Readers of this column are no doubt familiar with the spectacular recent growth in venture funding for cyber start-ups. In fact, raising capital is now such a fixture in our industry that some entrepreneurs seem to spend more time trying to impress investors than they do running their business. I’ve seen this phenomenon first-hand at gatherings where gin fizzes are raised in euphoria to celebrate completion of a funding round.
I had the immense good fortune this past week to spend time chatting with a man we all know well – Alberto Yepez, one of the recognized pioneers in our industry. As I’m sure you know, the amazing fund Alberto co-founded with Don Dixon, Trident Capital Cybersecurity, is largest of its kind, having recently raised a staggering $300M to invest in cyber start-ups. It’s quite an operation.
My interest in speaking with Alberto was to request his candid insights into cyber entrepreneurship. I wanted to understand what makes one start-up succeed where another struggles. We covered much ground in our discussion, but one theme pervaded Alberto’s comments – a theme that readers should take a moment to internalize: Successful start-ups, he explained, focus on solving real customer problems.
This might seem obvious, but Alberto offered considerable evidence that many founders focus their energies elsewhere. “I want to know what real problem they are trying to solve,” he said, “and perhaps more importantly – for whom?” He went on to describe some real cases where the answers to these simple questions were, in fact, crisp and clear, and how these companies went on to great financial success.
I asked Alberto if there are areas of particular interest for him and his partners: “We like to see solutions that remove friction and hide complexity for users,” he said. “This is especially important because of the gap that exists between available cyber security professionals and the growing need for help. Solutions using automation and techniques like machine learning are necessary to solve this problem.”
Alberto’s years of experience with entrepreneurs came through loud and clear in many of his comments. “I ask founders if they are managers or leaders,” he said, going on to explain that teams must be put in place to balance whatever dominant skill is reported by the leader. “It is important to know that it is the exception, rather than the rule, for a founder to step easily into the day-to-day CEO role. These are different jobs.”
As we dove deeper into the psyche of founders, Alberto recommended a classic work: The Founder’s Dilemma (https://hbr.org/2008/02/the-founders-dilemma), which introduced some staggering research results, such as that roughly 80% of entrepreneurs in successful start-ups must be replaced in the CEO position. “Founders must answer one basic question,” he said. “Do you want to be king, or do you want to be rich?”
Reflecting on my conversation with Alberto, the one theme that sticks with me most was his insistence that cyber start-ups must solve real customer problems. Anyone contemplating a new business, or expanding an existing one, should thus heed Alberto’s advice and answer these important questions: Why are you in business? What problems are you solving? Who are your customers?
If can provide great answers to these three questions, then the odds are likely good that your start-up is on its way to business success and growth in cyber security. If you can’t provide great answers, however, then I’ll bet Alberto would recommend that you sit down with your team . . . and that you not get up until you have completed this important task!
My sincere thanks to Alberto Yepez for sharing his wonderful experience and insights with us. The cyber security community truly benefits from venture capitalists like Alberto and Don, who enable creative entrepreneurs to build solutions that solve real business problems. I'm glad they do what they do. I hope this brief summary of our discussion has been useful to you.