs his life: lean. Compared to its competitors, Ubiquiti spends very little on marketing, customer support, and research development. In doing so, Ubiquiti can undercut competitors by up to 25%.

Let’s break down how Pera minimized operational costs.

Marketing

To understand how little Ubiquiti spends on marketing, let’s look at its competitors using 2022 stats:

• Extreme Networks–1.1B in revenue with $363M spent on SG&A (32.6% of revenue).

• F5 Inc– $2.7B in revenue with $1.2B spent on SG&A (44.6% of revenue)

• Ubiquiti–$1.7B in revenue with $69M spent on SG&A (4.1% of revenue). 

Though Ubiquiti has grown substantially since 2005, Pera has maintained his central strategy of developing industry-leading products with virtually no sales force support. Instead, Pera lets his products speak for themselves through what he calls “touchless evangelism”.

In terms of customer support, Pera has largely evaded these costs as well. Rather than hiring customer support agents, Ubiquiti directs consumers to the Ubiquiti Networks Community where they can discuss issues with one another and the company’s R&D team. By 2017, Ubiquiti’s online forum had over 4M registered users.

Research and Development

As you’d expect from a business run by an engineer, the bulk of investment is in research and development– Ubiquiti’s R&D budget is double its SG&A budget.

That doesn’t mean that Pera wastes money on R&D though. Ubiquiti’s 1,377 employees are mainly composed of highly intelligent engineers who create quality products. Ubiquiti’s operating profits per employee sits at $335K. For comparison, competitor Juniper Networks has 10,901 employees with