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Posts Tagged ‘venture capital’

Anaplan…& Implementing a Robust Forecasting Platform: Billings & Revenue

March 24th, 2017 Comments off

For the first few years at Cylance there was not a huge reliance on our forecasting platform and the need to put a pricey tool in place. There was simply no need to spend a six-figure amount when our business was still an entirely domestic story and the core revenue stream was still Professional Services. While we implemented NetSuite within our first few Quarters as a company, we opted for the NetSuite as our core platform so we could then bolt on additional modules as needed. We opted for their forecasting module almost immediately, but for a very basic forecasting function. As a Professional Services story, we only had a basic need to forecast gross labor hours, utilization rates, hourly cost rates, as well as estimated billing rates. At this point, we still did not have any consideration to Product revenue, and in the absence of, did not have any considerations for revenue recognition at that point. Considering that our Services revenue was not invoiced until completed, it was a very straightforward modeling exercise.

Fast forward to the launch of our Product offering and we knew it was going to necessitate a jump to a new platform as we were already starting to see some weakness in the NetSuite module. This new phase required an entirely different level of forecasting considerations for which there was no historical activity and for price points that had not been previously seen in the security sector. Would we actually realized, and stabilize, at a pricing level that would be many multiples over the incumbent first generation AV offerings. With consideration to the Product forecasting;

  • Average price per node on an annualized basis
  • Billings distribution by contract length…12, 24, and 36-months
  • Flexibility to easily adjust the anticipated weighting of billings
  • Subscription or Perpetual agreements (very few perpetual, but still present)
  • Robust deferred revenue modeling as a result of signed contracts
  • Sales staff hiring and assigned quotas.
  • Implementing any “seasonality” consideration into the model
  • Existing quotas, annualized growth, as well as ramp up period for new hires.
  • OEM, Consumer, and Government assumptions.
  • International entities & expected exchange rates for a consolidated USD view
  • Contra revenue accounts

It’s pretty easy to see that, even the short list above, there was going to be an entirely new level of complexity to our forecasting efforts, which could not be accommodated in our original module. After meeting with one of our key investors and discussing some of the options available, Anaplan seemed to emerge as a strong candidate and we made the decision to move forward. It was time to put a more robust tool in place as we started moving towards 9-figure revenue goals.  Even with the move to a new forecasting tool, we also had an entirely unique challenge as in developing a the components of this Forecast without a wealth of historical performance metrics. This meant that we would be constantly updating the Forecast as we compiled more Product transaction data. Fortunately for us, we saw a relative level of stability in our average PPN and our contract lengths. The two most difficult elements we had to work through during the implementation was the buildout of the deferred revenue forecast and the buildout of the revenue forecast that was supported by a detailed hiring plan and the assigned quotas for each one of those individuals. This was not going to be a simple spreadsheet exercised based on modifying a few cells and voila’…you have an annual number! The goal was to build a platform that would hold up to the scrutiny of our investors as well as easily identify & bridge any performance shortfalls that were realized versus planned.

In taking one example of where Anaplan excelled was in the modeling of our domestic revenues through the quotas that were assigned to each of our sales staff. While a painstaking exercise, there was an itemization of every existing sales staff, as well as those who were recently hired, or planned to be hired. There were individual quotas assigned to each one of these individuals. For those new hires, there were additional considerations to a ramp up period as they learned our tech, the inner workings of the Company, as well as seeding their existing network in their new employment. While these assumptions were usually conservative to reflect a few Quarters of nominal contribution, most were ramping extremely quickly. However, were we going to see the same level of immediate success as we scaled from a few dozen to sales staff to a multiple of that? That’s where we would have flexibility in Anaplan to adjust the model accordingly. From a billings and revenue modeling perspective, the only limits in Anaplan would be those that we placed on ourselves. However, we also had to be careful that the levels of planning detail we opted to incorporate would be important in the planning of the business and not turn into an exercise of planning paralysis.

The second painstaking, but worthwhile effort, was the buildout of the deferred revenue model. With the help of one of Anaplan’s premier implementation staff members, this was efficiently tackled and resulted in a clearly mapped Forecast that was easily trackable after any changes were made to new sales hires, quota modifications, or changes to average contract lengths. It was no longer the “black box” that we were challenged with on our prior platform. The additional benefit of the new Anaplan deferred revenue forecast is that it was easily audited and reviewed against the underlying assumptions. This would have played a pretty key role in our prior financing round in which there was a divide between the models presented by investors and our internal view…on the older platform. As one investor had noted during those efforts…”We’re familiar with that module and it is a bit of black box…”. A nice affirmation of our decision to move to Anaplan, but we were not yet fully deployed on Anaplan to supply the new view.

With respect to our choice to move to Anaplan, we also chose to work directly with the Anaplan implementation team as we wanted to keep our entire efforts and focus inside the Anaplan camp. I opted not to risk having a point of weakness between Anaplan and the efforts of a 3rd party reseller for implementation. It was a great decision and the Anaplan team was fantastic. In the end, the primary goal of moving to Anaplan was to be able to provide complete transparency to our investors, provide them the confidence that there was a robust set of underlying assumptions in the Forecast, and to allow for an intelligent dialogue on the integrity of the underlying Forecast. That once unbundled, it would be easy enough to see where any weakness might be occurring if there was a shortfall against Plan. We’ll jump into the cost of goods and operating expenses in the next round…

Thanks for reading.

Jeffrey Ishmael

Do You Stay On The Gas With “Unlimited” Resources…?

March 20th, 2017 Comments off

     It’s been just over four months since I made the jump to start a self-imposed sabbatical to “recharge” and look to define the next chapter after 4.5 years in a hyper growth start-up. In essence, it was 4.5 years training at a redline pace that ultimately demanded a level of moderation, but at a pace that wasn’t mine to control. But what does a hyper-driven and intensely competitive individual do to “recharge” the batteries and spend some much deserved down time do? Well of course you decide to set your sights on doing one of the longest paved climbs in the world, as well as deciding on racing two of the most notable Classic races in Europe that will have no less than a combined 100 kilometers of cobbles between the two events. Those are natural next steps in getting some rest…right?

I’ve always made some pretty strong comparisons between the training for my cycling and the disciplines that have to be practiced in a Corporate environment. While some may balk at the comparison, it comes down to managing the resources you have available, using those resources in an effective manner, while accomplishing the goals or commitments you’ve made to yourself…or others. Let’s look at the very macro comparison of the resources available at a Corporate level versus Personal level. At the Corporate level, imagine having complete open access to the checking account of your favorite VC and being able to deploy those resources in any way you could to your business…ANY way. You can spend anything from $1 million…to $100 million…or more if you felt you needed it. Let’s say you settled on the amount and burned through that spend. What have you been able to accomplish with the deployment of those resources in the end? Have you built a healthy business that has a strong foundation for future growth and have you been able to establish a strong pattern of increasing performance metrics that strike the right balance between aggressive growth, establishing a healthy corporate environment, while positioning the company to deliver on your commitments? General questions, but you get the point.

Let’s talk about the Personal side though. I find myself on sabbatical and all of the sudden I basically have an “open checking account” for training time and can do whatever I want. I can train for 10 hours per week, 20 hours per week…or even 40. However, as with a Corporate environment, there is the same consideration to resources and a healthy foundation as there is for an athlete training for an event. It has to be methodical, planned, sustainable, with appropriate periods of reflection and a tempering of the pace. The attached picture is the actual chart of my training since November and the progressive peaks and subsequent tapering as I move towards my goal of leaving for Europe next week. In the chart the magenta line is the shorter term acute training load while the blue line is the longer term chronic load, which indicates a core fitness base. The yellow line is the fatigue line and the more it dips, the higher the fatigue and time and indication of need to rest. Think of the magenta line as the 200-day moving average for a stock…you can see spikes above the norm, but ultimately it’s going to come back down before hopefully making the next run up. It’s the same concept here. You can see where I’ve had the spikes, but ultimately, you taper down before making the next training push. It’s about finding the right balance, creating a healthy foundation, and continually pushing forward.

Just like the Personal level, there is an equal penalty for “overtraining” at the Corporate level. At the personal level, overtraining can lead to becoming ill, an inability to achieve peak performance, and an extended recovery time to get back to a healthy state of training. In the Corporate environment, the equivalent of “overtraining” is essentially excessive spend, excessive hiring, and a deterioration in the performance metrics of the company. At that point, there’s no choice but to move into a period of recovery to get back to a higher level of performance.

Over the last four month I’ve managed to put in over 9,200 kilometers in the saddle, climb in excess of 300,000 feet, and during that time burn almost 210,000 calories on the bike to achieve that. Again…that’s just in the last four months. Putting 210,000 calories in perspective with some of my favorite foods…

  • Roughly 2,100 packets of energy gel…
  • 131 pounds of pasta…
  • Roughly 1,750 Chobani yogurt cups
  • 1,500 cans of that nectar of the gods…Coca Cola

You get the idea…it’s all about the long game and establishing a strategic and achievable result. Imaging trying to cram all the stats above into a shorter window…say even two months. The likelihood is that you don’t have the proper foundation in place, will overtrain yourself, you’ll likely get sick…and ultimately your fall back weeks or a month…or in the case of a Corporate scenario…potentially losing Quarters due to overtraining.

Happy training my friends…

Jeff

Best Of Class Forecasting & The Eternal Struggle…

March 16th, 2017 Comments off

There’s few corporate topics that elicit the levels of frustration and confrontation that budgeting will create amongst teams. Unlike the amusing skirmishes that we’re watching at a government level right now, you’d think that this exercise at a corporate level, when there is only company performance to address and the absence of “political parties”, that this would be a straightforward process. Well this certainly couldn’t be farther from the truth as we all know. Over the next few posts I’ll be diving into not only the process and pain that most companies will go through, but an overview of the budgeting platforms I have worked on and the considerations for each.  While some of my views might seem matter of fact to my finance colleagues, my posts are always intended to provide insights for the rest of the organization when their having to deal with what is typically that “black box” department called Finance.

In the most optimal situation, the compilation of a Budget represents the collaborative process that should involve all the functional areas of an organization. This collaboration in the end will yield a Budget that all individuals are supportive of and will ultimately drive future accountability in delivering results that achieve the commitment made to the Board. In the worst situation, and one that will ultimately result in a broken process at every level, are goals that are mandated at the top level and each functional area is forced to determine what path it will take to get to the end goal, regardless of how reasonable the goals might seem. Ultimately, these goals are not fully supported by the team, will not be met over time, will yield resentment, as well as create unnecessary levels of conflict amongst the team as they resources become scarce in the absence of results and fingers are pointed in every direction as goals that were never their own are missed. These are absolute extremes, and in most cases, the majority of corporate budgeting efforts fall somewhere in between and need to be navigated through effective communications, compromise, and support.

What is important to keep in mind, at least with consideration to what the Finance department is managing, is all the elements that they’re compiling and that the budgeting process is really a mechanical process…there is no emotion involved in this process. Even though it will prompt emotional responses across functional areas, it’s really mechanical for the Finance team. With that in mind, it’s also worth understanding what the endless data points are that are having to be compiled for the Budget. I’ve worked in smaller $30M turnarounds that have a relatively small product offering and limited international distribution….to much larger entities such as DC Shoes / Quiksilver, as well as MGE, which then reported on a consolidated basis to Schneider Electric. The latter organizations had extremely complex budgeting practices that had been decades in the making, involved consolidations with dozens of international entities, while also having to balance both GAAP and IFRS reporting. Not only were there challenges with international consolidations, but there were countless other elements to work into the planning process, which included…

  • Establishment of company codes depending on subsidiary considerations.
  • Delineation between the multiple sales organizations
  • Considerations to the multiple distribution channels that were at play
  • Breakdown between customer types
  • Inventory segregation
  • Product segregation to allow further performance reporting
  • Seasonal considerations, which in apparel, likely meant 4-5 seasons annually
  • Demographic segregation…Men, Women, Youth, etc.
  • Product categories…Bottoms, Tops, etc.
  • Fabric segregation…Denim, etc.

It’s easy to see with the list above why the Budget process is a very mechanical process and NEEDS to be absent of any emotion in the process. It’s also easy to see with the list above that the process also needs to be a collaborative one with EVERY functional area to ensure success in the process and an end budget product that is supported an endorsed by the team.

With some relief, it was a much simpler budgeting process at Cylance as we were still a primarily domestic story with Protect being the main product offering. We ran a separate P&L for the Services business as that was a strategic part of the organization, but we also had to ensure that the Services team was operating in a profitable manner. Services was an incredibly profitable business at MGE and there was no reason it shouldn’t be at Cylance and we had the reporting enabled to be able to track whether that was the case. While there was still some developing international business, it was going to be a fairly small percentage of our overall results, at least over the next 12-24 months while the domestic business was still going to be the main growth vehicle. Did we need to plan at a regional level and monitor the spend…absolutely. However, for the stage that Cylance was at, and for the foreseeable future, there was no reason to complicate the process and create a ton of busy work to keep Finance busy and engaged. There was no reason to build a P&L based on hundreds of departments or cost centers that was more akin to what was necessary at a $40B Schneider organization. As with manufacturing, and other supply chain philosophies, lean P&L management in early stages leads to a very straightforward process, one that does not require extensive interpretation, and ultimately leads to a clear & concise path that was developed by the team, is supported by the team, and is easily navigated by all constituents.

So how do we bridge the gap between supporting the teams with what they need, effectively consolidating and considering their feedback, and the platform that is utilized to bring it all together and present the detailed view to the Board? That’s what we’ll dive into over the next few posts and jump into some of the key areas of the P&L. The common theme that I’ve always carried over the years, is that the success of an organization is tied to the collaborative approach and one that considers and respects the feedback of the team. Ultimately it’s the team, or the CEO, that is presenting the Budget to the Board. A Budget that is expected to be delivered on and achieved. It should be a safe assumption that the Budget is the product of an entire team collaboration and one the team is committed to rather than being dragged along for the ride. I’ve had to endure every situation, but without a doubt, I’ll always side with collaboration…

Thanks for reading…

Jeffrey Ishmael

Off To The Races & Billion Dollar Valuations…

December 13th, 2016 Comments off

With the original Cylance team established in July of 2012, the orchestra came together and at that time there as a unified vision to transform the security market and change the way that corporations were thinking about their security infrastructure. We were less than a dozen people working in the living room and bedrooms with a goal of security transformation, and in the eyes of our founder, achieving a billion dollar valuation inside of 4-5 years. When you’re starting on fold-up tables there is no blue print to getting there…only a bit of a dream. However, that’s exactly what the team was doing in those early weeks and few months…creating the blueprint on white boards and oversized post-it notes. The team was sparring on a daily basis on what approach would achieve the best commercial results. It was all about specifically identifying the value proposition behind the vision of the tech that had been decided. While we were not trying to build a new company in a high growth sector, we knew the security sector was dominated by dinosaurs and there was billions in revenue that were ripe for disruption. Cylance was going to be the disrupting force in the equation and that exactly what the team was focused and unified on accomplishing.
We also knew that we could accomplish the goal while being very surgical in our spend and that our success would be based on a breakthrough tech and not spending tens of millions on advertising campaigns, spending ridiculous amount early on trade shows, non-value add events, as well as keeping our hiring cadence under strict control. The company cash burn was extremely minimal in the early stages and it was nearly 18-months before the company received its second round of investment in February of 2014. As we continued to bolster our headcount, invest in the Services team, and gradually moved into new offices, the original $15M investment lasted that first 18-months. Again, we were extremely surgical in our spend and spent every dollar like it was our last dollar. A philosophy that managed to last the better part of almost 4-years…
While the Research team was focused on developing the product there were a host of other operational issues to address as we started to grow as a company and would need a foundation for the first few years. First on the list was to find commercial space as we would definitely need to move out of the house. While a remodel was imminent, we were also working in a space where there were water leaks, open beams with exposed nails, and all the other fun elements of a home start-up! You can imagine the response received when you’re trying to meet with The Irvine Company on a commercial lease, as a new company, no revenue, and you want to sign a 5-year lease and then have them pick up all the buildout and incorporate into the lease rate so as to minimize any immediate cash burn. On top of that…and as a start-up…you’re also asking them to have certain restrictions on competitors worked into the lease as well. Suffice to say that we had a pretty weak position and it took more than a few meetings to get them to buy into our vision and the growth we were looking at achieving. At that stage, it was a huge accomplishment to get our lease signed with The Irvine Company, in a premier location, with building top signage on both sides….and all with a minimal security deposit. Score one for Cylance!
Even with our new lease, we kept our spend to prudent levels that were consistent with our philosophy. Rather than spend six-figure amounts on furniture, we committed to a new entry level offering from Steelcase that could easily be added to as we grew…but not before staying on fold up tables for many months before getting into our new space. We all tended to joke that fold-up tables had become part of the Cylance DNA.
Next on the list was our corporate insurance portfolio. Rewind to the start-up that had no revenues, still had less than a few dozen employees, had actually been turned down by Marsh for being “too small”, but seeking coverage in the low 7-figures. I looked to a prior relationship and again found a partner that believed in our vision as well. Fast forward a few months later and securing our first few customers and we were already going back to ask for additional increases in coverage to the mid-seven figure range. This drill continued on almost a quarterly basis until a final larger customer pushed the coverage limit again…to a point that exceeded our billings on even a cumulative basis. Again, transparency and strength in our relationship got the coverage in place. While there was certainly some raised eyebrows, they believed in Cylance and continue to realize the benefits of the relationship, which now extends on a global basis. Again, it came down to relationships, communication, and a mutual respect on both sides to manage the expectations on such a hyper growth path.
Marketing? The first few shows were an absolute kick to plan being the new kid on the block. Our burn was primarily aimed at headcount support, but we also knew we needed to start getting the Cylance name out there. For the first few RSA and Blackhat shows we had the luxury of being an unknown and used it to our full advantage as the team rolled out a full guerrilla assault on the show. With everything from custom napkins dropped in bars, to rented suites to meet with potential customers, to other similar means, we made a huge impact in those early days and clearly got the Cylance name out there. Not immediately recognized post-show, but we established the open ended question of “Cylance?”. We were clearly on the radar at that point…and already starting to create discomfort with our competitors.
At this point, there was still a unified team, all engaged in the same direction, and we knew the end play we were headed for. We knew we were going to be able to achieve our objectives without putting excessive spend in place. What I appreciated at this point, which was similar to the philosophy we had in place at DC, was that we were operating in a brand first capacity. There were no decisions made in the best interests of a person, department, or other agenda…it was all about Cylance. With this philosophy politics were still being avoided and there were no silos in place. We all bled green. Along with this approach was the continued prudence in spend throughout every level in the organization. We were pacing well, the product was coming along, and all indications was that once product was commercialized in 2014 we were going to start eating our competitors lunch. What our competitors didn’t hear was the increasing sound of the Cylance war drums and their sunset turning a bright shade of green…
Thanks for reading.
Jeffrey Ishmael

“I Have This Idea I Want to Share…”

November 18th, 2016 Comments off

While I am still only a few weeks detached after deciding to leave my position with Cylance, I’ve been getting an endless flood of inquiries about the trajectory we had been on as a team, how the company had achieved some of the major milestones it had, as well as whether there were any lessons that I was taking with me and would carry with me into the next chapter. It’s true that the pace had been insane from the very beginning and that the success we had achieved as a team may never be replicated…at least not without the synergies the team had realized early on. I also know that Cylance will not be easily replaced as the experience has been nothing short of amazing. It’s not about finding a job. It’s about reflecting on what has been a life changing 4.5yrs and the desire to reflect on that experience and share with those that have been asking. I’m not sure how many “chapters” there might be, but this is certainly my attempt to kick it off..
While Stuart and I had known each other for a handful of years prior to Cylance, we never knew the depth of each others professional capabilities. I knew he was involved in Security and he know my background was in Finance….end there. What we did know about each other was the relentless nature in our personalities and the ability to suffer for extended periods of time on a bike…think more than 12 hours. Think dehydration, severe cramping, horrible weather conditions, and perhaps all at once. Situations that truly test your personality and whether you have the vision and commitment to see it through. With that said, Stuart shared his idea of a new generation of security and one that he had a team committed to solving. This new initiative was not just about the tech, but about changing the way people thought of security. Fortunately, I had a mentor of almost two decades that came from the security space and he quickly validated Stuart’s knowledge of the space and where he was headed. Combine that with two investors who had prior interactions with Stuart and I know that this was not going to be any ordinary start-up.
Start-up. That characterization that seems daunting to some and terrifying to others. You’re not coming in and inheriting a team…or for that fact, even a company. You have to build it with the team. There’s no other way around it. We had found early on that there were a number of people that were just not capable of surviving in a start-up environment. Whether vision, discipline, experience, inability to build their own client book…or whatever the element might have been, some fell victim to an ongoing exercise in Darwinism. It was truly survival of the fittest. As I had started as employee #7, or for anyone starting in the first 50-100 people, there is no place to hide. You were either getting it done…and getting it done right…or you knew it was time to move on. There was no coddling, no hugs and “it’ll be ok..”…but a relentless push for achieving the results. As I had learned and practiced at so many other prior companies, you delivered on what you promised. Period.
However, at that time in the company, there was also a deliberate avoidance, and an absolute disdain, for politics and silos. We all recognized that if we didn’t have a sense of cohesion in place, a commitment to an end goal, and the support of our respective team members, then we were going to fail. Period. It was in these early days that the support was absolute. Whether someone was getting married, selling a house, establishing new households, moving across the globe…that these conditions were supported…to ensure that we were going to be successful and that everyone was going to be along for the ride. We knew we were going to be on the gas and the pace was going to be relentless. The pace was going to have to be relentless if we wanted to establish a billion dollar company inside of a 3-5 year window. Now keep in mind, while the term “Unicorn” now is common, if not overused, it was not in existence until being coined in 2013. So in 2012 for Stuart to say that in a handful of years he wanted to establish a commercially successful company with a billion dollar valuation…he was dead serious and it wasn’t going to be a walk in the park. His vision, while aggressive, was not part of a herd mentality of wanting to be in some hyped “Unicorn Club”. His view was not about creating a tech that would get sold on the hope of establishing commercial success…NO…he wanted to establish a truly disruptive technology that would turn the security space upside down. He wanted to see the team create a tech that would just eat the lunch of first generation AV vendors. Period.
After having done a number of turnarounds, the thought of a start-up certainly was not intimidating. Considering the quality of the team we had, the wealth of experience that each of them was bringing to the table, as well as the collaborative personalities that each one of them shared, I knew that we had a very high likelihood of success in the launch of this company. The most difficult balance we were going to have to achieve was being fiscally responsible to mitigate burn, continue hiring the right individuals, and ensure we had the resources in place that would allow Stuart and the product teams to stay laser focused on their obsession to disrupt the security space. The team that had been assembled would absolutely be able to do that. There would be a further challenge in determining what the necessary resources were that should be put in place. As an example, I had just finished an SAP implementation at my prior company and clearly that was not going to be our platform of choice, but it certainly wasn’t going to be Quickbooks or some other bottom tier platform. The challenge would be to find the Goldilocks solutions for the first 12-18 months. No reason to buy the F1 race car when you couldn’t afford the pit crew and the track hadn’t been built yet…
After a number of emails, a few phone calls, and finally settling on an offer letter, it didn’t take much convincing to join this new start-up. I saw the vision, I believed in the vision, I believed in the team, and I trusted the team at the table. With that, and a few weeks later, Stuart gave me my laptop, let me know it had Quickbooks on it, and if I could get the payroll done that day. With that, as well as a payroll processed that day, I knew we were off to the races… 🙂
Looking forward to the next chapter..
Jeffrey Ishmael

How Do You Summarize 4.5yrs of Hyper-growth?

November 3rd, 2016 Comments off

For my friends & family who have been watching my pace over the last four years, that pace has been relentless, and for the most part, all consuming. The 4+ years that I have spent at Cylance where I started as employee #7 and working on fold up tables in a living room had progressed to over 700 employees. Cylance has grown from an idea our founder shared in a coffee shop to now a multi-national company with operations in 10 countries and billings in excess of 9-figures, while protecting some of the most recognized company names.
As with most chapters, there comes a time to turn the page and start a new one. I’m so incredibly proud of the team I have been able to work with, what has been accomplished, and what they will likely continue to accomplish. The next chapter is not about quickly finding a new opportunity, but reflecting on the incredible experiences & team that I had the privilege of helping to create.

I look look forward to sharing the experiences I collected at Cylance & the insane hypergrowth pace we found ourselves in. From the early stages of transient office spaces, to system decisions, preparation for modest growth levels, financing rounds, vendor relationships, as well as the cultural challenges created in such an extreme growth environment. I leave behind an amazing team and know our paths will likely cross again and will look forward to that possibility.

Thanks for reading…

Jeffrey Ishmael

When Everyone Is Your New BFF…

February 22nd, 2013 Comments off

As I had announced in my last posting, Cylance had officially launched, and with that news came additional details on our Board of Directors, Advisors, and the funding that we had secured. More specifically, $15 million that have been secured through two of the top VC firms, Khosla Ventures and Fairhaven Capital Partners. Now keep in mind, while we are still technically a start-up, there is no shortage of work and structure that needs to be in place to secure this kind of funding. The last I checked, you just don’t go knocking on a few doors and hope that someone writes you an 8-figure check.

I’m also not going to go into the details of our current structure, but I get a bit of a chuckle seeing the onslaught of marketing materials that we have received since our launch. You would think that in one fell swoop we had just filed our fictitious business name statement and only moments later had already sold the company for a HUGE payday. To start things off, there were countless solicitations for real estate representation and wanting to help us find our future home. Check. Already have that covered through a long established and trusted network. The next onslaught would be best characterized as the recruiter onslaught. With a management team that has decades of experience in cyber security then they better be able to recruit from within their own network. Check. We are already solidly moving forward with an A-grade team. Next you wonder? A myriad of folks who want to help us navigate the stormy waters of insurance coverage. Check. Already have that covered as well through our long established and trusted network. Whether workers’ comp or D&O, it we don’t have that in place we have no business being in the positions we are.

The next wave of solicitations was even more amusing. As you know, when you start a company you are destined for riches and it might as well be a slam dunk. It’s a good thing that we started receiving all the literature now on what to do with the vast wealth that will occur at some assured time in the future. Again, this is an area where I wouldn’t trust anyone I didn’t already know and was a trusted advisor or source in the past. I just have to wonder what kind of success these firms have by reading the paper, assembling an envelope of marketing filler, throwing on some postage and dropping it in the mail. In the Finance world, unless you have a unique value proposition that will help me improve my results, in a sustainable way, and isn’t offered by my existing trusted network…then you’ll have a long line to wait in.

As our work and efforts require, we secure our business on trusted relationships and a definitive expertise that we bring to the table and not a glossy brochure. A unique value & protection proposition that our customers can plainly see. What are you bringing to the table…?

Thanks for reading…

Jeffrey Ishmael

Glad to see the Hockey Stick Forecast is alive & well….

July 30th, 2009 Comments off

     This morning I attended the 33rd gathering for the Growth Capital Conference in West Los Angeles, which is organized by the Growth Capital Institute. Aside from the standard self-serving pleasantries, which lasted the better part of 20-minutes, the conference showcased a presentation of 5 companies seeking growth capital. This was then followed by a 4-person panel discussing the current lending and capital environment. Although this was the first time I had been to this particular function, there were many of the usual suspects in attendance, which included the Tech Coast Angels, Pasadena Angels, Garage Technology Ventures, and various SBA reps. While a bit annoying at first, the lack of seating for an rsvp fee event was somewhat refreshing and the energy levels were high.

 

     Once of the greatest comments that was made to me by a successful business person, and later expanded on, was “Boring is not bad….”.  Well, that’s a bit of what we had this morning; some boring concepts, but not all bad. Unfortunately, what many of the concepts were lacking was the real “Wow” factor in their presentation and presenting the merits of their concepts in a simple 40k foot level. The presenters were give a simple parameter….7-minutes or less.  Many had problems staying within those confines and infused their presentations with too many details; details that could have been easily covered in a secondary meeting after capturing the attention of potential investors.  What was also somewhat amusing was the collection of hockey stick sales pr0jections without discussing any of the basic elements of a sales effort to achieve revenue goals.  In fact, one company even cited an 8x revenue multiple of a peer, from Q2-07, as a compelling reason for investing in their company. Don’t know if I’d be referencing valuations from 2-years ago….

 

     After the presentations were complete the conference transitioned to the panel of speakers, who would be discussing the current lending environment.

 

With regards to the SBA lending environment there were a number of points worth noting:

          Owners with an equity position of >20% are being required to provide personal guarantees on all loans.

          There is no longer 100% financing available.

          Start-Ups are requiring 30% infusion by Founders

          Ongoing entities are still only getting 80-90% with the remainder contributed by Founders.

 

     There was also a very consistent message by the panelists that they are only investing in entities where there is a unique proposition or offering. They are no longer investing in companies that are simply a variation of an existing and successful venture.  It was also noted, particularly by the Pasadena Angels ($25m / 65 deals) that they are doing more follow-on deals. While their investments in companies have doubled the number of companies in the portfolio has only increased by 50%. Further, the panel commented that “you can never assume that there will be follow-on financing and cite that as a basis for making an original investment”. They clarified that due to the environment, you need to make your investment decisions based on the merits and projections of the entity and not the hopes of bridging to more capital invested.

 

     Although a number of the discussion points were rather rhetorical, it was good to see the entrepreneurial drive alive and well at the conference this morning. It was clear that a number of the presenters really had not done their appropriate homework, or were being given some less than stellar guidance in their preparations, or just discarded that guidance outright. Regardless, I got a kick out of seeing that the Hockey Stick Forecast is still alive and well in funding presentations….

 

Thanks for Reading . . . .

 

Jeffrey Ishmael