How his AI-first services company grew $0 to $40M ARR in one year. | Eric Foster, Founder of Tenex

Eric Foster (00:00:00) :
We're standing at the precipice, not of the next dot com boom. We're standing at the precipice of the PC revolution. When people look around and go like, oh, is this AI thing a bubble? Or is this going to take away a bunch of jobs or all of the other sort of doomerism that a lot of people are coming from? You're the same people who in the 1980s were looking around at all the office jobs and going like, what do you mean everybody's going to be working on computers? We'll probably land this first year, call it $43 million in revenue.

Pablo Srugo (00:00:31) :
Wow.

Eric Foster (00:00:31) :
First year from first dollar.

Pablo Srugo (00:00:34) :
That doesn't even compute.

Eric Foster (00:00:36) :
The whole point of a startup is ultimately to find product market fit, right? And once you find that product market fit, you should throw as much fuel on the fire as you can. And if an input of a dollar is producing a business value output of $5, you should just keep doing that until you have as much business value or until it starts to decrease.

Previous Guests (00:00:55) :
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 (00:01:08) :
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. Cool, Eric, thanks for jumping on the show, man. It's great to have you here.

Eric Foster (00:01:26) :
Absolutely, big fan, Pablo. Thank you so much for having me.

Pablo Srugo (00:01:28) :
I'm excited to jump through your story. You said that you're actually on a track to be the next whiz, which is an insane thing to be on. Because I mean, there are as many people, you know? One of the fastest companies to hit $100 million in top line. Certainly the fastest kind of cybersecurity company to do that and you've only been around for a year. Already raised a Seed round from A16 and raised a $27 million Series A. So you're clearly off into the races. The plan here is to go as deep as humanly possible, really understand what it's like to be on a company that's growing so fast and what it takes to do that. Before we kind of jump into that in TENEX and how that'll happen. Maybe just give us a little bit of background context on you personally before 2025, before you started TENEX.

Eric Foster (00:02:12) :
Absolutely. So, man, this is one of those stories you hear that's a overnight sensation thirty years in the making, basically. I've been an entrepreneur my entire life, you know, like I think a lot of the other entrepreneurs started when I was very young. Started hustling, started building businesses and trying to find ways to earn money. And be one of these contributing commercial members of society from a very young age. But, you know, really serious about it. Built my first business in high school that carried me through college.

Pablo Srugo (00:02:46) :
Traditional business or a tech business?

Eric Foster (00:02:49) :
Yeah, so in the very early days of the computer industry. I was very fortunate to get exposed to computers at a very, very young age. Back when you were still building hobbyist computers. Before even the Dell and Gateway era of being able to purchase, and order so much of the commercial hardware. I had the opportunity to build my own computer in the very early days in the hobbyist world.

Pablo Srugo (00:03:13) :
What year were you talking about?

Eric Foster (00:03:14) :
Like, you know, 1989-ish times.

Pablo Srugo (00:03:17) :
Oh, wow.

Eric Foster (00:03:14) :
So, you know, very young. But got plugged into it very, very early and then the Apple II, and the Apple IIe. And the very early days of the computer industry. And I was hooked from day one. So, in the early 90s, you know, '92, '93. I started a business putting together computers for people and that turned into very early web design, and networking, and some other stuff like that. Focused on small and mid-sized businesses, basically. You know, in those early days. Very early internet, you know, dial up internet and everything else. You had a few different businesses that were really trying to get ahead of that and you know my speciality was going into like small credit unions or dentist's office, or people like that. Who had money. Who are like, look, we want to install these eight or ten computers and have them networked, and talk to each other, and we want to dial up modems. So we can get on the internet and do these sort of things. So that exposed me both to technology and to business, and then to the internet and ultimately to cyber security. I just sort of happened to get into that side of it very early on. You know, from personal interest in bulletin boards and gaming, and a lot of other components like that. So long story short, I've been doing cyber security basically now for thirty-two years.

Pablo Srugo (00:04:40) :
So like since late 90s sort of thing?

Eric Foster (00:04:41) :
Yeah, mid to late 90s is when I first got into cybersecurity and have been fighting the good fight in cybersecurity for a long time. I've had a couple different companies along the way. I've been very fortunate to be part of some really great teams and help build out some really great organizations. And really led all of that path, all of those scars, all of that effort, all of those lessons and learnings are what ultimately led to TENEX.

Pablo Srugo (00:05:10) :
What even was cybersecurity like in the mid 90s? I'm curious, it must have been a completely different world.

Eric Foster (00:05:15) :
It absolutely was. I mean, you had a lot of what we called war dialing. In the early internet days, some of your listeners will be too young to even know any of this. The whole internet was all modem based and so you had literal phone lines, and your computer would connect. One computer would connect to one other computer on, somewhere else and that would be essentially how you would get on to this whole giant network. That was the internet and some of the first computer intrusions were literally you had Russians or Chinese, or other hackers that would literally just dial phone numbers with a computer looking for another modem to pick up. And if that modem picked up, you could send it some commands and see if you could get into it. And so a lot of those early internet intrusions, and the early cybersecurity stuff. It was either that sort of attack via a modem of somebody literally calling your computer out of the blue, or a lot of it was malware that was coming over literal physical disks. You go to Best Buy and buy a video game that would come on like twenty-seven floppy disks. That you would turn in and install. And then people would share those with each other. You know, so like, oh man, I got this game and I copied it to these twenty-seven floppy disks. And you give it to your buddy, except your computer had some malware on it. And so now this floppy disk has some malware on it. And so your computer would get infected, and just absolutely insane the sort of scale of this kind of stuff in the very early days. But, you know ,cybersecurity the whole thing exists because that's where the money was. It's the same, that old Willie Horton quote of like, why did you rob banks? Well, that's because that's where the money was. It was the same thing in cybersecurity, the moment you started to put payments online. The moment you had computers doing financial transactions, very quickly thereafter you had cyber criminals who were trying to get in the middle of that or disrupt it, or make money from it. This is many years before the concept of ransomware existed. It was just literally people looking to break in and do specific harm. It's also funny a lot of it, in the very early days was all just use of services. Like, it cost money to be on the internet. You paid in a lot of cases, you were paying literally by the minute to be on the internet and so you had people who would break into your computer just to use its resources. Just to access the internet and just to do that kind of thing. Because nothing like AWS or anything else existed. It was a very different time. 

Pablo Srugo (00:07:48) :
Very much so. So during those thirty years were you mainly working at other companies doing cyber or did you kind of have your own thing?

Eric Foster (00:07:55) :
Yeah, so I started that initial business helping early technology forward companies get on the internet, basically and then that turned into web design. And then we ultimately built that company up, had a few employees, and we sold it off. And there was a big consolidation in the industry of a lot of businesses were coming up, and buying up web hosting companies just to acquire customers, and roll stuff up. So when I sold that company, I kind of took that entrepreneurial spirit and got a job at a financial services firm. But it was a financial services firm that basically was looking to get on the internet for the first time. But it was a much bigger bank. A super regional, publicly traded financial services firm and very interestingly, very fortunate for my career. The CEO at the time was a very young guy in the grand scheme of things. A gentleman by the name of Sandy Kemper, Alexander Kemper. Who basically brought this concept of Silicon Valley. He'd been out to Silicon Valley and this is, you're talking the mid-90s here. Had been out to Silicon Valley, had seen what was coming of the dot-com boom and brought a lot of those concepts back to this family-owned, publicly traded, sleepy, Midwestern bank. And he came out, and said, we're going to put this bank on the internet. We're going to do online banking. We're going to do a bunch of other really interesting stuff, including we ended up incubating a tech startup inside of the bank that I got to be a part of. Where we were providing IT services to other banks. Basically these community banks and so it was a very natural evolution. I'd started my previous company providing these network and IT services, and security services to these other small credit unions. And it was like, okay, this is actually a really good fit. I'm going to come over here and help this bank get on the internet, and help them be secure. And that kind of started my corporate career. Served there in a couple different roles, eventually was their first chief information security officer. So, I was responsible for all cybersecurity there at the bank and then was responsible for technology architecture for them. So planning out, you know, their technology investments and some other things like that. And then jumped from there into a fun career, kind of on every side of the table. So I took the background of being a CISO, being a, you know, being the buyer, if you will and then went out and became a consultant. Went out and became a, what we call a reseller. You know, the people who are helping other companies purchase and implement technology. And then I jumped into the startup game. and kind of have never looked back from there.

Pablo Srugo (00:10:27) :
What was your last startup before TENEX?

Eric Foster (00:10:29) :
So most recently I've spent a little bit of time, took a little bit of a sabbatical and helped a couple different CEO friends of mine. Basically kind of parachuted into some short tours of duty, to help them out and trying to help. Do my best to help them through some challenging times. It's always, the whole zero to one and one to ten stages. You know, the early stages of starting a company and trying to grow it, and scale it, are the most incredibly challenging. And I had two different friends who'd started two different venture-backed companies and could really use some help. And so I spent a little bit of time parachuting it, and helping them. But that sabbatical was driven off of, you know, before TENEX, we started a company called CYDERES and the long story short on it. We started it to really change the cybersecurity industry. We grew it very aggressively, you know, in essentially a four-year run we became, I think, pretty widely considered as one of the top five companies in our industry. In the managed detection and response industry. And then we ran a process on it, where we were going to go out and take additional investment to grow, and scale the company. And we ended up essentially getting an offer we couldn't refuse from private equity to purchase the entire thing. And that was quite a trip, because we ended up selling to a private equity company that owned controlling interest in Robert Herjavec's cybersecurity company. If you're familiar with that name, you know, the shark tank guy. A lot of people don't realize Mr. Herjavec is, his whole career is cybersecurity. You know, before he was a shark and most of those sharks. They all come from a business background, right? They had some business. Robert's business happened to be my business, cybersecurity and so what ended up happening is, my company got merged with Robert's company. So it was surreal. This thing that I dreamed up in the shower and spent four years growing, and building. All of a sudden now is owned by the Shark Tank or, is headed by the Shark Tank. It's owned by Private Equity.

Pablo Srugo (00:12:27) :
The world of business is like that, man. Every now and then you just, you find yourself in these movie-like setups and you're just like, what is happening? What's going on right now? How do I get here?

Eric Foster (00:12:36) :
Yeah, quite literally. I mean, very, very surreal and my wife, and I were huge Shark Tank fans. We'd seen every episode, we watched it all the time, we discussed it. It was, like, one of our very few family shows that were all in on and then to have that be this outcome. And then next thing you know, I'm working directly with and for Robert Herjavec, and working with him every day. I'm on his plane, flying out to L.A. 

Pablo Srugo (00:12:59) :
And how big was the company, by the way? When it got acquired?

Eric Foster (00:13:02) :
We were about three hundred employees.

Pablo Srugo (00:13:04) :
Okay.

Eric Foster (00:13:04) :
So we, you know, we. 

Pablo Srugo (00:13:06) :
Sizable.

Eric Foster (00:13:07) :
Yeah, in four years, you know. From zero, and man, that's always. The crazy thing, the crazy fun time, anything. That zero to one concept, right? You know, you're taking something that doesn't exist and you're willing it into existence and you're putting it into the world. You're getting your first customers, you're getting your first revenue and then jump into that next phase of one to ten. Of all right, you know, we've got some initial product market fit. We've got some traction. We're going to pour fuel on the fire and then grow into that next stage. So, yeah and in only four years building to three hundred employees, building to real serious revenue and then having a, you know, what was a life changing for a lot of people. Outcome of being able to sell that company, you know, as one of the things I was most proud about it. Was watching the checks go out to all the people around me that we were able to take care of. Where you're like, you know, not just about me, not just about the major investors. But seeing the people who came in, worked hard every day and got, you know, in some cases. Some life changing money, out of just that four year run. That's what it's all about. That's, you know, it's why we do this.

Pablo Srugo (00:14:12) :
Well, I assume it must have been in the, in the hundreds of millions. The exercise given the three hundred employees and their amount of growth.

Eric Foster (00:14:18) :
Yeah, when we put the two companies together. It was essentially a billion dollar company. So, we'd basically, built about a call it $400 or $500 million. Two companies coming together to create that merged billion dollar company.

Pablo Srugo (00:14:31) :
Incredible and how long did you end up working, with Robert after post acquisition?

Eric Foster (00:14:35) :
You know, I kind of came in, knew very early that this kind of wasn't going to be the direction that I wanted to go personally. Nothing against it, nothing against Robert, nothing against the team. Just, I think for an entrepreneur, there's a very big difference of being at a multi-billion dollar, you know, thousand employee company versus the, this is my thing that we started and kind of that world. So I met all my obligations to them, but was ultimately there. I think less than a year post-transition was what they needed me to kind of shepherd the company through to the next phase.

Pablo Srugo (00:15:10) :
So let's go deep maybe on TENEX. Tell me the origin story. What is the initial idea? I assume it happens at some point in 2024, but you tell me. How do you start TENEX?

Eric Foster (00:15:21) :
Yeah, you know, it really is. It's the thirty, thirty-five year overnight success story, right? It's every lesson that I've learned in my career. All of the great people that I've worked with, worked for, learned from. But it also all really starts with a couple really key, I think, observations, hypotheses, and learnings. First and foremost, I think any truly good startup founder. Not all of them, I guess, maybe but a lot of them have this same thing. Which is they're solving their own problem. I'm fixing a problem that I specifically had that has bothered me forever and really, the exact journey of how I got here. I like to use, I'm a big car guy. I like to use the Ferdinand Porsche quote, if you go read his autobiography of why he started Porsche. He uses this really great line. Which is, looking around and not seeing a car of my dreams, I decided to build it myself. That's really how I got here, was ultimately in this whole journey. I was in what was at the time my third CISO role, Chief Information Security Officer. Helping companies protect themselves in a cybersecurity perspective and my CFO at the time basically said, I couldn't do what I wanted to do. I couldn't build out the team the way that I wanted to, that I felt was what was necessary to protect the business. He's like, you've got to go out and buy a managed service. Which if, your listeners aren't completely familiar with this process. A whole lot of cyber security and obviously a whole lot of other services industries. Are based off of this concept of, you know, you're not doing it yourself, you're going out and hiring a partner who's going to come and do it for you. And the concept is it's cheaper, because it's a shared services model. Instead of me hiring fifteen people, I can go out and contract with somebody who's going to give me a timeshare of fifteen people and it's going to be more cost effective. I basically pushed back a ton on my CFO and said, you don't understand, there's nobody out here from a managed services perspective, from a managed security services specifically, that's worth working with. They're all either ridiculously high priced or they're really terrible quality and that started me on a journey in partnership with this legendary cybersecurity entrepreneur to try to change that essentially. It was, I need a great managed service. I don't believe any of the companies that are out there are doing it right. I'm going to start one. That was sort of the genesis of my previous company of CYDERES, and then once we sold that to private equity, and had kind of seen what I built go off into the ether into a different direction. I still sat back and had that same challenge. I didn't believe I was ultimately successful in my mission. I hadn't completely transformed the cybersecurity industry. You know, we'd built a great company, we'd built one of the top five MDRs but if you went back and looked at it. It was like, I didn't completely change everything.

Pablo Srugo (00:18:11) :
What exactly did CYDERES do? What problem did it solve?

Eric Foster (00:18:14) :
Yeah, it's in this industry called managed security services or managed detection and response, As sort of the flagship product, but the ultimate concept is it's cybersecurity services. You know, cybersecurity delivered as a service to people.

Pablo Srugo (00:18:29) :
Okay, so it was an MSP itself?

Eric Foster (00:18:31) :
Yeah.

Pablo Srugo (00:18:32) :
Just a really big fast growing MSP.

Eric Foster (00:18:34) :
Exactly and ultimately, and I say with all respect to everybody there, everybody involved. It became one of the top five best, but it just became another MSSP. That's great, you built a great business that's providing a quality service to people and changed a lot of people's lives. But it wasn't different, it was the same.

Pablo Srugo (00:18:53) :
And change the game. Yeah, the nature of what you're doing is the same, just better executed.

Eric Foster (00:18:57) :
Exactly and so, the big inflection point for me was artificial intelligence. I believe, and I believe so firmly, that artificial intelligence or what Jensen calls accelerated compute. We're standing at the precipice, not of the next dot-com boom. We're standing at the precipice of the PC revolution. When people look around and go like, oh, is this AI thing a bubble or is this going to take away a bunch of jobs, or all of the other sort of doomerism that a lot of people are coming from. You're the same people who in the 1980s were looking around at all the office jobs and going like, What do you mean everybody's going to be working on computers? You don't understand. We've got all these secretaries and they've got typewriters, and they do all this sort of stuff. Artificial intelligence is the next computer. It's the next computing interface and we're going to be at the level of post-bubble saturation. I like to use this example with people. When every single business you go and talk to is using artificial intelligence the same way they're using a computer or the internet. And what do I mean by that? So like the easy example, your neighborhood taco truck. If you went back twenty years ago in your neighborhood taco truck, you'd be like, why in the world would these guys have a computer or be on the internet? And now, if you go to your neighborhood taco truck, you'd go, why the hell aren't these guys using a computer and on the internet? And guess what? They all are. They're on Google Maps, they're on DoorDash, in some cases. They're on Facebook and social media. They've got a website. They're doing online ordering. They've got a Square Payments app, on their iPhone. Which has more compute than what we sent to the moon. It has more compute than some of those big bank mainframes that I started my career working on. Literally in the palm of their hand. Your taco truck has all of this, that is core to its business. I believe artificial intelligence is going to do the same thing to the entirety of the workforce. I believe it's going to change absolutely everything and I think especially it's going to change the fundamental nature of the services industry. And so our concept, you know, literally even down to the name of the company, TENEX in order of magnitude. We believe firmly that we can accomplish the mission. That I originally dreamed up before starting my last company of changing the face of cybersecurity by making it better and faster, and more cost effective for everybody. And that is our real true mission, and we believe we can do that. Because our people are an order of magnitude better, faster, more cost effective. Because if one person can do the work of ten, you know, what historically would have been ten. What we can do isn't, oh man, we're going to need a whole lot less people. It's, we're going to be able to do a whole lot more work. We're going to be able to accomplish a whole lot more. It's the same thing with software developers, man. It's like, what's crazy to me of people like, oh, AI is going to mean we don't need software developers. I, again, showing my age here, but I had the same arguments with people. I grew up on assembly and COBOL. That's what I learned, when I first started my software engineering career and when object oriented programming came out. People were like, oh, you're making it too easy to do all this and you're going to put a bunch of software engineers out of work, and everything else. It's like, no, what happened is fifteen years later, every company of mid-sized business up. Hired software developers, because they could build things for their business. I think it's going to be the exact same thing. I think artificial intelligence is going to produce this employment boom, this productivity boom. I think it's ultimately going to drive down costs of a lot of things and that's ultimately going to be way better for everybody involved. There's this very famous financial law that as prices fall, consumption goes up, not down and I think that's what we're going to see.

Pablo Srugo (00:22:52) :
I would tend to agree. I mean, the big thing that people will say this time is different is, oh, we're going to get to the singularity and after that, there's just no point of humans. I would argue, certainly everything that we're seeing so far doesn't point to that. It points to this being the same, as you said, as any other previous technology. Which was really an accelerant and a driver of productivity. And I think the best kind of analogy that I've heard of that's just super clear. It's like, let's say you want to dig a hole, you know, you want a lot of jobs. Just tell everybody to dig with their hands. You need like a thousand people. They're already giving shovels or you just get attracted to do it one time. I mean, you kind of be an idiot to do anything but the most effective way of digging a hole and then it just so happens that society, and capitalism is such. That new jobs and new ways to add value form around that. And ultimately, that is the essence of productivity. Because if we were all doing the same thing as a hundred years ago, there would be no GDP growth, there would be no productivity. But the only question that somebody could say is, okay, but this is different. Because AI is going to get to a point where it's like, you just sit back, close your eyes, and everything gets started. I guess, I don't know. I guess that's a philosophical question. But certainly, there's nothing that we're seeing so far that points to that. It points more to this 10X phenomenon of you just can get to do a lot more, either hire more developers or new jobs will be created around it.

Eric Foster (00:24:06) :
Exactly, yeah. I couldn't agree more and in fact, it is our fundamental philosophy as a company. We believe so much in the human. In the human-led approach to cybersecurity. The analogy a lot of people use for us at TENEX, we're kind of the Tesla self-driving car approach and if you go back to that one. I would tell you, self-driving cars is actually a much easier problem space than cybersecurity and think about the journey we've been on with self-driving cars. Think about how many years we had, when you first got in your self-driving Tesla, and it was put both hands on the wheel. Keep your eye on the road at all times and if you deviate from that. We're going to send an alarm, because we have to have the human in the loop guiding the car down the road. You know, and it's only literally what? A decade plus later that it's like, okay, now the car can drive itself from point A to point B. But there's still a human behind the wheel to take an escalation from the car if there's a problem or these other specific scenarios. So that's our approach. It's a human centric approach to manage security services and, to manage detection and response. But it's ultimately helping companies fight evil. Which is really what cybercrime is, we're going out and trying to fight the bad guys on behalf of our customers. Helping them be more secure, helping them avoid being attacked, being compromised, losing money, losing market share, business disruption, all the other things that happen and we're doing that in a way that is better than what it's historically done, faster. Way faster than what's been historically done and way more cost-effective. And ultimately, we believe if we can truly democratize that to the entire world, we're going to change everything. Cybersecurity is one of these really interesting things. Like my thirty year career in it, and I wrote a big, you know, massive about this you can find on my socials if anybody cares. But like, we've basically been losing this fight every year that I've been in this industry. The bad guys win more than the good guys. It's war, and we've just been ceding territory constantly to the bad guys. If you go look at the big industry stats, we lost about $1.5 trillion of GDP last year to cybercrime. That's a ludicrous number. It's way more than how much economic benefit is created by all the cybersecurity companies and you look at that and go, we have to do something about that. This is what our true mission is. We're a very mission-driven company here at TENEX, and the whole idea is we're not just trying to build one of the fastest growing companies in history. That's a byproduct. What we're trying to do is, as cliche as it is, we're trying to change the world. We're trying to make the internet a safer place. We're trying to let your business and other people's businesses be more secure online, not lose as much money to cybercrime, and thus have more money to invest in their business. Have more money to hire another person, have more money to pay that entry-level employee or whatever else.

Pablo Srugo (00:26:59) :
Well, it's funny. Cybersecurity is one of these things. I mean, it is very much this kind of, you know, circular thing where it's defense and offense. And so obviously offense changes, defense changes to that. But from somebody that's an outsider, not by any means a cybersecurity expert and I talked to, you know, a Huntress or an Axonius, or now TENEX, or a bunch of different. And it's like, from the outside looking in. You're like, every company sounds the same, right? It's like at the end of the day, we're going to make your network secure, we're going to do thread detection, we're going to stop the attacks and the flip side is most of these companies. At least the ones I talk to, they're successful. So it's obviously they are providing real value and yet the story really doesn't change. So maybe as a question to you. That's the philosophy, AI is going to make services more effective. It's going to make cybersecurity more effective. What does the product MVP V1 look like to you, as you're thinking through it? And again, like late 2024-ish?

Eric Foster (00:27:46) :
Yeah, I mean this is. You're talking kind of this early stage, this thought. I see artificial intelligence come into the market, I see the early adoption, I get to see not just the LLMs, but this is one of the other interesting parts of this. One, I mentioned before that I'd parachuted in to help a couple different founders. Both of those founders were doing artificial intelligence. One was a defense company that was doing it for the military around computer vision and some other interesting AI analysis. And then the other was in the cybersecurity space that was doing AI analysis of malware. And I saw the power that these guys were building into their company, and some very narrow use case. I got to see a lot of how the military was thinking about the adoption of AI, and we're talking 2022, 2023. What we were able to do and this is the other dirty secret of all this, right? It's machine learning that a lot of people consider a component of artificial intelligence. We've been doing that for ten, fifteen years in cybersecurity. This is not a new concept. What is this incredible new concept is this fundamental accelerated compute. It's the ability to do so much more with so much less, ultimately, than what we could do with traditional software, with traditional legacy compute and so I saw these trends come together. And I had this really strong conviction that we could build an AI native company, and an AI native product, and an AI native service. That would be that true order of magnitude differentiator. Better, faster, everything else and a big part of it. I'm so blessed in so many different ways in my life, but I think one of the only reasons that we're in this category. Where Crunchbase is literally putting us right alongside of Wiz and talking about all this, and I'll tell you that story about blowing up my phone later. But you have these kind of amazing moments. In part, I'm blessed because I did this before and because I sold my own company. So, you, I'm sure your listeners are very familiar with this concept called the innovator's dilemma and I believe. Like I said, we're at this precipice of this amazing shift. We're at the early days of the PC industry. Where all of a sudden, you're going to go from office workers working on paper or typewriters to computers and the productivity boost that that's going to drive. If AI has that big of an effect, and I think it's actually going to be bigger than that. Because Satya has this great insight on why he's all in on the AI boom, is because every platform shift is additive to all the others. The PC revolution led to the internet and the internet was so powerful because it included the PC revolution, and then mobile came along. And it included the internet, and the PC revolution and then social. All these other platform shifts that you want to talk about they're all

Pablo Srugo (00:30:30) :
It's also much faster, because what does it take to create billions of computers, getting into people's hands and generate the demand for those computers a long time, right? The internet as well, like the Telco and stuff. Now it's like, everybody knows what's happening all the time and everybody wants it immediately, like yesterday.

Eric Foster (00:30:46) :
You got it. This is why you can go out and look. And you'll find us on some of these lists but why they're setting this new standard of getting to a hundred million in revenue, like in your second year in business. Because all of this distribution now exists. You know, you come out with this great app. The insane growth of ChatGPT just in itself and OpenAI. It's like, if you didn't have everybody with a phone and everybody with a computer, and everybody connected with high bandwidth. And all these other things, none of that would be possible. But now, in the age of artificial intelligence, all this is possible. Well, where I'm going with the innovators dilemma is even if I was just, my old company and it's like I'm sitting here with a thousand employees. And some really nice revenue and all my legacy processes, and people, and software, and everything else. And I see this platform shift come and I go, the right thing to do is to destroy everything and start over. It's to rebuild absolutely everything to take advantage of AI and that is the true innovators dilemma. You see the innovation and you go, but wait, I got all this stuff. I got this business. I can't just retrain all my people. I can't just tear down everything. I can't pause everything with my current customers and go build this. So I've either got to build it completely in parallel while I'm still providing my services, which sometimes happens. You see some of these legacy companies will go invest in that and do that, and build this. and stand this up. But what is it?

Pablo Srugo (00:32:09) :
But even then, it's hard to give it the attention of your core business.

Eric Foster (00:32:12) :
Absolutely, so what ends up happening is these legacy guys try to bolt this on and the people like us come along. And go, no, we're doing this from first principles. We're doing it from a clean sheet of paper. We're doing it as a small, nimble company. One of my great analyses here, we've hired a huge amount of hyperscaler software engineers. It's one of our big differentiators over the rest of our competitors in the managed security services industry. It's like, I've invested in these world-class software engineers that none of my competitors have and a big part of why I got them is because they literally ship more code to production here in a quarter than most of them shipped their entire careers working for a hyperscaler. A lot of software engineers, they want to actually do something. They want to see their code get to production, get in a customer's hands, and actually produce meaningful results. Man, the search for meaning. We don't want to just move a bit from here to there and go home at the end of the day. And go, oh man, I completed ten thousand lines of code and checked it in. And a year from now, maybe that'll make it to production. Oh man, I worked really hard today and I built this thing that this customer needed, and it got in. And they thanked me, and they actually caught a bad guy real time because of this thing that I built. That is incredibly gratifying. So we're able to move at this insane pace in part by being AI native, in part by being a smaller laser focused company on this mission and I honestly couldn't be more grateful. And that's part of why all this stuff is coming together the way that it is. Why we're on these crazy hyper growth lists. In part, because of AI just in general, in part because of that insane distribution that exists of everyone that's come before us. But in part because everybody else is stuck behind the innovator's dilemma and our customers can see it in like five minutes.

Pablo Srugo (00:34:00) :
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. It's funny, I was just thinking about it this morning on the Innovators' Dilemma and I was thinking about. If you're a founder, CEO of an existing business. Your main thought right now is, how do I use AI to elevate my product? How do I bring AI into my product? Which starts at the wrong place. Because you're starting with, given the fact that I have this legacy SaaS product. How do I improve it through AI? The new founders are just thinking first principles, given that AI exists. How do I solve a customer's problem? And it's just a totally different way of looking at it. In some cases, some unique cases, adding AI to your product might just be the thing. But in many, many cases, you'll end up in totally different situations and then you'll wonder why these new AI native businesses are kind of eating your lunch. And it's because they don't have any of that legacy. They can just say, oh, all of a sudden, you can deliver 10X value by doing this thing. Has nothing to do with your existing product.

Eric Foster (00:35:02) :
You've got it exactly. That is the fundamental difference to me of built on versus bolted on. Built in native from that first principle philosophy and it starts everywhere to me. It's even your most entry-level employees being truly AI native and to me. We talk about the doomerism of job creation and everything else. It's like, man, we're hiring like crazy. We're growing incredible pace. We're hiring like crazy and every other great company that I talk to is hiring like crazy. And they're hiring people who are AI native. Who understand how to use these kind of tools and how to generate this insane productivity. Because if you had a business model before that said, oh, I'm going to hire one software developer and I'm going to pay them, let's just say, $150,000 a year. Because they're going to produce $500,000 of business value. Maybe you don't specifically lay this out, but if you were hiring a software developer before. You should have had some level of that kind of math going on. Maybe you didn't know it or be able to explain it. If I tell you that that same software developer is now producing $5 million of business value. Do you hire less software developers or do you hire more? You go in and go, holy crap, I can hire two software developers and they produce 10 million. And now I can hire five more software developers and they produce. This is what I mean, the whole pie is going to grow. The whole productivity is going to shift and I think we're going to be in a true golden age of America. In the next decade, I think an economic boom like has never been seen before in this country and hopefully in the entire world.

Pablo Srugo (00:36:39) :
So Eric, tell me about the first product. Are you building an AI-first MSP or are you selling AI to MSPs to help them improve what they do?

Eric Foster (00:36:47) :
So, great question and we're not building. We built and are shipping, and have. And this is why, again, we're going to close this first year. Still a little bit of time left, but we'll probably land this first year. Call it $43 million in revenue.

Pablo Srugo (00:37:02) :
Wow.

Eric Foster (00:37:02) :
First year, from first dollar.

Pablo Srugo (00:37:06) :
That doesn't even compute. I mean, we're gonna talk about how that even actually works. From a day to day closing basis but yeah, okay.

Eric Foster (00:37:13) :
No, absolutely. So what we've built is an AI native Cybersecurity service and what we're selling that. And this is advice to, I know you've got a lot of entrepreneurs and founders that listen to this. The important part here is what we're selling is a value proposition. We're selling an outcome. I'm not selling a product. There's this very famous story that if you aren't familiar. One of the greatest marketing minds ever talks about this concept of a quarter inch hole. A quarter inch drill bit. I won't do it the same level of justice that this great marketing mind will. You know, we can link it in the show notes. But the long story short is, so many people go and sell quarter-inch drill bits, right? I'm making this product and what it does is, it's a quarter-inch drill bit. What does it do? It puts a quarter-inch hole in the wall. Nobody goes and buys a quarter-inch drill bit. You don't go, oh man, I really want to own a quarter inch drill bit. That was my life goal, was to have this drill bit. No, you go to the store and buy one because you need a quarter inch hole. But you don't actually need a quarter inch hole. What you need is to hang a shelf and what you need. Again, isn't to hang a shelf, right? I didn't grow up and go, oh man, one day I'm going to hang a shelf on my wall. What you want, what you need, is how you're going to feel. When you hang that shelf and you organize your bedroom, and you put these books on it. What you're selling if you make a quarter inch drill bit is, safety. You're selling security. You're selling how you feel or how you feel when your wife finally goes like, you finally put up that shelf that I was asking for, for six months. That feeling is what you're selling and that is ultimately what we're selling. We're selling outcomes to our customers, which is we're going to fight evil on your behalf. We're going to make you more secure. We're going to provide for you cybersecurity outcomes. We're going to help you from getting hacked. We're going to stop the bad guys. We're going to detect and respond to your threats. And we're going to do it better, and faster, and more cost effective than you ever thought possible. Certainly better and more cost effective than if you had to go hire a team to do this yourself. And I could prove that to you in about thirty seconds with the math of why this is much more efficient and effective.

Pablo Srugo (00:39:22) :
I would love that because that's basically, what it sounds like is you're selling to end customers. Customers who right now either have their own in-house team or have an in-house team plus an MSP, or just an MSP and you're probably going in. And saying, get rid of the MSP, put us instead. I would assume, but I'm curious what the pitch goes like.

Eric Foster (00:39:35) :
Yeah, and that's one of the great parts of this too, man. I got to tell you, after having built a few different businesses. One of the great businesses that I had very much a pleasure of being a part of and helping to build. We grew this company called RiskIQ that we ultimately sold to Microsoft. Fantastic business, fantastic team, one of the greatest experiences of my life. But we were really early and sometimes it's way worse to be early than it is to be late, and bring in a product to market. One of the big lessons I learned from RiskIQ was, if you can. If you can build a business where you're selling something that the customer already understands, that's already in their budget, that's already solving an existing pain point, and this is what we're doing at TENEX. To your point, I'm going in and saying, look, you're doing this one of two ways today. You've either got an in-house team, And by the way, if you have an in-house team and you're doing what we call two true 24/7 security. Where you've got. Which, guess what? The bad guys don't sleep at the same hours you do. You're getting attacked literally 24 hours a day that you're on the internet. Which means if you're serious at all about cybersecurity. You've got to be doing this 24 hours a day. It's not, oh, we're just going to hire some people and work eight to five, and the bad guys won't attack us on the weekends, or nights, or holidays. Of course they do, so just to start with a 24/7 team. If you want those people to be able to have any sort of quality of life. You've got to hire fifteen employees just to make a 24/7 team. Just to do the eight or ten hour shifts to have around the clock coverage. So if you're a smaller, mid-sized business talking about cybersecurity. That's an immediate non-starter, right? You can't go hire fifteen people just to watch this clock just to respond to this.

Pablo Srugo (00:41:09) :
Which frankly is the birth of MSPs. It's like, that's the reason why that became so big.

Eric Foster (00:41:13) :
That is the fundamental concept, right? And so if I can come in, and do that for them in a way that is better. And more cost effective than their current provider. Which I can show them in, literally a thirty second demo of how our AI natively embedded into all of our people. These concepts of co-pilots and the AI doing so much work to supplement the human. It just immediately blows everybody's mind. They get it in an instant. It's like, okay, I get it, I see it. But the other side of this that you alluded to earlier. The big difference for us is we're real and it's so funny. I had one of the, literally one of the greatest CISOs in the world give me this really great compliment. I'm not going to use his name. I'm sure he's listening, he know who he is. But, you know, he said, we went into them and this is a top five financial services firm that we got as a customer. We went from first contact to them to contracting in less than sixty days. From the first time we met with them to a signed contract in less than sixty days. Which anybody who knows the enterprise procurement space.

Pablo Srugo (00:42:12) :
It should be a year, year and a half, yeah.

Eric Foster (00:42:14) :
Yeah, this is why the age of AI. You can come in with a demonstrable product. That is provably, immediately, observably better and people go, I obviously get it. I want this right now. Let's speed this through. So the big compliment that he gave me. He's like, look, man, I sat down with all of the big guys. All of the biggest vendors, everybody you'd want, you know, these billion, trillion dollar market cap companies and they're coming in. And they're saying the same thing you are. They're talking about how AI is going to change everything and agentic AI. And this, and this, and I go, that's great. Show me and they all go, well, we're building this and like seven months from now. We're going to have this release and we could do this, and this. How we sold them, my CTO and I walk in. We brought up two laptops. One laptop was our product, the other laptop was our console and we were showing all the API calls. All the AI queries, all the AI responses that were happening on the backend and it was. This isn't demo wear, this isn't fake. All of this is real, all of this is built, and all of it works today. And, we sat down and show him that. You just immediately see the light bulbs go off and, you know, the fireworks going off of like, oh my God. This is going to change everything.

Pablo Srugo (00:43:27) :
What does a killer thirty second demo look like for cybersecurity for TENEX?

Eric Foster (00:43:30) :
Cybersecurity, real easy example, right? What we're doing, what we're talking about is detecting and responding to threats. And the way that this works, you might get a bunch of different alerts. My firewall, my endpoint. So like CrowdStrike says I've got this problem on this machine and the way that this normally happens. Somebody gets that alert, you know, an analyst working in your company or working for a managed security company. They get an alert, they get to it, they pull it up, they read it. They try to understand what it means. They then go, is there anything else that's going on in my company that looks like this? That might be relevant to this? I need to go try to pull all this together. I need to go run a bunch of searches and queries to try to figure out what's going on. It's a process that everybody in cybersecurity understands. It might take you fifteen minutes in a very nice, everything went perfect. Maybe that was fifteen minutes. More often, it's like an hour, two hours of work. That I'm doing where I'm running all these queries, waiting on the data to come back, everything else. I come and pull up that same alert. Except the AI, and we've got seven or eight different clusters of agents that are constantly working on our behalf. The AI has already clustered thirty different alerts that are all the same thing that you all want to look at. It's already produced, a very meaningful summary of exactly what's going on. It's already told me, here's exactly what's happening. It's already assigned the right playbook. It's already pulled all of the data sources underneath the table together into one place for me. It's literally, when you pull it up. The AI in one second has done an hour's worth of human work.

Pablo Srugo (00:45:07) :
And it's still human in the loop? So you're still selling the full service to them. It's not like they're depending on the AI, because you're still there behind it all.

Eric Foster (00:45:14) :
Exactly, that quite honestly. I'll give away one of our big secrets for this but, you know, I've talked about this a little bit publicly. This is where I think the AI SOC space, the space that we operate in, has gotten pretty crowded. You know, I think we're pretty widely seen as one of the leaders in this, if not the leading company in the space. I had one venture capitalist tell me we have more customers and revenue than all of the others put together. Which, I think was just them being nice but regardless, the reason for it is they're selling a product and we're selling an outcome. And the other big secret of that is that their customers don't want to buy a black box AI, and turn everything over to it, Especially from a security perspective. You think, again, back to that analogy of self-driving cars. Elon didn't come out and go, hey, we've solved self-driving. You're just going to hop in and it's going to take you wherever you want to go. And in fact, you're not even going to tell it where you want it to go. It's just going to know where you want to go and it's going to drive you there. What they did is said, you're still going to be at the controls, and we're going to get you from point A to point B. And this is going to be provably safer, and provably better than just a pure human driver. But we're learning along the way, and we're showing you. And everybody had that understanding, and they could interact with it, and go. Our corporate buyers are the same way. They can't risk a sign turning over their cybersecurity program to a black box AI product. What they can risk assign is working with a services company, and working with that services company. Who happens to be using a huge amount of artificial intelligence. So long story short, I think most of the other AI SOC software companies are going to end up either trying to become services companies. Which they're going to fail miserably at. Because they've never actually built a run services companies and guess what it's way harder than you think. Or they're going to end up trying to sell products to services companies like you alluded to before. Which is a terrible business to be in. I can tell you as having formally built one of the bigger service providers, we're terrible customers and you don't want to be doing that.

Pablo Srugo (00:47:10) :
Eric, this thing you're talking about. I just want to go a little tangent on it. I think it's such a misunderstood piece. Because you think about B2B SaaS as like the thing that was happening for the last decade, right? In terms of founders and how they're thinking. And it's all about eighty, ninety percent margin. It's all about, you know, no capex, get the goods out, like capital light and these are just the things that were proven to be the things that work. The things that you want. That's why Airbnb owns no hotels, there's blah, blah, blah, right? It all comes from there and everybody wants that. And with AI, the reality is for a variety of reasons. Part is a customer doesn't want to give a black box AI kind of full control, it's too scary. Part is they're not really there yet, like they hallucinate. Part is if you think about a job to be done, AI maybe can do sixty percent or eighty percent but almost never a hundred precent. Because of all of those reasons, if you want to deliver outcomes. You're really stuck either going to a company and saying, buy my AI. Okay, I have like a hundred percent margin, ninety percent margins, but you've got to figure out how many employees you can really fire or how to get your employees to use it and somehow leverage up. Or, and I think this is the way that you get insane adoption. You take it on, which is what you're doing and you say, I'm so confident in my AI being able to do eighty percent, I'll give you a hundred percent. You don't really care what percent is humans, I'll figure that over time, I'll squeeze that, right? So I have the best margins possible. But from your perspective, you're getting the full value delivered. You don't really need to think about where it comes from. Sure, I won't have the exact same margin profile as if I was pure product. But I'm delivering an entire job to be done and when you can do that. The pull you should get from the market is so much higher. Because you're actually solving a problem instead of half of a problem.

Eric Foster (00:48:49) :
I totally agree and in fact, this is where I think the dirty little secret a lot of people don't understand is most of the greatest SaaS companies were doing this historically too. They were selling outcomes and they were delivering those outcomes in a lot of cases. With, you know, a huge customer success or pro-serve portion and they were giving the customer what they actually wanted. I used this analogy a ton. It's especially true in the SaaS business. Take, I don't know, Salesforce. Maybe one of the most successful SaaS companies of all time by most objective measures. Nobody grows up and goes, I really want to buy a Salesforce today. That is not why somebody is in business. They're buying an outcome, which is I want my salespeople to be more productive and when you buy Salesforce. You get consulting built into it, and especially at the bigger dollars. Where they're coming in and they're making you successful. And so most of the greatest SaaS companies learned that. It's not just, oh yeah, give me your credit card and here's your credentials, and there's your portal, and go. They're selling outcomes and they were delivering those outcomes to the customer. That was the whole point of SaaS in the first place. Software as a service, and a lot of people forgot the as a service part. Where they were like, well, no, it's just software delivered on the internet. No, that's not actual SaaS. The whole point was, it was supposed to have this concept built in of delivering the actual outcome that you don't have to do as much of the work as you had to do with on-prem software and it became instead. I think, just, well, yeah, it's the exact same thing as if you installed this on a computer in your environment. Here you go, go use it. It's like, no, the best SaaS delivered those kind of outcomes to you.

Pablo Srugo (00:50:20) :
I think that's true. I think it's often missed. I'm struggling to think of a role, but take an analyst that's a large hedge fund as an example. Let's just say grunt work, right? You think about grunt work and somebody who's doing something that you think AI can do the most of, right? But what most founders are doing. I find, is they're going to this hedge fund. They're saying, here's my AI, it'll do eighty percent of what your analysts do. So, now your analysts can use it and maybe you can fire eight out of every ten that you have. And that's not received nearly as fast, as if you were to go and say, what does an analyst produce? Produces this type of research. Why don't you just outsource it to us? We will produce the same research. Here you go, look at the research we're producing. Look at how fast, ask me a question. Oh, look, boom and you've got human in the loop, right? And now you're delivering the full outcome. It's just like, okay, wait. You've actually solved my problem versus you almost introduced a bit of a new problem. Because now I've got to figure out how to upgrade my analyst and get him to use the stuff, and everything that involves.

Eric Foster (00:51:12) :
Exactly, yeah. Sell an outcome, deliver an outcome, deliver real value. Amazingly, everything else takes care of itself. If you produce an actual quality product that delivers actual quality outcomes. That is the most important thing in the list of most important things.

Pablo Srugo (00:51:29) :
So walk me through this question. Because this is something, funnily my mind can't understand. You go from 0 to $40 million run rate in a year. How do you do that mechanically? Are you only signing $5 million contracts? How are you onboarding this fast? There's a logistical piece to, even if you have the demand actually fulfilling it. Maybe walk me through, what does last quarter look like to you and how you make that happen?

Eric Foster (00:51:51) :
Yeah, for sure, there's components to all of that. So one, every part of my company is AI native. Finance, contracting, legal, onboarding, customer success, engineering, everything else. We've done a huge amount of work and we envisioned this very early on. We built the whole company from day one to IPO. We've been running real adult supervision and gap financials, and all of these other things. Because we believed if we were successful at solving our mission, a big part of it is the market is demanding a provider of this level of substance. The market isn't looking for another, oh, cool, you built another $100 million MSSP. Now, instead of two thousand of them, there's two thousand and one. We believe the market is looking for the next great company in cybersecurity services and is going to reward us correspondingly. Because we produced a better product and a better outcome that we knew this was the inevitable outcome. And so, the long story short, we invested a ton in this from day one to go. We need to be able to take orders and get customers onboarded the same day that they sign. We need to be able to deliver them value, real meaningful value, the same day they sign the contract. So that you can not only recognize that revenue, but so you can deliver that value back to the customers. That you can turn them into a raving fan. That's them willing to tell ten of their friends or do ten reference calls. Because you're giving them so much immediate value, and a lot of that does really come from this AI native advantage. Because the product is so much faster. Because the, every part of the stack is operating more efficiently and more effectively. You know, we're not a 10X at every part of our business. Our contracting arm isn't doing ten times the contract of a normal person, but they're doing more than what a pure manual person could do before. So that is part of it. The other part for sure, I'm a big believer in this. Sell to bigger companies at bigger dollar values and then go down market. The vast majority of our first customers were all Global 2000. You know, our first ten customers, half of them were publicly traded Fortune 500 companies.

Pablo Srugo (00:53:55) :
What kind of ACVs?

Eric Foster (00:53:56) :
So if you looked at our total ACV, you can do an analysis of everybody but I think it's actually more meaningful to look at kind of two clusters. So there's these Global 2000 companies that are spending something like $500k ARR with us and a lot of times they're doing even larger deals. But if you looked at the average across the Global 2000. They're probably a $500k-ish, $490k ASP. ARR ASP, which is important, right? We're talking real ARR, not just this made-up concept that some people will track these days of, well, I did $1,000 yesterday. That means I'm at $30,000 MRR, right? No, it doesn't work like that. Then the other cohort, we do believe our solution and we've proven it out. That it's equally applicable to companies of all sizes and that's part of the big advantage is we can take these solutions that are in use by some of the biggest banks, by some of the biggest technology companies, and truly democratize it. And bring that same level of value to a much smaller company. So we've also got a cohort of ASP that's sitting right around $100K, and that's why I think as opposed to blending those two and going, oh, well, it's actually in the threes. It's like, no, there's one big cluster sitting right around $500k and there's one big cluster sitting right around $100k. And it's a, you know, double bell curve.

Pablo Srugo (00:55:14) :
What's the strategy there by the way? Because some would say, well, just if you've got the half a million. Just do that until you really caper it out, and then go down markets sort of thing.

Eric Foster (00:55:22) :
Yeah, and you can. And I believe that's a valid strategy if you're not trying to be one of the fastest growing companies in history. Which, I mean, I don't know that we're explicitly trying for that but what we are trying to do. Quite frankly, is capture as much market share as we can, as fast as we can. I'm a firm believer that honestly, I believe every company should do that. You know, the whole point of a startup is ultimately to find product market fit, right? And once you find that product market fit, you should throw as much fuel on the fire as you can and build as big, as great a company as you can. Because even back to our earlier analogy, if you're producing an input of a dollar is producing a business value output of $5. You should just keep doing that until you have as much business value or until it starts to decrease. So, part of it is that, part of it is the mission, quite honestly. The biggest banks have led cybersecurity for the last thirty years. It's why I started my career in cybersecurity at a bank. Because in the early days, they were the only ones that were doing cybersecurity. My mission isn't just to bring better cybersecurity to the two hundred biggest banks. It's to take the solutions that we have put in place, in some of the biggest banks. Because they see the immediate ROI and the value. But to take that same technology that we've built for them and those same outcomes that we're delivering to them. And go to this hundred and fifty person credit union, that we can provide them that same quality of service and those same quality of outcomes for a fraction of the price

Pablo Srugo (00:56:50) :
That was gonna be my answer. My question, sorry. Is a TENEX cheaper? Is that part of your selling proposition?

Eric Foster (00:56:55) :
It's cheaper, I'm not yet driving it down an order of magnitude. We might be able to over time.

Pablo Srugo (00:57:02) :
But it's material enough that it becomes a bit of a no-brainer. Once you see that it's as good.

Eric Foster (00:57:06) :
Exactly and I mean. Especially if you can go in and see the product quality is higher. It's provably better, it's provably faster, and it's less expensive. I don't have to be TENEX less expensive if it's like, well, you were going to buy this anyways and even if I'm fifteen percent or twenty percent more cost effective. That's still a massive win for everybody, right?

Pablo Srugo (00:57:26) :
The better comes in the form of what in this case? You show that you can detect more threats. That there's less leakage. What's the better from a customer perspective?

Eric Foster (00:57:34) :
Yeah, it's all of the above and I mean. There's all sorts of, we're big fans of metrics and we're big fans of transparency. So we put a big dashboard in front of all of our customers that exposes a lot of these metrics. That a lot of your traditional service providers hide or hide behind and it's like, I'm going to show you all of this. We're a glass box philosophy in everything we do. All the AI underneath is all completely exposed, all the reasoning is exposed, everything else. We believe greatly in that transparency. But, I mean, here's a dirty secret of the MSSP industry. But it's also of every security company and I just had this conversation yesterday with one of the biggest financial services companies. And they even say the same thing as they're now looking at buying our product, is you guys aren't looking at all your alerts today, right? And they're like, no, of course not, nobody could. Guess what? I am and I can. And I can prove to you that I'm doing it. And I can prove to you that I'm doing it in a way that is provably, scientifically, using literal quality assurance language. And that's the other interesting thing. QA and quality assurance is a solved problem. And it has been for a long time. I'm going to talk more about that later. But I can show you provable statistics about why our quality is better and we're doing it at machine scale across every single alert in your entire environment. That produces a 10X alone. Because even the biggest most well-funded companies were going that, you know, and they would tout themselves and I think correctly so. We've got one of the best security programs on the planet and we're not able to look at everything today. But AI can. And AI can do it better than what a human could do. Especially if the bar was, well, nobody's looking at it. You know, this is the self-driving car analogy to me, too and you touched on this with non-deterministic or hallucination, right? Guess what? All this stuff's being done by humans today. It's just like driving. Tesla is never going to be perfect with self-driving cars. It never will be. The question is, is it an order of magnitude better than the mistakes that are being made today by human drivers? From a cybersecurity perspective, I've had the opportunity, the fortune, or good fortune. Maybe bad fortune, to have worked some of the biggest breaches in history. If you go look at the list, you'll find I got some of the good or bad fortune to be part of the team that were working on some of those. But, you know, from being around this industry for a long time. Not just the ones I worked, but all of them. If you go look at all the breaches, they all have one thing in common. It's human error. It's not, oh man, the technical controls failed and man, they went in and, they cracked the encryption on our mainframe with this massive level of technological prowess. It's like they sent a phishing link and somebody clicked on it, and gave them their credentials, and that's how they got in. This person left this thing exposed and had this problem. That's how bad happens in our world. It's the same thing with self-driving. Accidents happen because somebody's distracted or they're not paying attention, they were drinking, they made a mistake, they just were inexperienced. AI doesn't have to be perfect, it just has to be better than the humans and when I especially take that route of like, if you're throwing away millions of alerts a day. Because you don't have the human manpower to look at them. If I can look at them with an AI that's just eighty percent as good as a human, that's way better than what you were doing today.

Pablo Srugo (01:00:47) :
Tell me a little bit about go to market. Go to market tactics, I think, are one of the things that are top of mind for many early stage founders. I don't know if rightly so, more and more. It's like, if you have insane product market fit. A lot of things get taken care of but in any case, how do you go to market? How much is inbound? How much is outbound? What strategies, tactics are you using that you found are particularly useful this last year?

Eric Foster (01:01:09) :
Yeah, I think a couple points. So one, this is one of those other unfair advantages. We had in starting the company is, because I've done this before. I've got a thirty year career of people who trust me. I've got fellow CISOs, other companies, companies that I've sold to literally. One of my first customers here at TENEX has been my customer four times. They bought four different products from me at four different companies. You earn that level of trust and it's way easier to sell to those kind of people who already trust you. Who've already got a great relationship with you. So the other big secret, I think, you know, it's maybe two. One, I'm a huge proponent of founder-led sales and I think way too many people start a company, and they don't do founder-led sales. Especially we see these days where, a solopreneur or somebody else is the tech genius that starts the company and they can't sell. And I will always tell people, great, if you're the tech genius and can start a company, and you're the CEO. But you're really the founding engineer and all of that, great. Go find a co-founder who can sell. You have to have both roles in the founding team of your company. You have to have somebody who can sell and you have to have somebody who can build. In my case, I'm fortunate enough that I have both sets of skills and I can, build and sell. And at the same time, I've built an amazing team around me of people who can sell and people who can build, and everything else. I'm very fortunate in all of that. But that is one of the big keys, especially going zero to one, and going one to ten. All of those early adopters. They're buying the founders as much as they are the product. They're buying your vision. They're buying your ability to execute. They're buying what you're selling into the world that you're going to create and way too much of the time. I'll see this of a technically amazing, brilliant founder who can't sell. They can't go communicate to the customer and they can't drive this. And so I think that's one of the other keys. And then the other thing I'd say is the channel. The right channel and the right channel partnerships. This is something that a lot of people waste a lot of time on and they don't do right, and they don't get the right traction from. But if you do it right, if you have the right true channel partners. They can drive a huge amount of value for us. So directly answering your question, we're probably a third of our business is direct outbound sales. About a third of our business comes through the channel. Where we've got other partners bringing us and then about a third. And it's actually probably more like twenty percent. So if you looked at it, it's probably more like forty, forty, twenty. That's coming from what we would consider inbound or marketing driven as opposed to like direct enterprise sales outreach.

Pablo Srugo (01:03:44) :
The piece you're saying about being somebody from the space. Has been one of our big thesis, when it comes to at least a verticalized AI. Just because, I mean, this has always been the case. Obviously, team is critical and having a district is always been important. But I think with AI more than ever, you know, this idea of product moats. I mean, it's really hard to say that you're like years ahead just because. You know, the talent is one thing but at the end of the day. People are building things really, really fast and copycats will appear. But if you can go to market that much faster and understand your customer that much more, and therefore have faster speed cycles. In terms of the things that you put out and being on bullseye when you decide this is the next thing we should build. That really becomes, I think, the edge and frankly, it's harder to displace and rip away one customer than it is to go to somebody, you know, greenfield that hasn't adopted anyone yet. So whoever lands the customers first, then everybody else is playing catch up and I think that's one of the biggest edges today.

Eric Foster (01:04:35) :
Oh man, I completely agree. I mean, I believe so much, not only in my own but when I go and invest. It's in that founder conviction who, like sees the world of, I started this, of I'm solving my own problem. I'm building the product I always wanted to buy or the service I always wanted to consume. Or it's the, yeah, I've been in this industry for five, ten, thirty years. In my case, I know what the problems are and I'm solving them. The worst thing to me that I see is the people who go, oh, well, I saw that these kind of things got funded last quarter and so I decided I'm going to go build that. And it's like, you don't have any conviction and you're operating out of your rear view mirror. Where is your vision of the future? What is the reality that you're going to manifest and bring into the world? That's the journey that people want to go on. They want that authenticity, especially those early adopters. They want to see that you have that vision, that you're going to be able to execute on and you're going to bring something into the world that didn't exist before. 

Pablo Srugo (01:05:32) :
Eric, let me stop it there and I'll ask the last three questions that we always end on. The first one is, when did you feel like you had true product market fit? 

Eric Foster (01:05:39) :
Oh man, you know, I think when we closed our first deal. Quite honestly, was immediate validation. Because it was a top financial institution, a publicly traded, one of the biggest companies. When they were like, oh yes, this is obvious, this is exactly what we need and exactly what we've been looking for. That was immediate product market fit proof point to me. Now, your first customer isn't always gonna do that and I would maybe discourage people from going, oh, we closed one customer. But when it's like your ideal, ideal, most ideal, most perfect customer for your exact use case. What is traditionally like a year sales cycle. When you see that immediate fit. Where they're like, oh no, we're going to throw out all these procurement rules. We got to get this through right now. Because this is exactly what we need. We knew from that moment forward, we had the right product but quite honestly. The only reason we did that is, because we've been doing this so long. Because we built this exact product before or not exact, but you know. We built products in this exact space before is what I mean and because we had that experience. We knew the moment we got traction that we had true product market fit.

Pablo Srugo (01:06:46) :
And then on the flip side, has there ever been a time in the last year. Where you thought things would just completely break or maybe just not work out?

Eric Foster (01:06:52) :
Man, anybody who tells you otherwise is lying to you. This startup life is you go and there is nothing in between. It is either, oh my God, this is amazing. Everything is going so incredibly well. We're all going to be trillionaires to, oh my God, we're all going to die and everything is on fire. And there is absolutely nothing in between. When you're early, especially, you look at like your first ten customers. Doug Leone gave me this great quote early on. I had the opportunity to sit with him and he's like, you know, you need to sell your soul for your first ten customers. And, I maybe want to hang on to my soul but like the general concept of that, right? I get behind of the, you have to do whatever it takes, is what he means to acquire and retain, and deliver a true ten ICP customers. And when you're in that, guess what? You lose one of ten deals. That's like ten percent of your company. It might even be twenty, thirty percent of your company. So those early, the early stage, there's just nothing but those high and low swings. Yeah, I mean, we're incredibly fortunate. We've got great partners with, you know, when Andreessen Horowitz backs you. You get a unfair playing advantage, they unlock so much value and then, we had a really great team with Crosspoint come in and back us. Who, that's another great example here, right? The CEO of Crosspoint used to be the CEO of Symantec, that was basically the biggest cybersecurity services company for quite a while. So you want to talk about somebody who's been there, done that and brings that expertise, man. When you can have a true strategic venture capital partner. Who's literally considered one of the great CEOs in cybersecurity history. Man, that is a ridiculous advantage. So, long-winded answer but you do a lot of stuff to mitigate the lows. You hire the right team, you work with the right partners, you do all this. But even at our level, even on that list of fastest growing cybersecurity companies in history. There is still moments of abject terror of we're all gonna die. I think it was Reid Hoffman who said, the whole thing of a startup is you're throwing yourself off a cliff with a box of airplane parts and you're putting the airplane on the way together as you're throwing yourself off the cliff. But the part that he underestimated and when he says that is, the parts are all on fire and you are on fire and you're taking fire. That is what a startup is like.

Pablo Srugo (01:09:13) :
Last question, what would be your number one piece of advice for an early stage founder building in AI today?

Eric Foster (01:09:18) :
Oh, man. Honestly, there's a lot been written about a lot of product market approaches and sales, and marketing, and everything else. I'll give one like really tactical example that a lot of people are sleeping on, which is Google. If you're not building on Gemini or if you haven't at least run analysis on Gemini versus the other AI's you're using. You are missing the boat. Gemini is the most cost-effective AI out there today, certainly from the biggest players. They're incredibly valuable and I firmly believe Google is going to come out as the singular biggest winner in the AI landscape. Alphabet specifically, I guess I should say, not just Google. But that is a company that I have tremendous respect for, that has a tremendous ability to execute and I think surprisingly. I talked to a lot of people who are like, yeah, we're building an AI and we're doing this. And I'm like, well, what models are you using? Have you looked at all of them? Have you looked at several of them? And they just know they got locked into OpenAI or they got locked into Claude or what, you know, Anthropic or whatever. And I'm not saying don't use all of them. They're all fantastic and in fact, we use all of them inside of TENEX for different use cases. I personally use Grok a ton and I'm a huge fan of, what Grok heavy does for me in some tasks that nothing else comes close. But Gemini, that's my one little takeaway. If you're building an AI, you should really take a strong look at Google and at least run some cost benefit analysis.

Pablo Srugo (01:10:46) :
Eric, thanks so much for jumping on the show, man. I'm excited to keep seeing you on some of the most insane growth lists.

Eric Foster (01:10:52) :
Thank you so much, man. I'm really a big fan of the show, and thanks so much for having me. And I will just leave it with anybody who wants to reach out. You can find me on the socials, X, Twitter is probably the single best place to get me. I'm performify, basically perform plus the ify of like modify. Performify on Twitter, or I've got a Linktree that's at the same. That you can go find all my socials and everything else. I'll drop it in the show notes for you.

Pablo Srugo (01:11:19) :
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.