They failed every POC—then grew their cybersecurity platform to $100M ARR in 5 years. | Dean Sysman, co-founder of Axonius

Dean Sysman (00:00:00):
There are so many disadvantages of an established enterprise to working with a startup. Then he says, OK, is there anything else that I did not see or did not get a chance to evaluate? Now, this is code word for I didn't like what I saw and I want to cover my ass. And we went from zero to one, I think in about a few months, less than a year. And then we went from one to ten in like a year and a half or something. And then from one to a hundred million, it took us four and a half years.

Previous Guests (00:00:33):
That's product market fit. Product market fit. Product market fit. I called it the product market fit question. Product market fit. Product market fit. Product market fit. Product market fit. I mean, the name of the show is product market fit.

Pablo Srugo (00:00:45):
Do you think the product market fit show has, product market fit? Because if you do, then there's something you just have to do. You have to take out your phone. You have to leave the show five stars. It lets us reach more founders and it lets us get better guests. Thank you. Dean, welcome to the show, man.

Dean Sysman (00:01:01):
Thank you for having me. It's great to be on.

Pablo Srugo (00:01:03):
Well, I'm looking forward to it, man. I was just going through Crunchbase here on Axonius. It says you've raised $865 million. Is that accurate?

Dean Sysman (00:01:10):
No, that's not accurate.

Pablo Srugo (00:01:11):
Okay, how much have you raised to date?

Dean Sysman (00:01:13):
About $500 million, yeah.

Pablo Srugo (00:01:14):
Half of a massive number, still a massive number. So congratulations on that.

Dean Sysman (00:01:17):
Thank you.

Pablo Srugo (00:01:18):
You know, we were talking earlier and you were telling me that when you start off, you didn't even know if you could raise like a seed round.

Dean Sysman (00:01:22):
Yeah, we didn't think we could raise any money in the beginning and we thought we would need to bootstrap. But things surprised us and it took a different course.

Pablo Srugo (00:01:30):
It's funny how things go, man. Well, let's start at the beginning. I mean, maybe just as a first question. What is Axonius? What do you guys do?

Dean Sysman (00:01:35):
We help organizations see everything connected to their digital environment and make sure that it's secure, and taking all the action around it.

Pablo Srugo (00:01:42):
For somebody that's outside of cyber, everything kind of sounds the same. It's like we keep things secure. Where do you kind of fit relative to other players?

Dean Sysman (00:01:51):
We're a category that we created, which actually is a long story about category creation versus category conquest. But we create a category called cyber asset management or cyber asset attack surface management initials chasm. That ended up being picked up by the industry sort of analysts, major firms like Gartner and Forrester and others. So we really created our own category and now we're the leader, and the honored player in that category.

Pablo Srugo (00:02:17):
This company started in 2017, but I'm sure the idea came before that. Maybe give me just your background first. What were you doing before you started Axonius?

Dean Sysman (00:02:25):
Sure, so in short about me. I'm originally from Israel and I had a pretty challenging childhood growing up both economically, socially, and that's what made me very entrepreneurial as a person. Because I always knew that I had to earn everything I wanted out of life and I had to be really independent. And I really loved computers, right? I learned how to program from a book from the library when I was twelve. I was part of the team that won the International Robotic Olympics in South Korea when I was fifteen, and I finished my bachelor's degree when I was nineteen. Then went into Unit 8200, which is the signals intelligence unit of Israel, very famous for its.

Pablo Srugo (00:03:03):
I think we've had others on the show, from that same unit. 

Dean Sysman (00:03:07):
Yeah, numerous alumni that are great cybersecurity founders and then after 8200, I was there for five years. Finished as a captain, won all the awards you can think of and had very meaningful service.

Pablo Srugo (00:03:21):
What's that world like, by the way? Just to go on a tangent. I mean, I'm sure there's a million things you can't share, but from what you can share. What's it like being inside of that?

Dean Sysman (00:03:30):
What a big question. On the one hand, you are doing some of the most exciting things possible technologically and again. I'm trying to share as much as I can, which is not a lot and yet on the other. You're in the army, right? And in the army, I still had to do guard duty. I had to go out and just be a guard somewhere for a week. A couple of times a year or I'd be, you know, eating not great food, or I had to sleep in a bunk in the same room with fourteen other guys, and you had this, dumb bureaucracy. So, it's always this weird balancing act between I'm part of this very complex bureaucratic organization, and at the same time. I'm doing some of the most innovative technical things with some of the smartest people in the world doing that together. So it's sort of a weird mentality and I actually have told other people. There's a lot of learnings that I've gotten to about enterprise sales from the army. Because you have to think about it that way, right? 

Pablo Srugo (00:04:31):
Politically, you mean? 

Dean Sysman (00:04:32):
I mean, when you're trying to get something to happen in a large organization, it's never by just making somebody realize it's good for them. You have to have an understanding of what influence each player has over a certain decision. What incentive each player has over a certain decision, right? And then you have to sort of understand how all these things play off against each other in order to be able to get that decision to happen. And most of the time, that's not even depending on whether the organization will benefit from it or not. It's more just like these set of people can work together to achieve something under all the dependencies that they have.

Pablo Srugo (00:05:14):
And what about the stakes and the pressure? Do you find that what you were responsible for, let's say. In your time in the army prepares you or in any way level sets you when you're a founder and you feel like you have the world on your shoulders. But in a sense, it's not life or death anymore sort of thing?

Dean Sysman (00:05:27):
For sure. So , you know, you're not out there in combat, right? So there's no bullets, next to, all flying next to your head or whatever. So you don't feel that, but I think it really depends on the person. In unit 8200 compared to like, we could pick your comparable in another large Western country. There's not a lot of people. It's the biggest unit in the army, but when I finished the elite course that I was doing. I was doing with thirty other guys who were the best in cybersecurity in the country at that point in time. In that age, and it was amazing to be able to go through that. But it was just thirty of us and we had gotten dispersed over the different units. The different sections of the intelligence community in Israel and you get to your team. And I got to the team, and we had this project. And this project was involved in this big intelligence operation or campaign, or capability. And then you realize you're in the bottleneck of that intelligence campaign being successful or not. If you're successful in your technical project, then that enables the intelligence campaign to work, and if you're not, then that intelligence campaign is just not going to work. And then you realize, wait, it's my team that's the only one doing it. So if we're not successful, like literally, you can see the impact on even your family and your friends. Are they going to be more or less secure by the work that I do every single day? Because it's that direct impact and to some people, they don't want that burden of responsibility on them, and they just come into work. And just do their work but for some people, if you embrace that responsibility and you're like, wait. I have this spirit of my life that I can give everything and what I will get in return is so immensely meaningful. Then you embrace that responsibility and it pushes you to really think about something bigger than yourself. And makes you a lot more able to really put your own limitations aside, and strive for something more.

Pablo Srugo (00:07:32):
When you end up leaving there, where do you go? Do you join a different startup?

Dean Sysman (00:07:36):
Yeah, so when I was finishing my service. I was trying to figure out what to do with my life, because I knew I'd be a terrible employee.

Pablo Srugo (00:07:42):
Why is that, by the way? I mean, you're in the army context. You're used to following orders and these sort of things. Working within, like you said, a big system.

Dean Sysman (00:07:48):
I think one of the things that made me successful in the army, is I never took the rules at face value. I always try to understand. I never broke any rules, don't get me wrong. I'm not a chaotic agent, but like in sales. You have to understand, why are the rules there? And sometimes even realize that sometimes the rules are working against that organization's incentives. And there are ways of using that to make things happen that are more a level above as far as how do you use that to create action, to create change, right? So I think that's why I would have probably been a terrible employee. Because I always saw what the job is and not what my job is, right? I never was like, hey, I get the stuff that I need to do and I'll do that, and great. I always try to see, where does this fit in? What's the larger impact? And I guess it's like the curse of being an entrepreneur. Whether you like it or not and I wish I could turn that off. But I could never just see my own role in something. I always try to understand what's the bigger mission and, try and make that happen. And to the credit of Unity at 8200, that place it's not easy to do that there. But it's also something that, that organization encourages, right? they encourage you to innovate. They encourage you to take initiative and do creative things. So as I was leaving the army, I was like, I know a lot technically about cybersecurity but I have zero understanding of the world outside of the army. I don't know what a product sale looks like. I don't know what a customer does. I don't know how to build a company. So I ended up joining this guy who had already had an idea and had raised some funding, was looking for a technical co-founder. And that was a great school for me. It was called Symetria. We did Y Combinator. We raised about $15 million. We had some good customers, but ultimately that failed because we were in the wrong category where at this hype cycle, creating this new thing that didn't end.

Pablo Srugo (00:09:54):
And what was your role in that company?

Dean Sysman (00:09:56):
I was the CTO and co-founder. 

Pablo Srugo (00:09:57):
Okay.

Dean Sysman (00:09:58):
And the idea for Axonius came about when I was there. We were working with one of the largest companies in North America and we had discovered that they had been breached. We had really found this computer, this machine and their network. That we saw for a hundred percent confidence was infected by this APT, is a term we use in cyber advanced persistent threat. Meaning this is not just a virus or some random thing. There is a group of people who are well-funded and who are very specific about this target who are manipulating this threat. And there were a lot of other cybersecurity vendors who had researched this group and attributed them to the Chinese government. So literally, we could see this computer, hey, there's a Chinese state-level threat hacking your company through this computer and I took this information to the security team there and I told them about it. And to my surprise, they didn't have a big reaction to it. And the reason was apparently they got tipped off that this was happening. That's why they brought us in, but the other reason was they told me there's nothing they can do about it. Now, once you discover a company has been breached. There's this process called incident response that like, what do you do about it? And the first few steps is you take whatever information you have, and you try to map out the threat, right? So the only information we had was here's this device that was infected. And we had its IP address, we had its hostname. And the next thing I would want it to do was, to go into it and look at its activity, right? Look at the files, look at the processes, look at the logins and network traffic. And then you can map out the threat but when I took that information to the team, I told them, here's the IP address, here's the hostname and again, this is one of the best security programs in the world. What they told me was they had no idea what this device was. They didn't know who owned it. They didn't know why it was in their environment. They didn't know how to access it and that to me, was shocking. But the more I talked to them, the more I kept talking to other security teams and IT teams. Actually, everybody kept telling me sort of the same thing. We don't really know everything that's connected to our environment. We don't really have a good understanding.

Pablo Srugo (00:12:04):
How is that possible? How does that happen?

Dean Sysman (00:12:06):
That was the billion dollar question, right? Why was this still a pain in 2017, when we started to think about it and talk to people about it? Because companies of that scale or, you know, of any scale, already had dozens of different products. People had already called this different names before us, like asset discovery or network discovery, and they would use the same approach that stopped working a while ago. But nobody realized it and that approach was like trying to scan the network. Meaning just really go out into the network layer of an organization. Just ask everything what's on there. It's sort of like, how do you map out all the people who live in a city? You literally go to every door, you knock and you ask who's there. And if somebody doesn't answer, then you're not going to know anything about them, right? And that was what was starting to happen in the world. Everybody thought that they could just scan the network and then figure out what they had. Because of the encryption of the networking layer, because devices stopped sharing information on the network layer and just through the internet, then that stopped working. There was a new approach that had to be brought in to solve the problem, right? And like that example of a city, how do you know all the people who live in a city? If you go knock on every door and ask them, who are you? You're not going to find out anything and you're going to miss a lot of people. It's going to take a lot of time. The right answer is to just have all the IDs of all the people who are registered to that city's tax authority or utility bills or whatever and by the way, that's spread out over many different data sources, right? You can ask the utility company and you can ask the water company or you can ask the tax authority. But if you ask all the different sources. At the end of the day, you'll find all the people who live in that city, the DMV, right? So that's exactly what we did. We created this new approach that we call the adapter approach. Instead of knocking on every door, let's go into all the existing data sources that an organization already has and we built all these adapters today. We have over a thousand three hundred of them. That you just give us an API key or credential to all your existing tooling, and then we pull all the data together, and just like a puzzle. We put all the pieces together and show you exactly what you have. And that's a category that we ended up creating.

Pablo Srugo (00:14:23):
And walk me through, this is kind of end state where you're at today. I mean, do they recognize that this is a massive problem or are they more nonchalant about it? Well, this is just the way it is and it's fine. We've gone here, we've gone so far with it, so who cares?

Dean Sysman (00:14:36):
So it was very non-orthodox. I think, the path that we took to product market fit and I have this framework of thinking about it, if you want to hear?

Pablo Srugo (00:14:46):
Please. 

Dean Sysman (00:14:46):
When selling products to businesses. When selling enterprise software, I think a company's journey and the way that it's successful in getting to product market fit. And growing way beyond that depends on the positioning of the problem that they're solving. So one type of positioning is when it's an established category. It's already something that people spend money on. It's very well defined and then somebody creates a new technology to solve that problem, right? Classic example is what Salesforce did in CRM. Everybody already had CRM, right? Like on Siebel systems and SAP and all that other stuff. Oracle and what they ended up doing was doing the exact same thing just as a SaaS product for the first time. Or in cybersecurity, for example, we hear that a lot when something is called next-gen, right? So like CrowdStrike, that's a next-gen endpoint protection. Palo Alto, the OGs, right? They were the next-gen firewall. When you're doing that, your buyer is very mature. They know exactly what they're looking for. They probably already have an RFP list of a hundred different items. So every time you sell in that kind of journey, there are two things that happen. One is that every sale is very competitive. Because there are already the incumbents, right? And obviously there might be new competitors doing the same thing as you. So every sale is with a lot of different actors, and the second thing is the budget's already there. So it's just like competitive sports. You don't need to win by a hundred points. Whoever wins at the end of that POC, that refresh cycle, by even one point gets the win, right? So those kinds of journeys are very sales-based, right? Those companies still need to do product well and marketing well. But the way they win, the way they become dominant is by being the best at sales. Because they understand the deal mechanics the most. They understand how the buyer is going to make a decision and that's how those next gen something companies end up being successful. They're super strong on sales. They understand how to replace the incumbent and take over the budget. The other kind of journey is I think when there's a new area of technology that's a vacuum, and then people have no idea what to buy. But they're trying to buy something, right? We're right now going through this exactly with the world of LLMs, right? When you go to a CIO today and you ask them, what are you buying for your LLM? Or what are you buying for your Gen AI? Most of them will tell you, I have no idea. I'm just like experimenting or I already have a contract with Microsoft or with Amazon. Whatever, I'm just using what I'm getting already and this happens in a lot of different fields. In cyber, for example, the biggest example of that is Wiz. Which is an amazingly successful company. The biggest VC acquisition in history, right? VC-backed company acquisition in history, and they did the exact same thing in cloud security, right? There's this new thing called the cloud. You now need to secure it. Most people had no idea what that means. Definitely, they don't have an RFP or a budget line for it. So when they're trying to solve that kind of problem, they will go to their colleagues, they will go to their partners, they will go to the people they trust, and they'll just ask them, what's the best out there? So it's sort of a race to what becomes the industry standard and the way to win there is just to have the biggest brand. And when I say the biggest brand, it's not necessarily the most dollars or the biggest company. The biggest brand means that when people think about that problem, you are the one that comes up the most.

Pablo Srugo (00:18:21):
Is that a product thing? Because I thought you were going to go sales and product. Would you go sales and brand or is it a marketing thing?

Dean Sysman (00:18:26):
I think it's both a marketing and product thing. But they both contribute together to a brand. One of the things, I think Wiz did.

Pablo Srugo (00:18:32):
I was going to ask it in a tangent, what did Wiz get right? Because it is such an insane story how fast they grew to a hundred and just how much they overtook.

Dean Sysman (00:18:41):
Yeah, so first of all from a marketing perspective, they were very creative. They were very different in their brand than everybody else. But they also did a lot of different things to make their brand stand out. One is they use their fundraising as a brand tool. Which is, you know, it has its pros and cons, but they kept raising many, many different rounds. Kept raising their valuation and that's a very dangerous game by the way. But for them, they were able to pull it off very effectively and people kept hearing about them. Kept talking about them and the other one is, I think that they were really able from a product perspective to understand what's the thing that's going to make customers promote them the most. Not necessarily what creates the most product value. But what's going to make their users tell other users, hey, if you're buying your first cloud security tool or you want to look at your cloud security strategy, you have to look at these guys, right? 

Pablo Srugo (00:19:33):
What was that for them, actually? I'm curious, because cybersecurity is not. I mean, inherently viral or word of mouthy or whatever.

Dean Sysman (00:19:40):
So that's something that we also did really well, and that's time to value. You know, it's funny, I heard a CISO do a podcast. This guy was a CISO of a public company, and he talked about what kind of security products he loves. And then they asked, what are the ones that you love the most? And he said, Wiz and Axonius. And then they asked him, well, why? And he said, with both of them, that time to value was almost immediate. I had spent very little effort to see an immense amount of value. So I think that was the key factor for them and for us as well.

Pablo Srugo (00:20:10):
To pull on that thread, it's an insightful comment. I'm just thinking about even in the consumer use cases. What are the products that make you go, wow, and a lot of it isn't about long-term how dependent you are on them or like. Not to say those products don't have PMF or that you don't use them or whatever. But the products that you're wanting to go tell other people about immediately are the ones where you use it, you download it, whatever, and you get some value just so quickly. I mean, recently I used a company called Wispr Flow, which is like the next gen, let's say, dictation app. But it just works as well as you would want a dictation app to ever work. Formatting, everything, and the time to value is immediate. Because you download, you click a button and you use it. And I told like 10 different people about it, just because it was so impressive and it was so fast. And I also knew that they would get that value so quickly. Which is part of why, you know, you spread word of mouth. Anyways, that was an interesting way to think about it.

Dean Sysman (00:21:01):
Exactly, the thing that people don't understand. This is even truer, the bigger enterprise sales you go. The more this is true, is that companies have budgets, they have resources, and they will put those into buying products but only if they can trust the outcome. This is, again, the word trust here is the most important. Because when an organization buys, this is what we talked about before. It's people betting their careers on that decision being successful for them. There's this saying, nobody got fired for buying from IBM, now that's not true anymore, right? What that saying means, and it's that trust factor. When you're talking to a VP or C-level person, you want them to put budget into your product. What you need to make them feel is that there's a minimum of risk of them ending up looking like they made a mistake, right? And the more you can guarantee to them that will make them look good, that will make them see the value for their organization, they're going to bet heavily on you, right? People want to buy products. People want to create value for their company. They just don't want to waste or make mistakes, right? And if you can show value very quickly with very little effort, you've already done that, right? They already know that it's going to be a great decision, because the values are already there, right? It's sort of like an investment. You get the interest upfront, right? Why wouldn't you do that? There's no way to lose. So that's why it's so important.

Pablo Srugo (00:22:28):
Yeah, I was going to ask. How did you create value quickly in enterprise? Where there's so much that usually needs to be done in terms of onboarding and getting everybody in access and, this and that? How do you shorten time to, like I said, at least some value? We have tens of thousands of people who have followed the show. Are you one of those people? You want to be part of the group. You want to be a part of those tens of thousands of followers. So hit the follow button.

Dean Sysman (00:22:53):
So it came to us in two dimensions, and then I want to go back to that framework of the three different journeys that companies goes through. Because that plays into that exactly. So the way we got value quickly was because our technical approach, the new thing that we invented, that adapter approach of connecting to your existing tools and then pulling the data together. That meant that to do that took very little effort, at least for the critical mass of products, right? You can connect four, five, ten products with APIs within a few minutes. It doesn't take that much work, but then we realized the big value we can show in every organization and very quickly is the larger the organization, the more likely there's blind spots. Or when I say blind spots, I don't just mean stuff the security team doesn't see. It's also like, hey, there's this team that uninstalled a bunch of your controls and nobody knows about. Or there's this part of your company that you never sent patches for, nobody updated. Or there is somebody who connected this super risky IoT device to your data center you never even saw. There's always these gaps that every organization has and if you surface them, you're like, hey, look, you spent a few minutes connecting us. We are already showing you gaps that are huge risks that you can fix without you needing to do anything more and that's not the long term value by any means. But at that point, they're like, well, I can't not see this anymore.

Pablo Srugo (00:24:20):
Are you able to do that before going through an RFP? Before kind of closing a deal and all these sort of things? Like, somehow really early before any of that?

Dean Sysman (00:24:27):
Yeah, so we have this proof of value process or proof of concept process. It's usually under thirty days. We just coordinated with the customer. We've also experimented with that from a self-service motion, and that's really hard to pull off. Because people are very privacy minded, right? They don't want to share information with something unless it's a person they talk to, or they have an NDA in place. But the sales process is incredibly fast, because we don't ask them anything besides like, hey, just connect some of your APIs to us. We can do that in your environment or in ours, whatever you prefer and then you'll see a bunch of things that you can't say no to anymore, right? And that's how we get the sale very quickly. So to us, you know, we talked about the first journey of a new technology in an existing category. And then we talked about the journey of there's a completely new category that people flock to the industry standard or the biggest brand. And then there's this third kind of problem that I think is true for us. And there's another analogy I will give to another company that had the same kind of path. Which is when a problem sort of gradually evolves into something else, Right? So there was this problem of asset discovery, network discovery that had a solution to scan the network, go over. You know, when people were in a castle, you could go to each door and knock, and people would tell you who they are. But once you move to becoming a city that doesn't work anymore and that's what happened. Organizations used to be able to just scan their network, but then gradually that stopped working and what ended up happening was people just sort of accepted the way things are, and they were very cynical. And you'd ask people, do you have this pain? They would say, yes, of course, everybody does. Then we'd ask them, well, are there any products that solve it? And they'll say, there are a hundred that will tell you they do, but no one does and in that kind of journey. It's not your sales or your brand that's going to solve the problem. You have to do two things really, well in order to be able to break through that kind of customer journey. One is your messaging has to be super accurate. You really have to decide what do you call your category? What do you call the problem space? How do you differentiate from what they already know and make them realize that there is an opportunity to solve it after a hundred other companies told them they would and they didn't. And then, you have to tie that with very fast time to value. Because you have to make them trust the fact that you're not just claiming claims like the other companies and if you do that, you will have fanatical favorable fans for customers. And we have one of the highest NPS scores that we know of in cybersecurity. It's like high 70s, low 80s. I don't know of any other cybersecurity product that has that kind of fandom and you talk to our customers, they'll be like, where were you my entire career? I wish this existed when I started and the analogy for that. Another great example is you can look at Datadog and observability, right? When that started, is this a debugging tool? Is this a log tool? Is this an application performance tool? And they had to reposition that whole thing, and call it this new name called observability. And now everybody would say, yeah, of course I need to have an observability solution. But back then they had to create that mentality, right? And realign how the customers were thinking about it.

Pablo Srugo (00:27:38):
What's the key difference between the second and the third? Between this new market, like a Wiz cloud and Wiz, and Datadog? Is it that it's an existing market that slowly becomes a new market, but nobody really knows it? Is that how you might kind of frame that third journey?

Dean Sysman (00:27:53):
Yeah, I think the difference between the second and the third is, in the second you have this moment in time where you suddenly get a lot of attention and everybody's competing for their attention. Because it's the trend, it's the hype, it's what everybody's trying to put their time and priority into. And the third is sort of this dormant, gigantic pain that people don't necessarily see. And once you do unearth it, it has a huge market opportunity behind it.

Pablo Srugo (00:28:19):
That's a good place to go back into the storyline. You have that discussion, you see this space and this framing that you have with these three categories. Does that become clear later or do you realize at that point, what kind of journey you're going to go into?

Dean Sysman (00:28:34):
I think in the beginning we realized this is not going to be a next gen something. Because people didn't have a dedicated budget line for it and we also realized this is not going to be a new trend. Because it's a problem that people have had for many years. So we started to understand like, how do we get budget? Should we create a category? Should we attach to an existing category and try to change it? This positioning, is very important for enterprise buyers and in crowded industries like cyber. Because people will always ask you, like, okay, which budget line should I be using? Because that also determines who's the real buyer, right? Who's the influencer? We realized that this is a security team problem and yet historically it's been assigned to the IT team, right? There is a category called IT asset management, but it's actually about the life cycle device. When do you buy laptops? When do you refresh them? All that kind of stuff. So we had to disconnect from that and we had to make it about the security buyer. So that's why we called it cyber asset management and created that category.

Pablo Srugo (00:29:33):
Then walk me through the, just on the fundraising side. Because I'm sure that's important. You thought at first you were going to bootstrap, why is that?

Dean Sysman (00:29:38):
So, you know, I'd had my experience of fundraising from YC and my previous company. And I understood that investors have a really hard time investing in that third journey, right? It's very easy for them to invest in a next gen something, or invest in a new category. But if you're telling them, hey, this problem has been around for a long time and nobody solved it, that scares them.

Pablo Srugo (00:30:02):
Because there's no why now. There's no like, okay, why now? Why you? Okay, it's just the way it's going to be.

Dean Sysman (00:30:07):
Exactly, everybody asked me, well, why didn't anybody else solve it? And there's a saying in Hebrew, you can't prove you don't have a sister because you don't know what your dad did before you existed, right? And that's what I told them, like, I don't know why somebody else didn't solve this. But we knew we could and we knew we had, and that made it much harder to fundraise. So we thought we'd need to bootstrap and we actually started to get these side hustles to fund us while we build this up. But then what happened was, there was this fund that was very dedicated to early stage cybersecurity seed rounds. Who had heard about us and they just convinced me, just go, we'll connect you to a bunch of CISOs. And we just want to hear what they say about what you're talking about. Worst case, you'll get to know them, you know. There's nothing for you to lose from doing that. So I said, great, always love to talk to potential customers and they put me in front of a bunch of Fortune 500 CISOs. Which was great and then I told them, I didn't even talk to them about the solution. We didn't even think about what the solution was at that point. I just told them, this is the problem that everybody is suffering from and we know how to approach this in a new way to solve it. And every single one of them told that VC. That investor, this is one of the biggest problems I have and even more so, nobody's trying to solve this. Everybody sort of just accepted the way it is. That gave them so much validation about the market opportunity that they decided to just give us our seed round and then we were off to the races.

Pablo Srugo (00:31:32):
Now that's an important, by the way, fact that I just want to point out. It's as much as the problem was accepted, when you verbalized it to these customers. They knew that it was a massive problem that hopefully one day would be solved. It's not like they dismissed it as, ah, who cares? I'm okay with status quo.

Dean Sysman (00:31:48):
Oh, if they would have said it's a nice to have, or if that wasn't a priority, that wouldn't have happened, right? That's what investors look for, at least investors who are very tied to a certain kind of buyer or industry. They want that person to say, this is a huge priority for me and I will take all the challenges of working with an early stage startup just if I can solve that problem.

Pablo Srugo (00:32:10):
And how much did you end up raising then?

Dean Sysman (00:32:11):
$4 million.

Pablo Srugo (00:32:12):
What's the next step? Do you have an enterprise that's ready to pilot? How do you get that first pilot?

Dean Sysman (00:32:17):
So after that was a very hard time for us as a company because in cybersecurity products are really black or white. It's not like the product works fifty percent and somebody will buy it for fifty percent of the cost. It's either it works or it doesn't. You know, what we built was very challenging technically. So as soon as we had the funding and we realized the approach. At the same time as building the MVP, my co-founders on the technical side were working on that. I was starting to create the go-to-market work of trying to find design partners and early customers. Because we didn't want to wait, right? We wanted to parallelize these things and also we really believed in that agile approach of, if you're not embarrassed by your MVP, then you launched too late. We definitely didn't launch too late. We were very embarrassed by our MVP and by the way, we had tried many different POCs before we got to our first customer, and many of them failed.

Pablo Srugo (00:33:14):
What was the ask, by the way? In terms of the POC? Was it paid or really the ask was just to go through the motions, give you access, which is already maybe big enough?

Dean Sysman (00:33:21):
There are so many disadvantages of an established enterprise to working with a startup. They know you're small, they know you're risky legally, you're not gonna have the stuff that they need from a diligence standpoint. So you have to really understand what's your advantages as a startup and you only have two real advantages. One, you can really cater the initial set of value of the product to what they want. Because you're building it as you're talking to them, right? So you can do the things that they always wanted to get and nobody else would give them. So you really have to create this very close relationship to the buyer and you have to have them be your champion in that organization. Because they're going to fight for you much harder than to buy something from Microsoft, right? So that's the first thing. The second thing is speed. You have to move very quickly and be very agile, right? You have to give them a version every day or give them an update every day, and by the way, we talked about that trust. That's also another huge aspect of creating trust with a buyer in the enterprises. If they ask for something, they're usually expecting it to happen a few months down the line. But if you give them that in a matter of hours or days, it's like, wow, I can really trust that this company is going to deliver for me. Because if I'm asking for something and getting it within a few days. Even if it's small, I know that whenever I'll need something, I'll be able to get it.

Pablo Srugo (00:34:49):
I don't think people appreciate just how important that, that is. I can tell you as an analogy, when we're, for example, considering an investment in a company and having that kind of initial touch points. The speed of response, it's the only window you have into that new relationship and so from the founder's perspective, whether it's selling to an enterprise or pitching to a VC. Whatever, you might imagine that like, well, you're doing all this work, you're doing all this stuff, you're a trustworthy person, you're a hardworking person, but the other person doesn't know what you do as soon as the call drops, the Zoom call ends, or the email. All they know is they ask you to do something and a week later you come back. If somebody else does it a day later, I mean, it's just so impressive. They email you and you respond right away. You ask for something and you get it a day later. You're like, man, this person is on fire. Either they only service me, which is great, or they're just so good that they can do this for everybody. I don't really care which it is. I'm just ecstatic, and to do that at the beginning. It can just change, I think, the direction of that relationship in a massive way.

Dean Sysman (00:35:48):
Absolutely. Let me tell you the story of how we got our first customer, right? We went through all these failed POCs. We're starting to feel really bad. We're like, this is never going to work. Very depressing, you know, people start to get questioning whether we can pull it off or not and then there was this customer who was POCing us. And I remember I was going to Black Hat in Vegas, which is one of the big cybersecurity conferences. And I was staying in Luxor, which is one of the cheapest hotels on this trip. Because I was trying to save money and I wake up in the morning and we had the POC readout call. The final summary with the technical guy we were working with and then I had the meeting with the economic buyer later that day. So I'm dreading this call, because we had had a lot of bugs and a lot of issues throughout this call. And when we get on the call in the morning, and I'm getting up really early cause it's Eastern time for the customer. And we just go through what we did in the POC, and then he says, okay, is there anything else in your offering that I did not see or did not get a chance to evaluate? Now, this is code word for, I didn't like what I saw and I want to cover my ass. That when I say no, I don't recommend we do this. Nobody can come back and tell me, oh, you missed this thing or whatever. So I finished that call, I'm super depressed, I'm like, I can't believe it, another one fails and I just like, you know, talked to my CMO at that time. And he told me, well, let's just think about what we actually did for them. What's our argument for why they should buy? And I said, look, we did bring them value that they wouldn't get from anything else. And we showed them meaningful gaps in their environment from a security standpoint. And also we had a lot of bugs, but we reacted very quickly. And what he did was just make this slide of like timeline. Here's an issue, here's how long it took us to fix it and there were like twenty of these issues. And over the span of four or five weeks, every time there was an issue a day or two later, we had fixed it. Or there was a feature they asked for a small feature and we had added it. So the guy comes into the meeting, now it's at our nice suite that we use to host the customers and I talked to him about it. And I show him the slides, and I said, well, what do you think? And he said, it's great. I want to buy it and that was one of the most meaningful things in the journey of our company. And I asked him, well, that's great to hear. What made you decide that? And he said those exact same things to me that you just talked about. One, you showed me value that I couldn't get anywhere else. That I've been searching for my entire career to be able to solve and it's just the initial value. But you proved that you guys are the ones who can deliver that for me. Nobody else can and the second, yeah, you had a bunch of issues but as soon as I told you about something. I got some response or I got some progress. Most of my other vendors, they talk to me about which quarter they're gonna respond to something. So that's why I can partner with you guys. That was our very first customer.

Pablo Srugo (00:38:41):
I love that. I mean, I heard it summarized by another founder once. You think when you're going to enterprise sales, you're selling ROI and that's part of the equation. But the thing you have to remember is as a startup, by definition, you have no credibility. So you need to find a way to show credibility and it's these little micro actions that get you there in that POC a lot of time. So now you land your first kind of pilot. No, your first customer, correct?

Dean Sysman (00:39:05):
Yeah, our first paying customer.

Pablo Srugo (00:39:06):
What does that look like, by the way? Is that a six-figure deal? Seven-figure deal? Much smaller? What does it start as?

Dean Sysman (00:39:11):
When you're creating a category, you have to find your pricing. Because people don't know what to pay for it. So you have to start to find ways of how to create this anchoring on price. So I basically asked him, how much would you pay for this? And he came to me, and he said, this would replace like a full-time employee for me. As far as manual work, at least. So, just give me a discount because I know I'm an early customer. Just give me a discount on what a full-time person will cost. So it was like a, I think a high five figure deal. ARR, you know, a yearly subscription. Today that would be, yeah, like a six figure deal for us. For that size organization, yeah.

Pablo Srugo (00:39:47):
And where was the product at? Do you go from here to deploy or do you go from here to actually building a production level product, that you can then deploy?

Dean Sysman (00:39:54):
Yeah, I'd say our deployment is very easy. So it didn't take a lot more effort to deploy, but to extract all the value. There was more work to get there, with them.

Pablo Srugo (00:40:04):
And do you go all in on this one customer? Or you start selling and trying to add as many customers in parallel?

Dean Sysman (00:40:10):
Yeah, we started to get a lot of customers and actually that started a huge flywheel for us. And we went from zero to one, I think in about a few months, less than a year. And then we went from one to ten in like a year and a half or something. And then from one to a hundred million, it took us four and a half years. So one of the fastest ever cybersecurity.

Pablo Srugo (00:40:32):
Maybe let's talk about a couple of those inflection points. The first one being that zero to one, which is you get that first customer and then you said you hit a million ARR in less than a year. What happened after that first customer that made things flow more easily?

Dean Sysman (00:40:45):
So you had to match that exact journey that I talked about. You have to match the messaging and you have to match the time to value, right? If you have those two things, and you can teach people to do those, like the people you hire. Then it just explodes, but we had to unlock both of them and by the way, to me, the messaging part was way harder.

Pablo Srugo (00:41:05):
What changed on the messaging? Because you just failed a bunch of POCs, then this one. You finally managed to get it over, and then clearly all the other ones mainly went over. What changed?

Dean Sysman (00:41:12):
So the messaging was that we realized, that we had to create our own category name. We had to target the security team as the buyer, and yet involve the IT side as a supporting function. So you don't want to make them adversaries, but also you want to get in through security, and the last thing is the way we priced was to find this equation to show them that it's ROI based, right? It's like, hey, you're already going to spend this money on a failed audit or on manual work, or not utilizing tools you've already subscribed to all these other things. You never want to just have the pricing be a negotiation. You want it to be, hey, if you can make an investment or you get the interest up front, it's a no brainer to do. So that's part of the messaging is like, Hey, this is a new category you don't have a budget for, but you already have a budget that you can use for this and all these other buckets that this would be the most effective way for you to use.

Pablo Srugo (00:42:10):
Walk me through the getting different champions, getting different people to support the deal is key to enterprise sales. Especially on the security side. It's clear, it's this ROI, I mean, it's very much, the value prop is direct for them. On IT, what do you tell them to get them to support the initiative?

Dean Sysman (00:42:25):
So the first thing is never call anybody's baby ugly, right? So a lot of times we would find gaps that could make people defensive, right? Like we'd say, hey, this control or this architecture, there's a bunch of problems with it. So instead of going and telling these people, hey, you did a terrible job. What you want to do is tell them, hey, using our solution, we can help you be world class excellent at this. Because everybody is at that point of lack of execution that we're seeing here for you, right? And that way you can make even security, usually security and IT are very frictionful towards each other. Because sometimes they have conflicting incentives. For example, security has sometimes an incentive to lock things down and make them slower. Because then it's less risky and IT has the opposite. They want to make things fast and not lock things down. Because their incentive is speed and operational efficiency, right? But what we did was, hey, using our solution, you can finally not have a conflict over what's the data, right? Here, we're connecting both your systems. We're connecting the IT systems, we're connecting the security systems. We're showing you the deduplicated data. Now you can effectively work together and not get into these arguments over what's the reality. So we found a way to have them be in alignment using our solution instead of it being another factor of friction.

Pablo Srugo (00:43:53):
And then this is a bit post product market fit, but what do you think was the unlock from one to ten? I see a lot of companies directly that get to a million, whether it's in a year or two years. Seem to have real PMF but then from one to ten, it just starts to slow and it's so slow, it's like, just becomes a grind. In your case, it actually accelerated.

Dean Sysman (00:44:12):
So you have to be really honest with yourself if the way you got from zero to one was, because of the market opportunity or because of your hustle as a founder, and that's sort of what happened to me in my previous company. We got to a million ARR but to be honest, there was no real market opportunity there. It was because we were hustling as founders, right? We made enough people like us enough and knew we would work our ass off for them. Even if it wasn't the product we were selling them. They just knew that working with us would make them successful and you could never copy that to a hundred AEs, and make them be able to do that. What you need to ask yourself is if, the way I got from zero to one gave me a recipe. That I can pick up an AE from the street and make them be able to do the same thing I just did. If that's the case, then you're going to accelerate from one to ten, and there are always questions. You know, you're always questioning yourself and everything. That's true and you always have to hustle as a founder anyway. But if there isn't a very clear recipe of, how do I take an AE from the street and make them do what I just did to get from zero to one. Then you have to really ask yourself, why? Because that's the difference.

Pablo Srugo (00:45:24):
And when did you feel you'd found true product market fit?

Dean Sysman (00:45:28):
That first customer, that was August of 2018. Then in the end of 2018, we had raised our Series A from Bessemer. They're one of the best VCs in the world, one of the best brands, and I totally give them as much credit as I will give any VC. Because I've seen everything and there's a lot of bad things. I would say VCs do as well, but they've been amazing and they really saw our potential. Invested in us when we were just a handful of customers. Because of how passionate those customers were about us. About like, hey, this solves a problem I've had for so long and nobody can really solve this. And they said, we've never heard customers in cybersecurity say the word love about a product. And they said they loved you guys. So they invested in us and then in February, I think of that year, we went to the RSA conference. That's also the other big cybersecurity conference in the US and we had won that startup competition, it's called Innovation Sandbox. The winners of that competition are all like multi-billion dollar companies. You know, some of the biggest public companies and everything. So that day we won it, we had also announced the Bessemer investment just like a month before, I think. I even remember my head of sales, the first sales hire we hired. He said, I never thought I'd say this in my career. But he told our marketing guy, please stop the leads, like in general.

Pablo Srugo (00:46:48):
That's product market fit.

Dean Sysman (00:46:50):
Then you know you have product market fit, right?

Pablo Srugo (00:46:53):
And then was there on the flip side, ever a time where you actually doubted things and maybe thought things might not work out?

Dean Sysman (00:47:00):
There are many times, especially that period right before we got our first customer. Because I just started to question whether it's feasible to have a product that does that in a scalable way. But what gave me conviction was how deeply I understood the problem and how big the problem was. Those two things together, I knew this is a huge problem that everybody suffers from, and I knew we understood it better than anybody else. And those two things made me realize that, you know, regardless of the challenge in front of me. That's the recipe for really, you know, large scale success.

Pablo Srugo (00:47:32):
And then last thing, if you could say one piece of advice to an early stage founder. What would it be?

Dean Sysman (00:47:37):
Only do it if being an entrepreneur is the only career path you see for yourself. Otherwise, it's really just not worth it. You know, don't do it for any other reason, besides the fact that you feel that your calling is to be an entrepreneur and that's the only thing you'll feel fulfillment, and meaning by. And if that's the case, then go ahead and try. And get as much advice from more experienced founders as you can. But don't do it, because it's cool or because you think you're going to make a lot of money, or because somebody else is expecting you to.

Pablo Srugo (00:48:09):
Awesome, man. Well, dude, it's been great having you on the show. Really appreciate it.

Dean Sysman (00:48:12):
Thanks, Pablo.

Pablo Srugo (00:48:13):
Wow, what an episode. You're probably in awe. You're in absolute shock. You're like, that helped me so much. So guess what? Now it's your turn to help someone else. Share the episode in the WhatsApp group you have with founders. Share it on that Slack channel. Send it to your founder friends and help them out. Trust me, they will love you for it.