Sramana Mitra: For the Series A investors, what did you tell them you were going to do? What problem were you going to solve?
J. Paul Haynes: I described to them the problem of solving cyber security in the mid-market. Everybody in the industry at that time appeared to be focused on the enterprise. We just have to sell to 50 of the Fortune 500 and the company is exit-ready is the standard business plan I was later told. The thing that drew them our way is we said, “That’s not who we’re selling to. Instead of the Fortune 500, we’re going after the 10,000 mid-sized enterprises in America and other parts of the world that have the same problem but have no way of solving it themselves.”
They need the people and the training. They need the 24/7 coverage. They need all the technology complexity managed for them. That’s the story that I sold. Many investors were drawn to it because it’s a different model. It’s not B2C. It’s still B2B, but you have such diversity in your revenue streams that you don’t have concentration risk. You are also going into a market where your competition in terms of the number of opportunities and time with key decision makers is a lot lower so that you can basically get the meetings that lead to closed deals a lot easier.
With the degrees of separation between initial contact and the decision makers, you’re probably dealing with two people and four at the enterprise level. All of that adds time and friction to closing deals. Investors see business plans all the time. They said, “You are amongst the very short list of firms that isn’t targeting the Fortune 500.”
In our second round, we talked to about 45 firms over a course of six months. I had an initial indication of interest from one in particular which we closed with. They had an LOI which we signed. We went through an exclusive phase. That’s not uncommon. Investors that want to preempt that market process will jump the gun and get a closable term sheet in front of you. The first funding was intended not to ramp up our sales and marketing organization but to ramp up our product management and project management capabilities.
As a consulting firm, you tend to hunt everything that moves and try to be everything to everyone. The discipline that you need to bring into a market-driven firm is what you’re not going to do. That requires some product management discipline. In our particular area, we are fortunate to be able to find those resources that have a lot of experience. We are in the Toronto Waterloo tech corner where we have several telecom players. We were able to tap into the skill-sets that we needed.
We started the product and resource management journey, which were two things that were foreign concepts to the founders who were technically very strong. We were not going to be everything to everyone. We’re going to focused on this mid-market problem set and we’re going to get really good at solving that problem. Then we will make sure that all the resources we have are deployed at utilization rates that are in the range that we need them to be.