He bet his house on a startup—took 7 years to $1M, then hockey stick to $100M+ ARR. | Eldon Sprickerhoff, Co-Founder of eSentire

Pablo Srugo (00:00:00):
What were the numbers back then? Year one would have been what? A couple $100K in terms of revenue?

Eldon Sprickerhoff (00:00:04):
Yeah, I think it took about. To get year seven, I think. Where we hit a million US.

Pablo Srugo (00:00:10):
What did the contract look like?

Eldon Sprickerhoff (00:00:11):
At the beginning we paid monthly. I had a vacuum paucity of business knowledge and we're just making the rules up as we went along.

Pablo Srugo (00:00:18):
You started one of the iconic companies in Canada, eSentire. Been around now for, I guess, over 20 years and you have. I mean, now it's worth over a billion doing multi, you know, many hundreds of millions in revenue.

Previous Guests (00:00:30):
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 (00:00:43):
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. Eldon, welcome to the show, man.

Eldon Sprickerhoff (00:00:59):
Pablo, good to be here.

Pablo Srugo (00:01:00):
Started one of the iconic companies in Canada, eSentire. Been around now for, I guess, over 20 years.

Eldon Sprickerhoff (00:01:06):
It's hitting 24.

Pablo Srugo (00:01:08):
Hitting 24. It's incredible, right? To have a company that actually lasts that long, especially given just how much the world. Like how fast things are changing and you have. I mean, now it's worth over a billion doing multi, you know, many hundreds of millions in revenue. But it didn't start like the classic venture way. So really curious to dive into that. Maybe take us back to that time. We're talking, what? Like 2001 or so?

Eldon Sprickerhoff (00:01:32):
Yeah, so to start at the end of 2001 and I just to sort of set it up. I think where it came from, I'd been working at a prime brokerage in New York. You know, the.com 2000 era. Building security systems in process, at this prime brokerage for hedge funds and for the prime brokerage themselves. And that was my, you know, you go to New York to seek your fortune during the.com gold rush. Lived through the February-March 2001 dot-bomb meltdown. I had a kid who was born in May 2001. So I was living in New York, coming back on the weekends and then 9-11 put a fork in it. And said, maybe it's time to come home. And so I started off with sort of a consulting idea. I knew that I wanted to build a services business, you know, zero business acumen. I knew what the hustle that was required to do consulting and I could always go back to that. So, you know, came back. Took a $150,000 line of credit on the house and started this company with a buddy of mine. Who I had known since the first grade and just started cybersecurity. It wasn't even called cybersecurity back then. It was information security, consulting, and that was sort of the start of it. We were selling to my network of customers I'd worked with in Toronto and in New York.

Pablo Srugo (00:02:58):
By the way, how crazy was that market crash? Like that time, you know, post the dot com. We've obviously had many market crashes since then. 2008 and then you know in 2022, we had a big one. Obviously right before the first few months of the pandemic. But I find when I read about those in 2001, it just feels way more visceral than the ones than these new ones. I don't know, they just seem so short term. They seem like they get fixed so fast. I'm just curious what it was like, you know, back then.

Eldon Sprickerhoff (00:03:26):
Well, you know, there was no rescue, right? There was no rescue, there was no bailout, Amazon was not guaranteed to survive.

Pablo Srugo (00:03:34):
Crazy.

Eldon Sprickerhoff (00:03:35):
You know? But there was some insanity, right? The multiples on public stock, you know, in every.com it was the rush to get listed and just giving out options like their toilet paper, you know? To everybody around and the DSL stocks. That was really the hot thing that DSL was going to change the world. The internet is around and it emerged stronger, but there was a lot of wreckage across almost everything. I think Nortel was dealt a fatal blow in that time and Amazon pivoted, right? And so they just don't sell books at a loss, right? So there's a lot of good that comes out of that fire, but there was a lot of damage. A lot of retail investors that lost everything buying things on margin. So there was a lot of fallout and it shook up. You know, I was part of that sort of Silicon Alley as they called New York at that time. But there's some, some big names that emerged from it stronger.

Pablo Srugo (00:04:37):
And why did you decide to go the consulting round instead of starting, I don't know. Like an internet company or whatever else was kind of hot at the moment?

Eldon Sprickerhoff (00:04:44):
You know, I just. You build what you know, right? And I knew here's the problem, here's what people need, here's the itch that I can scratch. So it just, it fit really well. I understood the, I guess the horizon, the problem set. You know, I had excellent contacts within these hedge funds that were spinning over the prime brokerage. These were all people that I'd worked with that became CTOs there and I recognized that they needed these solutions that a tier one bank would have. But couldn't afford them, because they were a hedge fund that's running $2 or $3 billion of money. Still has concerns, but they can't afford their own full-time security staff. Whereas a tier one bank, you know, like Morgan or Goldman would have.

Pablo Srugo (00:05:23):
And by the way, the $150K that you took out. What was the main use of that? Obviously, you're not building product. Did you hire people right away?

Eldon Sprickerhoff (00:05:31):
Yeah, we hired some people, we got office space, we had to buy servers, we had to buy internet. Back in 2001, 2002, you had to build your own server room. You had to be your own sysadmin. There was no going on AWS is spinning up an instance like that. It was everything required physical on-prem people and tech. And so that all costs, right? You know, it was crazy, right? And I don't think I'd recommend anyone doing that. Even if you're, you know, if you have a house more or less paid off. Which is almost impossible from, these days, right? You know, and so I just. I would not necessarily recommend it was, you know, incredibly risky, But that was, I didn't know enough about raising money to even go to the market then and, I didn't ask friends and family. Because I didn't want to let them down. It would make for a very uncomfortable discussions at Thanksgiving and Christmas, right? So it was just sort of self-financed and paid ourselves very little. And just squeezed every dollar that we could. Got Waterloo co-ops that did a lot of the heavy lifting at the beginning. Both my co-founder and I are UW grads. Just had a lot of luck along the way. I burnt a lot of shoe leather. Flying down to New York and trying to sell, and do the consulting, and do the, you know, all of these pieces. And back home, my co-founder would be busily coding behind the scenes. And so it was peddled down. That sort of 996, that Jack Ma, right? It was easily, you know, 997. It was every single day. I used to joke that I worked half days. It was like 12 hours a day, seven days a week. That was my popular refrain back then. I'm not exaggerating, it was an awful lot and I could say that if this thing doesn't work out. It won't be because we didn't try hard enough.

Pablo Srugo (00:07:35):
Did taking that line, which you don't recommend. But did that fuel you or did it suffocate you? What was the impact of that emotionally on your desire to kind of make this thing work?

Eldon Sprickerhoff (00:07:44):
That was just a cushion and it cannot fail, It cannot fail. There are plenty of times where I felt, okay, I just can't do this anymore and between what I felt I owed my family. And maybe surprisingly, the true believers along the way. Who were the first clients that really believed in what we were doing and supported us. Almost bent over backwards to support us in every possible way, acting as references and acting as, you know, opening their networks to us, and really cheerleading those sort of early Johnny Appleseeds. I did not want to let them down, because they put their reputations on the line and their own jobs on the line to help me succeed. So that was at least as big a concern or a thought than the money itself.

Pablo Srugo (00:08:32):
Tell me about, who was your first customer and how did you land them?

Eldon Sprickerhoff (00:08:34):
So my first customer was ING Asset Management out of New York. So the prime brokerage that I had been working at before was ING. It got sold to ABN AMRO and there was this. This was, I guess the early 2001. There was an ISP that was going out of business and, both the prime brokerage and also the asset management group used this ISP. So we had to do this kind of, we had a week's worth of grace before we had to do the cutover and so, you know, I was, that was my job, right? So I was prepping to do that on a Saturday for the prime brokerage and this other arm of ING needed somebody else to do it. Their head of networking started asking everybody around, nobody wanted to work on any more than they had to and so it came to me, and I said, yeah, I'll do it. But I have to do it on Sunday. So we'd go live on the Monday morning, Sunday would have to be it and I'd only known this person. The guy who was in charge of tech, his name's Andrew Rosson. I'd only met him to see him. We're walking back from lunch and the two groups pass each other. I said, yeah, let's say a couple of hours and we'll do the cutover. I'll be there Sunday morning. We'll do the cutover, test everything, you know, no big deal. Gave a $60 bucks an hour, something like $60, $80 bucks. It was just, yeah, no big deal, you know? So I did the cover on a Saturday for my prime contract and then went over and on a Sunday morning. Went over and did the cutover, and you know, three, four hours testing everything. And the market data feeds, and things like that.

Pablo Srugo (00:10:09):
But this is still when you're working, right? Like your full-time job?

Eldon Sprickerhoff (00:10:12):
This is when I'm still working, yeah. On the contract, so this is before I started eSentire. You know, they did this and it all was fine. It all went well and so I kept in touch with Andrew. And, you know, as I came back to Kandi. He was like, I've got some things for you to do here and so we would just do other little tech pieces just on contract. And then, you know, I think we were at a dinner, and he's like, is there anything you? Like, what are you doing right now? And so I'm trying to build this security services company that we're looking for network traffic, we're looking for bad behavior, all this kind of stuff and try to. You know, sort of the tools of an instant response team would have without having to fly in people. So instead of having to wait 24 hours for an incident to be resolved. You have people who have the tools, they're online, they're remote, they dig in, and within an hour it's all taken. He's like, that's really interesting. I'd like to help you out with that and that's how it began. I had lunch with, I had dinner with him last week or two weeks ago and we were talking about how unlikely this whole scenario is. Like who these days would give a raw founder, just full access to their network. Just to try things, let's see if this thing works, right? It's absurd to think how this would be. But that's what happened. We just built so many interesting things about it with permission lists and deep inspection.

Pablo Srugo (00:11:46):
What were some of the things? I'm curious on the actual services that you rendered. what was it that they needed that you ended up building for them?

Eldon Sprickerhoff (00:11:54):
Yeah, so we started looking at network traffic. So attacks from the outside and then things from the inside that were inappropriate. And so, yeah, that was just purely on network traffic. And we had to sort of push the limits of what you could do looking for bandwidth defenders. If there's problems on the network, you could play the traffic back. When there's internal HR investigations, started looking into that. We looked at, you know, so we had this very interesting place in the network. Where we could see pretty much everything that traversed these choke points and, so we can say these are. This is why you've got bandwidth problems, this is why you've got jitter, this is what you can do from grabbing voice data and spinning it out into MP3s for use later. Because it's a trading environment, you need to have that kind of stuff going on. So we ended up building tech, like a circular queue in memory to pull data as fast off of the network, the NICS, as quick as possible. Things that just didn't exist before and that's just a lot of the crazy sort of breakthrough first time situations, right? We had all this incredible data and from that we could start building up permission lists. So there was a point where people were downloading malware just by single click, right? And so we built up this method that said you were only permit to download executables from this list of 30. That we had across like a few dozen clients. So this permission list and then automatically block it. And so in this sort of six-month period, people would accidentally click something, the antivirus was not catching it and so they'd be rebuilding four or five machines a day. And it doesn't matter how well automated you had it. It was just such a pay-it-up and so there's this sort of little. I call it the EXE-cutioner, right? Executioner, because it would just kill this malware and it took attacks down from five or six for every client down to zero for months, and months, and months.

Pablo Srugo (00:13:56):
And how did you set up the? What did the contract look like? Were they paying monthly? Was it a big contract? How did you set that up?

Eldon Sprickerhoff (00:14:03):
Yeah, so it was. At the beginning they paid monthly, you know annual contract didn't pay monthly. When we brought people in that actually had business acumen. You know a three-year contract that's paid annually and revenue recognized as it occurs. That's what it turned into. But like I said, I had a vacuum paucity of business knowledge and we're just making the rules up as we went along. Quite, you know, sort of InfoSec cowboys and founder, right? Communitech was only a couple of years old. We were in Cambridge, so we weren't really part of the KW society, right? There's no YouTube, Wasserman hadn't put any books out, it was just this sort of open desert.

Pablo Srugo (00:14:41):
Were you profitable? On this single customer?

Eldon Sprickerhoff (00:14:44):
Not by the first one, but we were super lean. We had currency arbitrage, which was really in our favor as well. Because the dollar was around $0.57 and the fight for local talent was quite a bit lower than it is now. And we squeezed every penny, right? When I went down to New York, a flight to New York on Air Canada was about $1,000. We would drive down to Buffalo and take JetBlue into JFK. Every dollar was just squeezed until it screamed, right? And this was, it's so profitable. We were growing, you know, thirty percent every year, right? This is organic growth. I was doing the sales efforts as well, right? Just sort of talking to everybody that I could, having ideas.

Pablo Srugo (00:15:36):
And I assume like, what were the numbers back then? Like year one would have been what, like a couple hundred K terms of revenue? 

Eldon Sprickerhoff (00:15:40):
Yeah, I think it took about to get year seven. I think, where we hit a million U.S. Especially at that time, there's a few early stage investors that would come out and talk to us. It was a word melt or whatever and we described this thing that we're doing. And they'd say, well, you know, we really like hardware, we really like software, we don't understand service at all. So they had no real interest in funding that and a couple of years after that last one came by. They boomerang back and said, hey, we're, you know, we'd like to talk to you again. And I said, well, we haven't changed it. Like our numbers are up, but we haven't changed anything and they said, no you have an annuity. And this is before, Bessemer came out with.

Pablo Srugo (00:16:23):
You're just discovering SaaS, yes.

Eldon Sprickerhoff (00:16:24):
Yes, before Bessemer came out with the stat. You know, MRR and ARR and so on. So they call it annuity. I was like, okay, we're like, yes. I guess that's what it is.

Pablo Srugo (00:16:36):
VCs are funny man. It's an interesting tangent, right? Because things are hot, you know, in particular moments and business models get all like. You know SaaS these days is not nearly as hot because of AI, of what it was. But when I started in venture not that long ago, we're talking let's say seven years ago. B2B SaaS, you know, I mean? But this is probably peak hype and yet the businesses might be there before. The value might be there before, it will still. The market's not that efficient, I guess is my point. It'll take a few years until everybody wakes up to something that. From a founder perspective, you might have been like, I've been doing this for a long time. I guess you just put a name on it and you got excited.

Eldon Sprickerhoff (00:17:14):
Yeah, that's sort of, you know, you feel sort of a prophet out in the wilderness and eventually. Maybe the world will turn and put a spotlight on you. You know, that's one of the things why I go to a lot of early stage founders and it's not necessarily the best thing to be the first one building. Whatever this thing that you're building is. Because if you have to educate the public, you have to wait for them to catch up.

Pablo Srugo (00:17:38):
Tough to be a pioneer.

Eldon Sprickerhoff (00:17:40):
Exactly, it's like you have to wait long enough and it can be done, right? We did it, but there's a lot of lean, cold nights in that desert as you're waiting for the world to come around.

Pablo Srugo (00:17:53):
That's another question. In those seven years, you're growing to a million. I mean, things are going relatively well, but you're working a lot for probably a little relative to what you could have been making or were making as an employee. I would assume, how did you justify through that time? How did you think about it?

Eldon Sprickerhoff (00:18:08):
It was just a death march, right? We're just, it has to work and pigheaded, and kept pushing forward. And we kept making, we got more revenue, we expanded things, we pushed things forward on a technical basis and the clients were really happy. And that helps inspire you and keep you forward. We're completely committed to making it. If it didn't, we're going to go down in flames and there'd be no excuse for us not trying hard enough. Around the sort of year eight, we came across this guy named J. Haynes. So J. Paul Haynes, he became our first CEO and, you know, I joke with him. You know, you hate the serial entrepreneur but that truly. He had just finished selling one of the businesses he was working with and that company was just across the hall from our place in Cambridge. So he came on board and he had experienced all the things that I did not have, right? So I couldn't have spelled PMF back then, right?

Pablo Srugo (00:19:09):
Did you know you wanted a CEO though? Or how did you decide to go out and get him?

Eldon Sprickerhoff (00:19:12):
So we were looking for like an advisory board, right? Just sort of help us move it along and then he came on board. He's like, we don't need a board directors, we don't yet need probably an advisory board, but we do need somebody with the chops, right? And the thing is, I've been working really hard at this. It's got to pay off, right? To your point, if I'm going to work this hard, it has to really rocket ship and organic growth is not doing it. I don't know, what I don't know. I've taken this company, but as far as I think I can take it with what I know. We need to bring somebody on board and so he came on board. I joke with him sometimes as I looked at him. Like he was the life preserver and you know, I got. I'm out there, okay, I've been swimming for eight years and they threw this. The J. Paul Haynes life preserver at me and I grabbed that thing is that okay. We've got, we can go forward with this and it was terrific. He was just very inspiring. He's still with the company, you know, came on as CEO.

Pablo Srugo (00:20:12):
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. What did he do differently? You know, a lot of times you kind of see these, been there, done that people and you just assume they can come in, and transform. And I mean sometimes they do, sometimes they don't. I'm curious what he did.

Eldon Sprickerhoff (00:20:32):
He, you know, we went out and talked to all of our clients. What they love, what they hope for, what they want to see, this thing got really tight on the messaging. I had no idea what marketing was required, tightened up the sales and marketing process.

Pablo Srugo (00:20:46):
How big was the company, by the way? People-wise at this point, like ten people?

Eldon Sprickerhoff (00:20:49):
No, like fifteen, twenty people. I think, around that time. Pretty much all developers or SOC people. So Security Operations Center, sort of a split of half and half. I think we had one sales guy by that time and he's still with the company as well,  even right now. And we were doing four-legged sales calls, right? Because that's what it took, right? To get the message across and before. So he could get his, get the spiel, get the cadence, get the tone, understand what the clients were looking for.

Pablo Srugo (00:21:16):
So that's a lot of like the learning that he did, but then was he able to kind of change the growth curve of the business?

Eldon Sprickerhoff (00:21:21):
So he helped bringing in some early stage money.

Pablo Srugo (00:21:24):
How much did he raise at that time?

Eldon Sprickerhoff (00:21:26):
It was like a mil, a mil and a half. So nothing extraordinary. Just some local, you know, Canadian investors. I think Alkarim Jivraj who's with Espresso now, was an early investor as well. Just enough to let's bring in people who've done this before and transform it from just a bunch of cybersecurity cowboys. You know, shoot down the bad guys to an actual business and so as he's doing that. He's learning about information security and cybersecurity. And I'm learning what it takes to, to build a business as well. So in this sort of mutual, I'm watching what he's doing, he's watching what I'm doing and both sort of elevating from that.

Pablo Srugo (00:22:07):
And what's going on in the macro? When I think about your story. I mean, this seems like the birth of managed service providers, MSPs, MSSPs. What's going on there and how much does that help drive the business forward?

Eldon Sprickerhoff (00:22:18):
Yeah, so you know, there's other competition coming in. SecureWorks got acquired by Dell and so they were kind of quasi competition. And so I got really tight on their strengths and weaknesses, and use that in our messaging. And so when we'd go to head to head competitions. I knew exactly what to do and we won ninety-five percent of the time on head to head competitions.

Pablo Srugo (00:22:44):
Dive deeper on that. Because it's especially, I mean, it's tough to win head to head that often even on product. Which has features and these sort of things, but with services it feels like it should be even harder.

Eldon Sprickerhoff (00:22:52):
Yeah, so I started off by saying they're both hamburgers. Okay, we're both selling hamburgers. They're selling McDonald's. We're selling something from, I do. I choose a burger joint that was local to the domicile I was selling it to. So let's say it was going to be Burger's Priest. So I said, where you get to choose the bun and the toppings. And so, yeah, you want a Big Mac? You can go anywhere in the world and you get the same Big Mac. And there's nothing wrong with that, right? Once in a while you want a Big Mac. I think you deserve more than just a Big Mac. You deserve this and it's a bit more customized. So we would go into if there was a, at the time. A service provider, if they saw something. If MSSP saw a weird piece of behavior, an alert came through. They would send a message telling you that there was an alert. So the end user would receive this alert. There's something bad going on in your company. Not a lot of detail, it was up to them to do the investigation and so that would be like having a fire department. A fire breaks out in your house and they call you, and say, hey, there's a fire in your house. All right, you got the call? Like, yeah, you got the call. Okay, all right take care and they hang up. But like, no, you don't want the fire department to tell you that there's a fire. You want them to come and put it out. And what's more, If you could do that proactively. That's what you want to do. There were cases where, there were a lot of false positives in these alerts that came out and so it was like, well, how do you know it's a false positive or not? They would leave that up to the customer to discover this. Because we had been grabbing the network traffic, just like a DVR. We could play it back, you know, and you get this alert. You could do a deep investigation in real time and so that they would never get a false alarm. So no false alarms. if we see an attack that came across another client of ours. We're going to proactively defend you against that attack. It never even makes it to your company and then if there is an attack. We're going to get in there. We're going to get engaged with the attacker. We're going to kick them out and we're going to get it all clear.

Pablo Srugo (00:24:45):
And why were you able to do that, and the competitors weren't? I mean, it seems like the obvious thing to do. At least when you say it. You're like, yeah if you have a problem, solve it. Yes, definitely that's what I want. But why wouldn't they do that too?

Eldon Sprickerhoff (00:24:56):
It was not obvious then. It was sufficient just to say, hey, there's this weird thing going on your network. Go send your team to take a look at it. Looking back, yes, of course it's obvious. It was not obvious then.

Pablo Srugo (00:25:07):
It's a matter of, kind of going the extra mile before anybody else did it.

Eldon Sprickerhoff (00:25:12):
But if you want a big back, you've got a big back and that was the talk track that developed, and I could use that. You know, we put a system in and we put the preventative blocks in. And at the end of the demo, I'd say, look. I pull up the log of everything that we prevented that we knew was bad that got through their firewall. I said, here's 170, this week, 170, 570, whatever number of attacks. That made through your firewall that we know are bad and we blocked them for you. And so there was like, they would take that list and it would go to whoever we were up against. Well, what would you do against these? They said, they didn't have the data, they weren't keeping the data, they weren't looking for the data, they were looking for just basically signatures of bad behavior and if it didn't match the signature. They wouldn't register it. So it just, we basically redefined what a vulnerability assessment looked like. Because at the time, people were just doing external scans. We started doing internal scans and looking at network traffic as well. And it was a tough market to get into. People did not want to get into managed services or the monitoring immediately. So we used it as part of the vulnerability assessment and so instead of getting an alert at four weeks after the event. Here's some bad things that were going on, because that's how long it took to write up a report. Two weeks, three weeks, four weeks, whatever and then here, and then we'd have the operation center saying an alert. There's something bad, this machine, pull it, clear it and so at the end. They get the report and they go, here's the vulnerability status. We can give this to our investors. We can give this to the SEC, if they were asking or things like this. But there's this thing that in the here and now told us there was a problem, and helped us kick it out. Can we keep that in? So that's how we flipped from a pure consulting pace. Which was our wedge in, to fifty percent, sixty percent, and now it's ninety plus percent of the revenue. And that's when it turned into MRR. That's when it got really exciting.

Pablo Srugo (00:27:02):
Is it a product? Or what's the?

Eldon Sprickerhoff (00:27:05):
The service offering.

Pablo Srugo (00:27:06):
Cause the wedge was kind of more of an audit, like a one-off.

Eldon Sprickerhoff (00:27:11):
They all, like, every financial group of any size need to have this done every year and have an attestation. So, and all they needed at the time was an external scan. We said, we'll give you an external scan and an internal scan, and the network traffic.

Pablo Srugo (00:27:24):
Is that like a pen test? Penetration testing or is it different?

Eldon Sprickerhoff (00:27:26):
There's similarities, but this is what they needed every year. So we'll do that, but we'll give you all this more and we use that as a wedge to get it.

Pablo Srugo (00:27:35):
And then they would say, I want that consistent and then that's how you would stay, and get that recurring revenue.

Eldon Sprickerhoff (00:27:39):
Bingo.

Pablo Srugo (00:27:40):
And was there any pressure ever either internally or externally as you raise more money, brought more investors. To move away from pure managed services to building some sort of cybersecurity product or whatever?

Eldon Sprickerhoff (00:27:51):
There are questions about that for a while. There's a product that if you're an MSP, not an MSSP. If you're just an MSP and you want to build your own operations center, your own MDR piece, you can use the tech we use, right? So that's the product that's come out. But it's a completely different muscle memory, right? And muscle memory and go-to-market. Everything that goes along with that, completely different and so it wasn't something that we were rushing to do. And it had to make sense, you know, we would build technology that fixed problems that our clients had. And it wasn't so much, we're going to sell, we're going to spin out a product, a standalone product, like a commercial off the shelf product. These are all going to be offerings that fit into our larger managed services offering.

Pablo Srugo (00:28:36):
And let me ask you this. You took about seven years to hit a million in ARR, in annual revenue. How long did it take from there to hit ten?

Eldon Sprickerhoff (00:28:45):
Three.

Pablo Srugo (00:28:46):
You cut it by half and you 10X.

Eldon Sprickerhoff (00:28:48):
Yeah, boom, right? It was that sort of hockey stick. It was very quick. I think that's one of the things when I talked to J. I was like, what did you see in us? He just said all this raw, sort of,  not directionless but not focused talent and clients that just loved us. Just bent over backwards, loved what we were doing, wanted to make us more successful. We made them look so good when it came to audit time that, they just wanted to be part of that journey.

Pablo Srugo (00:29:19):
You know, it's funny. I was talking to, I had Mike Maples on the show a few weeks ago. He's one of the kind of earliest, let's say, seed investors, right? He started Floodgate, I think, fifteen, twenty years ago or so. In any case, he was telling me, what he. You know, there's a lot of focus on getting to a million ARR and I think a lot of founders today, for obvious reasons. Want to get there as fast as possible and there's nothing like the faster you grow, all else equal the better. That's not the point. The point is, though, that he was making is, this obsession with getting to a million ARR so fast has repercussions. Which is that it's not the thing that actually matters. The thing that matters, you know, in his view, and I tend to agree is. Not how fast you get to a million, but how fast you can get to ten. That one to ten is really the thing that'll set you on this kind of different trajectory. I wonder what you think of that. Because you, I mean, you took seven years to get to a million. It was not fast by any means, but then it really flipped like one to ten in three years. It's spectacular, even more so, I would say for services. Because services is kind of hard to scale. But even for product, like one to ten is incredible. Anyways, curious what you think about that kind of thinking.

Eldon Sprickerhoff (00:30:21):
Well, I've done some early stage investing of my own and I think the $1 million is a cool marker. If you've got something, it's proven itself in your network. You basically exhausted your network and got to a billion, right? And it's not, I think there's a lot of credence in what you're saying. Because what got you here won't get you there and that is basically what you're going to say is like, yeah. So you've proven something, all your friends, all your network agree with you. They're willing to put up a little coin or a lot to get you here. The muscle memory that you have to get here to sell is not going to work. So it's sort of grade school versus high school. Those relationships, those classes, it's a different. It's a whole different thing and so the first million is incredibly difficult. And then the next nine is the next most difficult. This is where you run into tech debt and just people who didn't, you know, they were happy in the scrappy early days. And there's the situations that you've got the, you know, sort of the bun to boss scenario, right? Two people who are hired at the same time doing the same thing and one gets promoted and so there's always some sort of unhappiness there that you have to start dealing with as well, right? So there's so much that has to change to get to ten from one.

Pablo Srugo (00:31:50):
What would you attribute for, in your case. The speed of one to ten to mainly. Is it changes in go to market? Is it changes in just market readiness and timing? Or something else?

Eldon Sprickerhoff (00:32:00):
Well, it's everything, right? How do we tell our story? How do we tell our story to a non-technical buyer? Because it moved a lot from the CTO to the chief compliance officer at that certain point and that went up to the CFO when there was audit pieces. And so it was, how do we tell our story in a way that doesn't require us to talk about how fast we can pull network traffic off a network interface card.

Pablo Srugo (00:32:32):
And this is how you tell your story relative to someone else or relative to? I'm curious, in the beginning, 2001 to 2002. Was it always a bake-off? Was it always a situation where they're going to spend on someone, the question is who? Or did it go from that to. At first, they might just not spend, they might not have any sort of investment there and then after a while it was like, yes, for sure we're going to spend this money. But it's a question of who. Did that change over time?

Eldon Sprickerhoff (00:32:54):
It was, so in those first couple of years. Why do I need this at all? I don't even believe there's a problem, right? I remember going into one company and they were fairly big. And they had, there were a lot of problems in their network, right? A lot of active malware in their network and a lot of vulnerabilities. And the CTO, you know, usually this kind of thing would take half an hour. Because it's all well documented. We were in there for over two hours and he went over every single bullet of what I brought up saying, that's not the case, that's true, that's not true, it's not the case, and I know we have forensic level data supporting us. And so by the end of it, I passed the two hour mark. And I just said, okay, so here's my question. Right now, there is demonstrably active malware in your company. What is the acceptable level from a C-suite perspective of active malware in the company today? I just want to know what's that minimum, which is okay, right? Like, you know, in breakfast cereals, right? There's a certain level of rat feces, which is permitted, right? By the USDA, just let me know what that number is. I just want to know it formally and I'll make sure that we just don't report anything. And so the amount of rat feces should be zero. And I had to get him to say that. It was a struggle even for a very sharp, tactical person to recognize. You have this void of you don't actually know what's going on and this reflects very poorly on you. And so now we have to do something about it. I've just demonstrated, right? That your partner's having an affair and maybe you didn't want to know about it. But now you know about it. What do you want to do about it? We can ignore it, it's probably best not to ignore it. So that was that was part of the educational process.

Pablo Srugo (00:34:39):
Let me kind of stop it there. Maybe just fast forward really quick. Today, the company is obviously still running, still growing, but I know you sold a majority of it. Do you still own some of it?

Eldon Sprickerhoff (00:34:49):
I own a small piece.

Pablo Srugo (00:34:50):
How did it feel? This is a moment whenever we talk to an exited or partially exited founder that we go through? You spend so much time building something and there is that kind of zero to one event where you exit or majority exit or whatever. I'm always curious, the feeling of it. What was the day after that actually closed like?

Eldon Sprickerhoff (00:35:10):
It just felt like another day to be fair. I stepped back, you know, two years ago. Almost during the summer, two years ago and that was more. That felt more like a different chapter closing, right? It felt, the way I described it was. It was 20, it's been three years now. So it was 21 years, almost 21 years. I said, as soon as you're with my baby and, you know, I would go places and introduce myself. Eldon Spikaroffi Sentire, that was my surname, right? And I said, look, I put 21 years in my baby. As soon as my baby can drink legally in the States. I shouldn't have to be a helicopter parent anymore and so that was the stepping back that was. I don't need to be a helicopter parent and so here we are. That was the feeling that I felt like. There's a group I belong to which is a lot of exited founders and you go through these same sort of group things. Where you start doing some angel investing, you start working on your health a little bit better, you reconnect with family, you read a bunch of books, you start traveling. Maybe you have a small mental crisis, like what do you do? Write a book, do some consulting, and then should I start a new business? Should I start a podcast? 

Pablo Srugo (00:36:33):
Which one did you do? Did you write a book? 

Eldon Sprickerhoff (00:36:35):
I wrote a book, I did. So I wrote it.

Pablo Srugo (00:36:42):
Committed.

Eldon Sprickerhoff (00:36:42):
Committed and it did really well. On Amazon, it was basically. So one of the things I was doing was working with a group out of TMU called Catalyst, Rogers Catalyst. So cybersecurity companies and so I've been doing that for just over four years now. And so it's just a bunch of startups, cybersecurity startups, Canadian mostly, and walking through all of these things. To help you grow and so the book came out of this, you know, eight or nine cohorts had come through the program and there was no YouTube. There was no YC and even with all these things right now. I still see them making the same mistakes. Every cohort, every company, pretty much the same mistakes over and over again. And when they're pitching or selling, I was like, oh, this is exhausting. And it's like, I so want to make you better, not to make the mistakes I made. Make more exciting, innovative, right? Be a mistake innovator and so I started writing down an FAQ. So I wouldn't have to keep saying the same thing over and over. And then, you know, 55,000 words later, there's something to publish, right? And so it was a very raw, concise, for a tech founder who knows nothing about business. What do you need to do? And so that's what it turned into.

Pablo Srugo (00:38:00):
What would you say are some of those like, most common mistakes that you see founders making?

Eldon Sprickerhoff (00:38:05):
Every pitch deck followed exactly the same format. Here's the name, cybersecurity, it's a 88 ding dong dillion dollar problem. We can solve cybersecurity problems. Here's our team. We're raising $2.5 bill in a safe, the end and so we'd have all these other mentors, and EIRs in there. I let everyone else go first because I think I have a tendency to bowl over, anybody else in my way. So let everybody else go first. I was like, okay, I have no idea what you do. I don't know how you're going to solve it. You say you solved that problem. Some of the mentors are not technical and so I am technical, but I have no idea what do you do? Is it a box? Is it software? Is it AI? Is it training? Before we get into use of proceeds, what do you do? So by the end of that and that's kind of a grilling, because I'm not the gentlest person. When I get fired up, everyone comes out of that group better than when they started. But there's, I wrote chapters about everything, including PMF, of course, which is essential. But I think the one thing that I think particularly Canadian founders struggle with is founder led sales. And I didn't even know it, that's what I was doing at the time, right? There was no books on founder led sales really for this little time, but.

Pablo Srugo (00:39:25):
You think they struggle because they don't do it right or they don't do it at all?

Eldon Sprickerhoff (00:39:27):
Both, but mostly the latter, right? Where that we have this, you know, if it's our Canadian persona, our style that sales is dirty or like a used car salesman sort of thing is like, no. This is you, you better be selling everything, your ideas, right? Cause you just simply won't survive. The main thrust of the book, you get all these hats, but you have to be the chief survival officer. All right and that means don't run out of cash. You need to be the one like, what does it take to survive every single day? You need to be out there fighting for your survival. My wife raises chickens and there's times I look out. Because, we live out in the country and there's coyotes, and hawks. I had this moment of epiphany where I said, everything likes to eat chicken. Everything wants to eat chickens. Chickens will eat other chickens as well. This is your startup, right? Everything is out to get you and you better figure out how to survive. And part of that is being authentic, like listening to what the customers need, putting the pedal down every single day. Because you simply will not survive if you don't. There's, nothing you salesmen greasy, right? No, you better believe in your product and you better get out there. And put the pedal down, and sell it.

Pablo Srugo (00:40:39):
Well, that's a perfect spot to end it, Eldon. Thanks so much for sharing your story. It's been awesome.

Eldon Sprickerhoff (00:40:43):
Oh, my pleasure. Thank you, Pablo.

Pablo Srugo (00:40:45):
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.