aDolus Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Eric Byres. He's a leading expert in the ICS 13 supply chain security industry. He invented the Tofino firewall, the world's most widely deployed ICS security appliance. Eric is now CTO of aDolus Inc, a SaaS company focused on the production of software supply chain in critical infrastructures. Eric, are you ready to take us to the top? [00:18] >> Yep, absolutely. [00:20] Okay, so what does that mean? Like, talk to me about like a recent threat that you guys found and you protected the company from? [00:28] >> They're not threats that we find necessarily. So take, for example, the whole SolarWinds problem. We didn't find SolarWinds. Nobody has a silver bullet to solve a problem like SolarWinds. But what we've seen in our customer base and we've heard in government disclosures is that companies don't even know if they run SolarWinds. And so what we're really good is finding out what software you have through second party, third party, fourth party, fifth party. Where's your software coming [01:01] >> from? And trying to unravel that mess called the software supply chain. [01:06] Interesting. Okay. And so what are people paying you per month on average to use this? [01:10] >> Sorry, say that again. [01:11] What do your customers pay you per month on average to use this technology? [01:15] >> You know, it depends on, you know, we have big customers and little customers. Customers will pay as little as 5,000 a month. Some of them are paying, oh, probably north of about 40,000 a month. [01:29] Is that your biggest customer, about a $500,000 a year contract? [01:32] >> Yes, that's correct. [01:33] Wow, very cool. Put this on a timeline for me. When do you guys launch? [01:37] >> We, the company started in 2017. We actually launched product in 2019. [01:44] How did you fund yourself while you were pre revenue? [01:48] >> Got US Department of Homeland Security Silicon Valley Initiative Program grants, about $800,000 worth of research grants. So that kept us alive for the first couple of years. Then we did two seed rounds, basically a safe round that raised about another 1,200,000. [02:05] What year was that? [02:07] >> One in 2019 and one just last year at the start of COVID. [02:13] And so what was the amount there in 2019? [02:15] >> In 2019, we raised about $650,000 somewhere around there. We were looking for $500,000 and got $650,000. So we're pretty happy. [02:22] Congrats. Yeah, that's exciting. And I guess that's sort of a pre seed round. What valuation did you raise that at? [02:28] >> It was basically raised around 4. I think it was 4,000,000. [02:34] Think that was a fair number? 4,000,000? [02:36] >> I think I think it was a bargain, actually. You know? But, you know, I didn't have a crystal ball to know that [02:46] >> President Biden would be releasing executive orders about supply chain, I didn't know that SolarWinds was going to happen. So it was, yeah, it was an absolute bargain. But with the information available, I think it was a fair number. [02:59] And then you raised a little bit more last year. How much? [03:02] >> Oh, no, that was the last year. That was the one last year, $650,000. [03:06] When was the other round? [03:09] >> The other round was 2019, which is just over $500,000. [03:12] Okay, got it. And what was that raised at? [03:14] >> That was raised at 3,000,000. [03:16] Okay, got it. So it's a nice little increase there in valuation. Talk to me about sort of where you're at today in terms of team size, how many folks? [03:24] >> So I think we have 19 people, maybe 20. I guess maybe we have 20 on Monday. [03:30] >> So, we've been growing our team pretty aggressively. We've been bringing somebody in just about every month for the last eight months. [03:37] Okay. And how many do think you'd at by the end of the year? [03:41] >> I'm pretty sure we'll probably add another five or six by the end of the year. [03:47] So total would be what? 25. Thirty five? [03:50] >> Twenty five people total. [03:53] And you folks are engineers. [03:55] >> Okay. There's probably engineers, developers and data scientists probably account for of the current 20 people, probably 14. [04:04] Okay. And give us a sense, like for people that might want a product like this who are listening right now, how would they sign up? How would they use you? What's the activation on the onboarding look like? [04:14] >> So we're an enterprise play. It's typically we get contacted. People can go and poke at what we call the free portal where they can just submit some samples. But mostly, in fact, everybody who's a client or even a prospective client or running a pilot contacts us and say, hey, we'd like to set up a pilot. We'd like a demo. Then we'd like a pilot. And then from there, we'll do a pilot. We'll set up basically what [04:41] >> we call a prototype portal and they can try using the package to analyze what software, to analyze some sample software packages. And then we'll roll that into either an API contract if they just want to make API calls or if they want to use the web portal. Basically, that's the role. That's the way it rolls. [04:59] And Eric, how many customers today? [05:02] >> Right now, we don't have a lot of customers. We've got three primary customers and about six large pilots running right now. [05:08] Okay. So three times $5,000 a month, you're doing about $15,000 a month in revenue? [05:12] >> A little less because we got some little ones. So right now we're doing [05:20] >> let's see, what is it? Well, I can tell you annual revenue. That's easier. We're doing a little less than 600,000 a year. [05:27] A little less. [05:28] >> Large contracts. I tend to think annual because what we found is our large contracts are you know, our contracts include people like Honeywell and Caterpillar. They hate, for some reason, I don't understand why they hate monthly contracts. They always drive us to an annual contract. [05:43] So just to be clear, if I take 600,000 divided by three customers, they're paying you way more on average than $5,000 a month. You've got that one big one at $500,000 a year, and then it sounds like two others that make up the other $100,000. Is that right? [05:56] >> No, it's a little more divided than that. I'd actually have to I mean, you're talking to the CTO, so I'd I'd have to go and talk to the cash guys, but I think it's probably about half with one client and then the rest are sort of divided out. [06:09] I see. But I guess what I'm saying is your monthly recurring revenue is much greater than $15,000 per month. $600,000 divided by twelve months is much closer to [06:17] >> Yeah, that's right. Yeah, that's correct. [06:18] Yeah. And what does growth look like? [06:21] So exactly a year ago, where were you? [06:23] >> So a year ago, we had exactly one, basically what you'd call a design partner, development partner. [06:32] >> We're expecting to close probably two more pilots this year, and we expect to be somewhere below a million annual recurring revenue by the end of the year. [06:46] Well, you already are below a million, right? But do you think you'll break a million No, by the we won't break. [06:50] >> Just under it. [06:51] Okay, interesting. And so it's fair to say you've basically gone from nothing to $600,000 a year in the past twelve months. You weren't really doing much revenue at all a year ago. [06:58] >> Yeah, that's correct. [06:59] Interesting. Okay, how are you going to go from three customers to 15 customers? Where are you going to find them? [07:04] >> Well, you know, it's interesting. And again, it's partly because of the dynamics right now. Want at this point, we're getting phone calls. It's literally inbound stuff. Stuff's coming in. People all are saying, hey, we have a supply chain problem. Are you interested? We have really, really good media relationships and conference relationships. I do probably a keynote or a conference [07:32] >> presentation, one a week right now for virtual conferences. So we get a lot of inbound. And right now, that's where we're finding them. We've just brought on a full time VP of sales to basically take all those inbounds and turn them into sales or into real clients. And we also brought in a person dedicated to running pilots as well. So [07:57] >> that's great. [07:58] All in the near future or no? [08:00] >> Say that again. [08:01] Any plans to [08:02] raise capital in your future or no? [08:03] >> Absolutely. Yeah, we're probably going well, not probably we plan to do over the next month or two as one more seed round and then go for an A this spring. [08:14] And how much in the seed round right now? [08:17] >> You know, we'd like to do we've done these two five hundred ones. So we'd like to do, say, 1,500,000, something like that. You know, we've had this really good growth. So we'd like to do the same thing to the seed round. [08:29] And you last raised a $4,000,000 valuation. What would you like to raise the 1,500,000 at? [08:34] >> I would say we probably do a raise. I think a reasonable raise. And in fact, we had some term sheets land on our plate. Probably it'll be below 15. It'll be probably somewhere below 15. [08:48] But above what? [08:50] >> Definitely above 10. So somewhere between ten and fifteen. [08:54] Yeah. So let's say it's worst case 10. I mean, are you comfortable selling 15% equity? Obviously, that dilutes you a little bit, too. [08:59] >> Yeah. You know what? I mean, the important thing to me is making this company a success. I mean, we're just in the middle of crazy growth, not just me, but the whole marketplace. I mean, just the dynamics of the supply chain software bill of materials market is, you know, a year ago, nobody knew what a software bill of materials is. Now people are regulated to supply them to the US government. I mean, it's it's a crazy [09:25] >> market. So for us, it's probably more important even it's most important for me to keep this Us moving forward aggressively and bring on salespeople and bring on people to support, you know, incoming calls. [09:40] And Eric, so when you look at your equity today, how much do you own? [09:46] >> Can I park that one? [09:48] You can park it or give me a big range that you're comfortable with, if you don't want say specifically. [09:52] >> I own more than 50% and I own less than 80. [09:56] Okay, well, 50 to 80%. So you're, I mean, really a sole founder then, right? [10:00] >> Yes, that's correct. [10:01] Yeah, yeah, very cool. Got it. And so how did you recruit in? Whoever is the CEO, how did you recruit them in? Did you have to give them equity? [10:09] >> Yeah, I definitely gave them equity. [10:12] >> The way we set it up is we don't get paid a lot. We're, you know, both of us are basically driven by equity. He came from my board recommended by a long term board member who said, hey, here's a guy you just got free. He's a long term CEO. He actually came out as CEO at doing very, very good, successful [10:35] >> growth and acquisition plans for insurance companies, etcetera. So he really knows the acquisition of the growth. Actually, was a VC for a long time. So we just hit it off. I interviewed a pile of potential people. I thought, who would I like as a CEO? Look after the money, look after the fundraising and let me focus on making sure we have technology that rocks. [10:57] And Eric, if you own between 50 and 80%, who owns the other 20%? [11:01] >> So definitely, you know, all those previous seed rounds, it's safe, but they'll all get diluted out. Some early founders that we had that were involved and then just different investors. And, you know, I'm I'm talking about a diluted table when I so the CEO, board members, early investors, things like that. [11:24] How much do the early investors own, the ones that put in the two seats so far? [11:29] >> About 20%. [11:30] 20%. Got it. Got it. Got it. And when you say early founders, what do you mean by that? Do you have founders that you bought out or something? [11:35] >> Yeah, they went they got interested in other projects. And so they're early but silent founders. [11:41] They own less than 10% together? [11:43] >> Correct. [11:44] Interesting. Why not try to go buy them out so you get that equity back? [11:48] >> You know, I'm really letting Rod, our CEO, just sort of completely strategize on the cap table. That's been less of my focus now. And just sort of figure out like what is going to make it the nicest, cleanest cap table that is not going to get in our way. So we may do that. But at this point, that's not been his strategy. [12:10] Good stuff, Eric. Really fascinating. Let's wrap here with the famous five. Number one, what's your favorite book? [12:16] >> Number one book, you know, I think my favorite book was the Lincoln and the Bardo. I just thought that was a brilliant Lincoln in the way. I'm assuming you're talking about fiction here. Lincoln and the Bardo. I love that book. [12:33] I haven't heard that. I've looked that up. Number two, is there a CEO you're following or studying? [12:39] >> You know, [12:41] >> no, I don't think so. Not at this point. I mean, I've, Steve Mumford, I've watched very closely. But, you know, at this point, I'm not following anybody in particular. [12:53] Number three, what's your favorite online tool for building your business? [12:57] >> You know, I think the tool that I spend the most time with is probably HubSpot. That's the tool that we've kind of really drunk the Kool Aid and we've been using that a lot. [13:09] Number four, what how many hours of sleep are you getting every night? [13:12] >> How many hours of sleep? You know, I work on that. I try and get eight hours of sleep. I know that's I didn't do that in my last startup, and I don't think it was good for me. Rather I'd rather get to sleep. [13:26] What's your situation now? Married, single kids? [13:29] >> Married. And my wife really understands this. She was on the executive team and super active in my last startup. So she knows what the startup life is. And so how [13:39] many kids have any? [13:41] >> Three. I've got three kids, all grown. All have got their careers together. So it's pretty nice. [13:47] Eric, how old are you? [13:48] >> I'm sorry? [13:49] How old are you? [13:50] >> How old am I? Did you I'm 63. [13:54] 63. Take us home. Last question. What's something you wish you knew when you were 20? [13:59] Wow. [14:01] >> You know, [14:04] >> think two things I wish I knew. I wish I knew how fast time would go by. I never, ever thought that I'd be beyond this at 63, you know, that that much time would go by. And the second thing that I wish I knew at 60 at 20 was more of a balance. I think I burned myself out and didn't do my self a service back when I was 20. I think life balance actually matters. You [14:30] >> end up becoming a better CEO or CTO. [14:32] As adolus protects you from dangerous software and it's a good security blanket for your business. They launched in 2017, now doing about $50,000 a month in revenue or $600,000 a year, up from almost nothing a year ago. They've raised two rounds of funding, one in 2019 at a 3,000,000 valuation, another $650,000 about a year ago at a $4,000,000 valuation. Looking to raise 1,500,000 now between a 10,000,000 and $15,000,000 valuation. Team of 25 growing very, very fast, [14:57] which we love. Eric, thank you so much for taking us to the top. [15:00] >> Thank you very much. [15:03] One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday, 1PM [15:28] Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM Central. 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