Carbide Security Revenue & Funding (2024)

[00:00] Guys, 2007, he launched a tool for music festival to manage their events in Canada called Marcado. By 2014, he was counting customers like Bonnaroo and Coachella. Ultimately, grew it into $20.18 to $2,000,000 in ARR profitable, basically bootstrapped with 14 people, sold it for a five to 10 x multiple, and then got into carbide because he was frustrated with all the security protocols he had to do at his first company, Mercado. Now today, carbide has raised to [00:21] seed sorry, pre seed, a seed. Most recently, that seed was in 2021. They broke 500 k of ARR at that time raised 4,100,000. Today, over 2,000,000 in ARR targeting 3,000,000 by end of Q3 and 4,000,000 by the end of the year, already serving 190 customers, helping them do things like SOC two compliance, get expertise in the cyberspace, along with three very powerful feature sets and feature tiers. Hey, folks. My guest today is Darren Gallop. He's the [00:46] co founder and CEO of carbidesecure firm that provides businesses of all sizes with the tools they need to adopt a strong cybersecurity and privacy posture, enabling them to protect their data from cybercriminals, transform security from a potential liability to competitive advantage, and accelerate their growth. Darren, you ready to take us to the top? [01:04] >> I'm ready to do it. Let's go. [01:06] Alright. Let's rock and roll here. So first things first, can you give a story of maybe a customer that used you today and how they use you, their specific use case? [01:15] >> Yeah, I'd say the majority of our customers have pretty similar use cases. And usually what it is is they're selling a product, a lot of times it's a SaaS, a software as a service type product. They have some degree of confidential information. Maybe it's personal identifiable information, health care information, financial information, which are pretty common classes. And they're selling to government, they're selling to enterprise, and they're being required to comply with a variety of cybersecurity best [01:44] >> practices, standards, frameworks. They may need something like a SOC two audit or an ISO 27,001 audit. And more so nowadays, we're seeing on top of those requirements, they're getting requested to comply with various different data privacy regulations, things that are in Europe, like the big ones like Europe's GDPR, but also we're seeing a lot of these state based privacy acts coming up. And that's really what customers are using us for. They're coming in, they don't have [02:10] >> a sophisticated enterprise grade security program in their SMB, and they're using our platform and their resources within that platform to build and to manage that program and then effectively report that and demonstrate trust to their customers. [02:23] So just to be clear, mean, there's companies like Vanta, obviously, that help with SOC two compliancy. It's sort of easy, that's all they do. Is that what you guys are competing against, or are you sort of more vertically integrated SaaS? [02:33] >> No, I would say that we definitely do end up competing with Vanta in the SOC two example, where we generally focus our energy and where we have more success with customers is when their needs are more complex than just simply getting a very fast and dirty audit for SOC two, it's when they have more multi compliant environments, or they're just being they're they're being required to do more above and beyond, the simplicity of a SOC two, [03:01] >> for example. [03:02] Okay. And so with all that in mind, I sort of think of you as an enterprise version of Vanta based upon what you just said. What's the average customer paying you per month or per year to use your technology? [03:12] >> Yeah, it ranges anywhere from 7,500 to about $30,000 We do have an enterprise grade package that can climb north of that substantially, but we're still working primarily with SMBs. We have a lot of customers that are as small as twenty, thirty, 40 employees. I'd say the bulk of them are probably more like 100, 150, two fifty. That's where we see a lot more. But we have tons of smaller customers that just because of the nature and [03:38] >> complexity of what they're doing and the types of customers they have, they need something more complex. They need something more rounded in their in their security program. [03:46] What are the pricing axes that you're upselling against? Is it number you just mentioned FTEs. Is it feature based upselling or some utility based upsell? [03:53] >> There's a little bit of both. So there's definitely a feature. There's, like, three tiers when it comes to features. There's also a layer that we can put on top of our plans that provides expertise. So a heightened degree of expertise. I'm not talking about just standard customer success people, but having access to information security and data privacy expertise, running workshops, upskilling into your team, that is a premium feature. But yeah, we do have our tiers, they're [04:19] >> feature based. And then for our more larger businesses, we do have a per customer sort of buckets that that sort of get involved. We do our when we do deals with companies that are, say, four or 500, 600 employees, they're paying a little bit more because of the volume of people and and that are integrating with the and and interacting with the tool. [04:37] Didn't hear you say anything that was necessarily utility based upsell. I heard three feature buckets. They can pay for services in the form of experts, heightened expertise. And then lastly, you said three, four, 500 employees. So just to be clear, is there any numerical based upsell that is not a seat based? For example, number of API calls per month, number of reports done per quarter, anything like that? [04:58] >> Yeah. I mean, now that we're starting to launch a lot of stuff that's integrating with AI, there are some thresholds that are bucketed into those tiers right now. I expect there'll be some more stuff like what you're referring to as we launch more and more of our AI based features because there are sort of per quota token costs associated with that. So I would expect that we'll start rolling out more of that type of stuff as [05:22] >> we start rolling out more of our AI based features over the coming months. [05:27] Oh, what's going on there, YouTube? Good to see you guys. Now imagine this, you love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually, Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second. But you log in, you connect [05:50] your Stripe account, you see your valuation real time, you can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna [06:15] get a different valuation. A VC is gonna pay a different valuation, Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here. Right? So the teal is what a VC would pay. Yellow is what private equity and red is if you sold the whole thing outright. Now what's cool about this is this is [06:37] not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction 1,200,000 seed round 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired the valuation and the multiple. Maybe you're [07:02] going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. All right. We're gonna go back to the YouTube video here in a second. But [07:24] if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link, this link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back into [07:50] the interview. [07:52] Okay. And, Darren, give me more of the backstory here. What you did launch the company? [07:56] >> Yeah. It's just pretty fascinating. My my background is actually in music. I used to be a professional musician in my twenties, and then I started a record label. And then that, that kind of was a bit of a tough go in 2007. So I started my first SaaS company, which was a back end logistics management platform for music festivals and cultural events. And we started off with a lot of smaller towns sort of, you know, Canadian [08:18] >> events. And then eventually, we ended up working with some of the biggest music festivals in the world. So by 2014, 2015, we were the we were the back end tools for Bonnaroo, Coachella, Burning Man, Just For Laughs festival, x games, like, just a pile of really massive events in several different countries. [08:36] Working revenue on that music business, that music SaaS business? [08:40] >> Revenue at that biz we sold that business in 2018. It was it was just over 2,000,000 ARR. It's a pretty niche product. Right? Yeah. [08:48] Okay. So from 2007 to 2018, you grew up from 0 to 2,000,000 revenue, then you sold it in 2018. [08:54] >> Yeah, it was a profitable company at a little over $2,000,000 in ARR. Small team, like there's 14 people. We have like 300 events around the world that use some form of the platform and we sold that in 2018. And that was really what got me into security because we were finding that later in the life of that company, as we started working with more corporate owned events like, you know, properties owned by Disney and Live Nation [09:18] >> and AG Live and organizations like that, We were putting through we were starting to get put through pretty rigorous cybersecurity assessments, and then data privacy elements were starting to come about with things like GDPR and and whatnot. So, you know, that just became a really big focus of my energy in the last couple of years of that business, like keeping the company compliant and keeping the company trustworthy on that security front. So it kinda forced me [09:43] >> to get pretty knowledgeable about the topic. And and I ended up doing a doing a couple of courses, and it did a CISSP by the end certification, did a did a privacy certification as well. And just out of that journey, I started looking around and I'd be like, oh, man. This is gonna be like a big problem for a lot of companies. This is gonna be a really fascinating transition where, historically, people were kinda like make [10:05] >> things fast and break them, and there wasn't really a lot of sophistication around looking at startups from a security trust perspective. But that certainly really the the needle on that turned really quickly. [10:17] That company was called a Marcato, I believe. Correct? [10:20] >> That is correct. [10:21] Yeah. You move past this. You immediately go into a carbidesecure quick. [10:26] Almost the way you say it, it's like you want to move on so quickly. It makes me feel like you feel like it's a weak story it took you that long to 2,000,000 in ARR bootstrap, but I love the fact that it's a $2,000,000 bootstrapped profitable software company with 14 employees. I mean, is like the new American dream. It's just people don't celebrate that, so I want you to know I love that story. Think that's fantastic. [10:46] What else did you learn sort of, you're doing something very different now because you've raised a bunch of VC, right? So when you compare sort of what you're doing now versus the good old days of bootstrap profitable, no board, do what you want, how do you compare the two? [10:57] >> Yeah, I mean, if I were, I would there's pros and cons to both avenues. I think I like the bootstrapped approach. I mean, you could sell the company have a much smaller exit, but it could end up being just as big or just as good for yourself as like a much larger accident when you've got, you know, all kinds of different classes of pref shares and, you know, some some venture debt and, like, you know, all [11:23] >> this kind of stuff sort of piled on all before you and your common shareholder sort of category. Right? So, yeah, there's a lot of bullshit associated with with you know, you get a lot of people in your business and and, you know, you can't really predict. It's really hard to predict how how your your board members and your venture investors are gonna react to things both, you know, out there in the macro environment in your own [11:47] >> sort of within your business, but also in their own world, what's going on with their fund and stuff like that. So, you know, it's it becomes another thing to manage. Right? And, like, you know, to be I'm a big fan of focusing. Like, I like building product, solving problems, and talking to customers. So all the shit that you pile onto your business that's not that can be can be tough. Right? So it's extra. Right? So, you [12:09] >> know, I don't know. Like, what do I do what am I gonna do next after carbides? Yeah. I I I think I'd probably start off a little bit more to the roots of my last company in the in the very bootstrapped sort of position and then, you know, maybe maybe look at capital later on. Like, I'm always I'm always impressed. You you know, brought it up. It's a we don't celebrate that enough. Everyone just celebrates, oh, [12:31] >> some such and such raise $20,000,000. It's like, you know, now they just signed some big checks they have to figure out to cash in the next couple of years and a lot don't cash them. You know? So [12:40] I know a lot of I know a way more broke VC backed founders than I know broke bootstrap founders. Let's just put it that way. So so but moving to the carbides story in that launch, which I assume happened after 2018, can you close that story out for us? Was it public what you sold for? Can you give us a range? [12:56] >> No. It wasn't it wasn't public. It was it was it was confidential. It was private. It was true. It was a PE roll up company that bought another company, and then they they had some big PE money rolled into it, they rolled up eight companies, and there was some pretty strict terms around disclosure of of deal terms, you know, associated with that. But, it it was it was enough. [13:18] It was now almost six years ago or five years ago. [13:22] >> Yeah. That was '28 that was late twenty eighteen that that deal closed. I think it was October 2018. [13:27] You can't give a range. I mean, most private equity firms, look at Vista's last last couple of deals. I mean, you're you know, especially in 2018 when the market was maybe hotter than it is today. I mean, folks are paying sorta five on the low end, some for those folks, and then maybe, you know, ten, eleven, 12 x on the high end. Were you sort of in that same range? [13:42] >> Yeah. You got it. But that that that kinda game. Right? So, you know, it was a life changing. It was a successful exit. Everybody that put money in got money back and then some [13:51] How much money bootstrapped? [13:54] >> It's pretty bootstrapped, but we did we raised like some some, like some a little bit of money. We had a we had probably, you know, had a little bit of loans that we took, like some government grant money, some government funded loans, which is a really cool thing in Canada that you can get some fairly, nonintrusive, nondilutive capital put in your business. So, you know, all in all, we probably put about 1,000,000.5 into that business, you [14:18] >> know, over its over its time, but, you know, pretty bootstrapped. Let's go [14:22] over the carbide story. This is running short on time here. So you officially launched that company right away in 2019 or 2020? [14:28] >> Yeah. So we started working on it kind of while the acquisition was happening and then launched the product in 2019, you know, did a pre seed, then a seed, and, you know, we'll probably be doing a series a in [14:42] the near What year was the pre seed? [14:44] >> Pre seed was 2019, the year of the launch. [14:47] Okay. And what it's pretty standard there, 1 to 2,000,000 raise, something like that. [14:51] >> You got it. You got it. Yep. [14:53] Cool. And then you did and I guess why did you you just made a bunch of money. Why go out and sell 20% of your company on day one for for a million bucks? I assume you could have self funded. [15:04] >> Yeah. But, you know, I I also had other personal projects and other things I wanted to self fund. [15:09] Okay. I see. You know? [15:11] And then you move forward to do the seed round. When was that? [15:14] >> That was in 2021. [15:16] Okay. Okay, 2021. And what kind of traction did you need to show in that round to make sure it was a competitive round on terms that you liked about being super dilutive and a lot of negative backfill terms? [15:25] >> Yeah, I mean, we were shy of a 500,000 in ARR, know, I think what what helped us, though, was that the space was pretty hot. [15:34] Yeah. [15:36] Yeah. Yeah. I was sorry. I just got your events business mixed up with what your current gonna, like, on. And events in 2021 were were not hot, so you sold the other [15:43] >> Pretty glad pretty pretty stoked to get out when we got out, to say the least. Yeah. [15:47] So you did [15:48] it this season. How much was the seat for? 4.1. Okay. 4.1. [15:53] And then what was the thesis? When you [15:54] raised that money, you said, we wanna use this money for x. [15:57] >> Yeah. I mean, was really to double down on, you know, build out a sales team, bring in bring in a leadership team. Like, it was really just my co founder and I kinda spinning plates, building the business. So we wanted to bring in, you know, a leadership team, some some VPs to run the departments, sort of formalize the business, put a put some more energy behind sales and market, and and put some more energy behind building [16:17] >> out our product. Right? Because we were still [16:18] pretty released. What's the full time c sigh team size today then? [16:22] >> Yeah. 34 folks on the team right now. [16:25] Wow. And that's up from what in 2021 when we did that round? [16:29] >> I got about 16 or 17, probably, something like that. [16:33] Yeah. Alright. So you definitely you definitely made some hires there. So and so sorry. Pre seed seed, and you have not done a series a yet? [16:40] >> We have not done a series a. We are we're we're starting conversations right now, and hopefully, we'll, you know, be talking about term sheets in July. [16:49] Well, why now? I mean, many would say I mean, some people would hear this podcast and go, man, Darren must really need the money because no one is raising equity right now because the market is so compressed. Now would be the last time you'd wanna raise equity as a [17:01] >> Yeah. You know what happens when everybody thinks that there's a really bad time to do something? It can it can surprisingly be a really good time to do something. So, what I see out there, if you look at the venture market, there's a lot of companies, there's a lot of venture, there's a lot of dry powder, there's a lot of firms sitting on money. So when you have a company, there's a lot of companies that are [17:18] >> flat lining right now, they're really struggling to hit their targets. If you are, for us, for example, we're a 105% on target so far this year. So that's in a rough time. Now we've been somewhat conservative looking at the situation in the macro environment to to make [17:31] attainable targets. Conservative goals. Right. You know? But sometimes, [17:36] >> you know, investors are investment isn't always magic. Right? Like, it's a lot of, you know, it's it's a lot it's a lot of sort of, you know, looking at America's good opportunities. Like, right now, we're still closing a lot of new business month over month. We've got just different actions that are working, and we wanna put more velocity behind it because it's working. So I think the time to raise capital is when you have the ability [18:00] >> to spend money and know that it's gonna result in in revenue growth, then, you know, spending money makes sense. Now we might get shit terms and decide, you know what? Let's just keep boots let's just go more into boots. Let's stay in a more bootstrap mode. Like, at the end of the day, if we didn't do the series a, we're we've got road to break cash flow positive, you know, by by later in the year. [18:21] What about end of the year? [18:23] >> Okay. Get it. Yeah. It'd be, like, December, January, February, you know, in that range, we'd be we'd be crossing over into that sort of, you know, cash flow positive point. So that's an option. Right? So, you know, we're out there talking to people like, sure. We're we're not gonna take a shit deal. If we get a real if we get a reasonable deal and, you know, it's again, it comes down to, like, well, is are these [18:41] >> terms and is this solution? In the end, is it worth the value of growth trajectory transition that we can apply to the business by executing the capital. Right? [18:50] Darren, before we wrap up yeah. I totally understand what you're saying. That makes tons of sense. Where are you today, in terms of total customers actively using the platform? [18:59] >> Yeah. We got about a 190 customers on our platform right now. [19:02] One nine zero? [19:03] >> Yep. [19:04] Oh, that's great. Okay. Well, I mean, at that minimum at that minimum, ACV, told me earlier, I think you said $7,500. Will it be $1,500,000 of ARR, something north of that right now? [19:13] >> It's quite a bit north of that. Yeah. It's it's north of two. So it's, you know, we're we're we're we have eyesight on, on three in this quarter in this next quarter. So, you know, that growth has has been pretty [19:24] year going, thinking you can break 4 or 5,000,000 or no? [19:26] >> Be be be pretty much on the doorstep of four. [19:29] Okay. Okay. And you're on track to do that, you think? [19:32] >> You got it. Right now, we are. [19:34] That'll that'll be exciting if you do it. Now just to wrap us up here, you said, what would shit now that we know more than numbers, what would you consider shit terms? [19:42] >> Yeah. I mean, like, when you start seeing things like two x participating and stuff like that, I think those become you know? And I'm hearing stories of people being sent these two and three x participating sort of terms, which kinda remind me of the olden days before, you know, people was, you know, the court of invest the the company or founder friendly terms and standardization of terms started to to to materialize. You see some some terms [20:07] >> like that. So, yeah, they can be shift terms. Other shift terms could be like [20:11] influence dilution, though. That just treats that's how cash is treated at the end. I mean, when you think about dilution, say, it's obviously a function of valuation and money raised. Right? So what would you consider shift percent of dilution for the stage your company's at in your growth? [20:24] >> Yeah. I mean, I I think that that most good funds and good deals are still looking somewhere between 1218%, some maybe 20% ownership in a round of of the series a style round. So, you know, anything in that range is is, I I think, acceptable. [20:42] Yep. Yep. Very good. Well, that makes a ton of sense. We're rooting for you. [20:44] In the meantime, let's wrap up with [20:45] the famous five. Number one, your favorite book. [20:49] >> Oh, man. That's just the moving target all the time. I don't got one for you there. What am I reading now? I'm not really reading right now. I'm reading, like, a lot of, a lot of blogs and a lot of stuff like that and reading a lot of cyber standards because there's been a whole bunch of new regulations coming out just trying to, like, figure out how we're gonna you know, start to figure out where the [21:10] >> needle's going. Right? So, like, California's new privacy law, stuff like that. [21:14] Number two, is there a CEO you're following or studying? [21:19] >> No. [21:20] Number three, what's your favorite online tool for building the company? [21:24] >> My favorite online tool for building the company. [21:31] >> We use Asana a lot for for building out projects, planning. That's pretty Okay. Pretty important for us. [21:37] And number four, how many hours of sleep do get every night? [21:40] >> Between seven and nine. [21:42] And, Darren, what's your situation? Married, single, kids? [21:46] >> Married, no kids. [21:48] Zero kiddos, how old are you? [21:51] >> I am 48. [21:52] Last question, something you wish you knew back when you were 20. [21:56] >> Oh, god. I can make a whole podcast about that. [22:02] >> Thing I wish I knew when I was 20. Yeah. I mean, I probably wish I knew how important it was to focus more time on customers and less time on a lot of other things that could become distracting as you're building a business. [22:16] Guys, 2007, he launched a tool for music festival to manage their events in Canada called Mercado. By 2014, he was counting customers like Bonnaroo and Coachella, ultimately grew it into $20.18 to $2,000,000 in ARR profitable, basically bootstrapped with 14 people, sold it for a five to 10 x multiple, and then got into carbide because he was frustrated with all the security protocols he had to do at his first company, Mercado. Now today, carbide has raised to [22:37] seed sorry, pre seed a seed. Most recently, that seed was in 2021. They broke 500 k of ARR at that time raised 4,100,000. Today, over 2,000,000 in ARR targeting 3,000,000 by end of q three and 4,000,000 by the end of the year, already serving a 190 customers, helping them do things like SOC two compliance, get expertise in the cyberspace, along with three very powerful feature sets and feature tiers. Darren, thanks for taking us to the top. [23:00] >> Thanks for having me. [23:02] 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 one [23:27] pm Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM Central. 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