aDolus Revenue, Valuation & Funding (2024)

you folks my guest today is eric byers he's a leading expert in the ics ot and supply chain security industry he invented the tofino firewall the world's most widely deployed ics security appliance eric is now cto of adolescence inc a sas company focusing on the production of software supply chain in critical infrastructures eric are you ready to take the top yep absolutely okay so what does that mean like to talk to me about like a recent threat that you guys found and you protected the company from so um you know they're not threats that we find um necessarily so um take for example the whole solar winds problem we didn't find solar winds nobody uh you know nobody has a silver bullet to solve uh a problem like solar winds but what we've seen in our customer base and we've heard in uh um government disclosure system companies don't even know if they run solarwinds um and so what we're really good is finding out what software you have uh through uh second party third party fourth party fifth party where's where's your software coming from and trying to unravel that mess called the software supply chain interesting okay and so what are people paying you from an hour to use this sorry say that again what do your customers pay you per month on average to use this technology um you know it depends on you know we have big customers and little customers um customers will pay um as little as five thousand a month um some of they're paying oh probably north of about 40 000 a month is that your biggest customer about a 500 000 year contract yes that's correct wow very cool put this on a timeline for me when did you guys launch um we with the company started in 2017 um we actually launched product in 2019. how did you fund yourself while you were pre-revenue um we got u.s department of homeland security um so 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 um basically a safe round uh that raised about another 1.2 million what year was that uh won in 2019 and one just last year uh at the start of coven and so what was the amount there in 2019 uh in 2019 we raised about 650 somewhere around there we were looking for 500 and got 650 so we're pretty happy congrats yeah that's exciting and and uh i guess that's where your pre-seat round what valuation did you raise that up uh it was uh basically raised around four i think it was four million you know that was a fair number four million i think i think it was a bargain actually uh you know um but you know i didn't have a crystal ball to know that uh um president biden would be releasing uh executive orders about supply chain i didn't know that solar winds was going to happen so it was yeah it was a it was absolute bargain but with the information available i think it was a fair number and then you raised a little bit more last year how much oh no that was the last year that was the that was the one last year uh 650th when was the other round uh the other round was 2019 which is just over 500. okay got it and what was that race at uh that was raised at 3 million oh okay got it so it's a nice little increase there on evaluation um talk to me about where you're at today in terms of team size how many folks um so i think we have 19 people maybe 20 i guess maybe we have 20 on monday um uh so yeah we've we've been growing our team pretty aggressively we've been bringing somebody in just about every month for the last uh eight months okay and how many do you think you'll be at by the end of the year um i'm pretty sure we'll probably add another five or six by the end of the year so total would be what 25 35 20 25 people total yeah folks are engineers um okay there's probably engineers developers and data scientists probably account for of the current 20 people probably 14. okay and give 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 what's the activation on the onboarding look like so it's we're an enterprise play um so 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 um and then from there we'll do a pilot we'll set up basically what we call a prototype portal and they can try using the package to analyze what software you know to analyze some sample software packages and then we'll roll that into either uh an api contract if they just want to make api calls or if they want to use the web portal um basically that's the role that's the way it rolls and eric how many customers today uh right now we don't have a lot of customers we've got three primary customers and about six large pilots running right now okay so three times five grand a month you're doing about fifteen thousand dollars a month in revenue a little less because we got some little ones so uh right now we're doing um let's see what is it well i can tell you annual revenue that's easier uh we're doing a little uh less than six hundred thousand a year large contracts uh i tend to think annual because um what we found is our large contracts are you know our contracts include people like honeywell and caterpillar uh they hate for some reason i don't understand why they hate monthly contracts they always drive us to an annual contract so just be clear though if i take six hundred thousand divided by three customers they're paying you way more on average than five grand a month you've got that one big one at 500 grand a month and then it sounds like two others that make up the other 100 is that right uh no it's a little more divided than that um i'd actually have to um i mean you're talking to the cto so i'd have to go and talk to uh the cash guys but i think it's probably um about half with one client and then the rest are sort of divided out i see but i guess what i'm saying is your month your current revenue is much greater than fifteen thousand dollars per month six hundred thousand divided by twelve months is much closer to fifty yeah that's right yeah that's correct yeah and what does growth look like so exactly a year ago where were you uh so a year ago we had exactly uh one um basically what you'd call a design partner development partner um we're expecting to close probably two more pilots this year um and we expect to be somewhere uh below a million um annual recurring revenue uh by the end of the year well you already are below a million right but do you think you'll break a million no we won't break just just under it okay interesting and so it's fair to say you've basically gone from nothing to 600 a year in the past 12 months you weren't really doing much revenue at all a year ago yeah that's correct interesting okay how are you going to go from three customers to 15 customers where are you going to find them well you know it's interesting and again it's partly because of the dynamics right now we we want to at this point we're uh getting phone calls it's literally inbound uh stuff stuff's coming in people 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 keynote or a concert conference ah conference presentation um one a week right now uh for virtual conferences so we get a lot of inbound um and right now that's where we're finding them we've just brought on a full-time vp of sales um to basically take all those inbounds and turn them into sales or into into real clients and we also brought in a person um dedicated to running pilots as well so in the near future or no say that again any plans to raise capital in your future or no absolutely yeah we're uh probably going to well not probably we plan to do uh over the next month or two uh uh on one more seed round and then go for an a uh this spring and how much in the seed round right now um you know we'd like to do we've done these two 500 once so we'd like to do say uh 1.5 something like that we you know we had this really good growth so we'd like to do the same thing to this round and you your last raise was a four million dollar valuation what would you like to raise the 1.5 million at um 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 um it's probably um it'll be below 15 it'll be probably yeah somewhere below 15. but above what uh definitely above 10. so somewhere between 10 and 15. yep 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 yeah you know what i mean the important thing to me is is um making this company a success i mean we're just in the middle of crazy growth uh 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 market so for us um it's probably more important even it's most important for me to keep this this us moving forward aggressively and bring on sales people and bring on uh people to support you know incoming calls and eric's when you look at your equity today how much do you own uh can i park that one you can park it or give me a big range that you're comfortable with if you don't say specifically um i own more than 50 percent and i only less than 80. okay well 50 to 80 so you're i mean really a sole founder then right yes that's correct yeah yeah very cool um got it and so so how did you recruit in whoever is the ceo how did you recruit them and did you have to give them equity yeah um definitely gave them equity um i you know the way we set it up is we don't get paid a lot we you know both of us are basically driven by equity um he came from my board uh recommended by a long-term board member who said hey here's a guy he just got free um he's a long-term ceo he actually came out of the ceo at doing very very good successful growth and uh and acquisition plans for insurance companies et cetera so he really knows the acquisition of the growth and actually he was a vc for a long time so i we just hit it off i interviewed a pile of potential people i thought who would i like as a ceo uh look after the money look after the fundraising uh and let me focus on making sure we have technology that rocks and eric if you own between 50 and 80 who owns the other 20 so uh definitely um you know all those previous seed rounds it's a safe but they'll i'll get diluted out um some early founders uh that we had that um were involved and then um just uh different investors and uh you know i'm i'm talking about a diluted table when i so the ceo uh board members um early investors things like that how much do the early investors own the ones that put in the two seeds so far uh about twenty percent twenty percent 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 yeah they went they got interested in other projects and so they're uh early but silent founders they own less than 10 together right interesting why not try to go buy them out so you get that equity back you know i'm really letting rod our ceo uh just sort of uh uh completely strategize on the cap table that's been less of my focus uh now um 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 good stuff eric really fascinating let's wrap here with the famous five number one what's your favorite book um number one book um you know i i think my fame favorite book was the um lincoln and the bardo i just thought that was a brilliant um link i'm assuming you're talking about uh fiction here uh lincoln and the bardo i love that book i haven't heard of that i'll look that up number two is there a ceo you're following you're studying um you know uh no i don't think so not at this point i mean i i've uh steve mumford i've watched very closely uh but you know at this point i'm not following anybody's in particular number three what's your favorite online tool for building your business you know i think the tool that i spend the most time with um is probably hubspot that's the tool that we've we've kind of really drunk the kool-aid and you've been using that a lot number four what how many hours of sleep are you getting every night how many hours of sleep you know um 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 um and i don't think it was good for me i'd rather i'd rather get to sleep what's your situation now married single kids uh married um and my wife really understands this she was um on the executive team and super active in my last startup so she knows what the startup life is and so how many kids have done uh three i've got three kids all grown all all have got their careers together so it's pretty nice hey eric how are you i'm sorry how old are you how old am i did you say um i'm 63 63 take us home last question what's something you wish you knew when you were 20 wow you know i i i think two things i wish i knew i wish i knew how fast time would go by i never ever thought that uh 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 about balance um i think i burned myself out and didn't do my self-a service back when i was 20. um i think life balance actually matters you end up becoming a better ceo or cto guys atos protects you from you know dangerous software uh and it's a good good security blanket for your business they launched in 2017 now doing about 50 000 a month in revenue or 600 grand a year up for almost nothing a year ago they raised two rounds of funding one in 2019 at a three million valuation another 650 000 bucks about a year about a four million dollar evaluation looking to raise 1.5 million now between a 10 and 15 million valuation team at 25 growing very very fast we love eric thank you so much for taking us to the top thank you very much one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas 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 central additionally remember these recorded founder interviews 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