How Carbide Security CEO Darren Gallop grew Carbide Security to $3.2M revenue and 190 customers in 2024.

guys 2007 he launched a tool for music festival to manage their events in Canada called Marcato by 2014 he was counting customers like Bonnaroo and Coachella ultimately grew it into 2018 to 2 million bucks in aor profitable basically boots chapter of 14 people sold it for a five to ten X multiple and then got into carbide because he was frustrated with all the security protocols he had to do at his first company Marcato now today carbide has raised a seed sorry a pre-seed a seed most recently that seed was in 2021 they broke 500k of AR at that time raised 4.1 million today over 2 million in ARR targeting 3 million by end of Q3 and 4 million by the end of the year already serving 190 customers helping them do things like sock 2 compliance get expertise in the cyberspace along with three very powerful feature sets and featured tiers hey folks my guest today is Darren Gallup he's the co-founder and CEO of carbide a cyber security firm that provides businesses of all sizes with the tools they need to adopt a strong cyber security and privacy posture enabling them to protect their data from cyber criminals transform security from potential liability to competitive advantage and accelerate their growth Darren you ready to take it to the top I'm ready to do it let's go all right let's rock and roll here so first things first can you give a story of maybe a customer that uses you today and and how they use you their specific use case yeah I you know I'd say the majority of our customers have have pretty similar use cases and usually what it is is they're selling a product a lot of times it's the SAS software's a service type product they have some degree of confidential information maybe it's personally identifiable information Healthcare information financial information which are pretty common uh classes and um they're selling to government they're selling to Enterprise and they're being required to comply with a variety of cyber security best practices standards and Frameworks they may need uh something like a sock 2 audit or an ISO 27001 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 that's really what customers are using this for they're coming in they don't have a sophisticated Enterprise grade security program in their SMB and they're using our platform forum and their resources within that platform to build and to manage that program and then effectively report that and demonstrate trust to their customers so just to be clear I mean there's companies like vanta obviously that help with stock two compliances sort of easy but that's like all they do is that why you guys are competing against or are you sort of more more vertically integrated SAS now I would say that in you know we definitely do end up competing with vanta and the sock 2 example uh where we generally focus our energy and where we have more uh you know success with customers is when their their needs are more complex than just simply getting a very fast and dirty audit uh for sock two uh it's when they have more multi-compliant environments or they're just being they're being required to do more above and beyond uh the Simplicity of a sock 2 for example okay and so with all that in mind I sort of think of you as an Enterprise version of vanta based on what you just said what's the average customer paying you per month or per year to use your technology yeah it ranges anywhere from 7 500 to about thirty thousand dollars we do have an inter Enterprise grade package that can that can climb north of that substantially but we're still working primarily with snds like we have a lot of customers that are as small as 20 30 40 employees we have you know I'd say the bulk of them are probably more like 100 150 250 that's where we see a lot of a lot more but we have tons of smaller customers it's just because of the nature and 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 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 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 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 data privacy expertise running workshops some upskilling to your team that is a a premium feature but yeah it we do have our tiers that they're feature based and then for our more our larger businesses we do have a per customer sort of buckets um that that sort of get involved we do our when we do deals with companies that are say four or five hundred six hundred employees they're paying a little bit more because of the volume of people and that are integrating with the and interacting with the tools didn't hear you say anything that was necessarily utility based up so I heard three feature buckets they can pay for services in the form of experts heightened expertise and then lastly you said three four five hundred employees so just to be clear is there any numerical based upsell that is not a seed base for example number of API calls per month number of reports done per quarter anything like that yeah I mean now that we're starting to launch a lot of stuff that's integrating with with AI um there are some thresholds that are bucket 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 up more of that type of stuff as we start rolling out more of our AI based features over the coming months oh what's going on there YouTube good to see you guys now imagine this you love watching these interviews with SAS Founders but imagine if we took all of the valuation data out from over 2807 interviews I've done manually saves you a lot of time well we've done this we've built the into the beautiful interface inside of founder path check this out I'll show you how you can access this in a second but you log in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for evaluation this year now the secret evaluation is there's many different ways to value a SAS business so the reason you're going to see three or four different evaluations inside of your founder path dashboard this is all free by the way is because depending on who's 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professional musician in my 20s and then I started a record label and then that uh that kind of was a bit of a tough go in 2007 so I started my first SAS 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 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 2014 revenue on that music business that music SAS business uh Revenue at that business we saw that business in 2018 it was it was just over 2 millionaire um right yeah okay so from 2007 to 2018 you got from zero to two million revenue and then you sold it in 2018. yeah it was a profitable company to a little over two million dollars in an ARR a small team like there's 14 people uh we had like 300 events around the world they use some form of the platform and uh we sold that 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 property Zone by Disney and Live Nation and AEG live and organizations like that we were putting through we were starting to get put through pretty rigorous cyber security assessments and the data privacy elements were starting to come about with things like gdpr and and whatnot so um you know that just became a really big focus of my energy in the last couple years that business like keeping the company compliant and keeping the company trustworthy on that security front uh so it kind of forced me to get pretty knowledgeable about the topic and I ended up doing uh doing a couple of courses and it did a cissp by the end Certification did a did a privacy certification as well and just had that journey and started looking around and be like oh man this is going to be like a big problem for a lot of companies this is going to be a really fascinating transition where you know historically people were kind of like make things fast and break them and there wasn't really a lot of sophistication around looking at startups from a security uh trust perspective but that certainly really the you know the needle on that churn really quickly and that company was called Marcato I believe correct that is correct yeah move past this you immediately go into a carbide and cyber security like quick almost like you almost almost the way you say it's like you want to move on so quickly it makes me feel like you feel like it's a weak story that it took you that long to hit two million AR bootstrap but I love the fact that it's a two million dollar bootstrap profitable software company with 14 employees I mean that is like the new American Dream it's just people don't celebrate that so I want you to know I love that story I think that's fantastic um did you what else did you learn sort of you're doing something very different now because you've raised a bunch of AC right so when you compare for what you're doing now versus the good old days of bootstrap audible no board do what you want how do you compare the two yeah I mean if I were you know I I would there's pros and cons to both Avenues right um you know 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 prep shares and you know uh some some Venture debt and like you know all 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 associated with with you know you get a lot of people in your business and and you know you can't really predict um it's really hard to predict how how your your board members and your Venture investors are going to react to things both you know out there in the macro environment in your own 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 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 customers so all the that you pile onto your business that's not that can be it can be tough right so it's extra right so you know I don't know like what do I do now what am I going to do next after carbide yeah 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 some such and such raise 20 million dollars it's like well you know now they just signed some big checks they have to figure out how to cash in the next couple of years and a lot don't cash them you know so I know a lot of I know a way more broke VC back bounders than I know broke bootstrap Founders let's just put it that way um so so we'll move into the carbide 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 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 uh company that bought another company and then they they had some big PE money rolled into it and they rolled up eight companies and there was some pretty strict terms around disclosure of of deal terms um you know associated with that but uh it was it was enough it was now almost six years ago or five years ago yeah that was 28 that was late 2018 that that deal closed I think was October 2018. you can Arrangement most private Equity firms you look at Vistas last last couple of years I mean you know especially in 2018 hotter than it is today I mean folks are paying sort of five on the low end some frozen Spokes and then maybe you know 10 11 12x on the high end where you're sort of in that same range yeah you got it but that that kind of 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 um how much money bootstrapped it's pretty bootstrap but we did we raised like some some uh like some a little bit of money we had a we had probably you know I 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 you can get some fairly uh non-intrusive non-dilutive Capital put in your business so you know all in all we probably put about a million and a half into that business um you know over its over its time but uh you know pre-boost draft carbide story this was running short on time here so you officially launched that company in 20 right away in 2019 or 2020. yeah so we were you know started working on it kind of while the acquisition was happening um and then uh you know launched the product in 2019 um you know did a pre-seed then a seed and uh you know we'll probably be doing a series a uh in the near future precede was 2019 the year of the launch okay and what a great standard there one to two million raise something like that you got it you got it yeah cool and then you did uh and I guess why did you you just made a bunch of money why go out and sell 15 20 of your company on day one to for a million bucks I assume you could have self-funded yeah but you know I also had other personal projects and other things I wanted to self-fund okay I see you know and then you move forward to do the seed round one was that that was in 2021 okay 2021 and what kind of traction did you need to show sort of 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 yeah I mean we were we were we were shy of a half a million an error so uh you know I think what what helped us though is that the space was pretty hot yeah um yeah yeah I was sorry I just got your events business mixed up with what your credit organized and events in 2021 were not hot so you sold yeah pretty good it's pretty pretty stoked to get out when we got out to say the least yeah as much was the seed for 4.1 okay 4.1 and then what was the thesis when you raised that money you said we want to use this money for x yeah I mean it was really a double down on you know build out a sales team bringing bringing a leadership team like it was really just my co-founder and I kind of spit in plates building the business so we wanted to bring in you know a leadership team some some VPS to run departments sort of formalize the business um put a put some more energy behind sales America and and put some more energy behind build another product right because we were still pretty early with the full-time team size today then yeah 34 folks on the team right now wow and that's up from what in 2021 when you did that round I got about 16 or 17 probably something like that yeah all right definitely you've definitely made some hires there so uh and so sorry pre-seeds seed and you have not done a series a yet we have not done or series a we are uh we're starting conversations right now and hopefully we'll uh you know we'll be talking about term sheets in July why now 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 and that would be the last time you'd want to raise it 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 you know what 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 like there's a lot of companies that are flatlining right now they're really struggling to hit their targets so if you are like for us for example we're 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 conservative goals right um you know but sometimes you know investors are investment isn't always magic right like it's a lot of uh you know it's it's a lot it's a lot of sort of you know looking at America's good and opportunities like right now we're still closing a lot of new business month over month um we've got uh you know we've got just different actions that are that are working and we want to put more velocity behind it because it's working so you know I think the the time to raise capital is when you have the ability to spend money and know that it's going to result in in Revenue growth than uh you know spending Monday makes sense now we might get 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 you cash flow positive you know by by later in the year end of the year that would get it yeah I'd be like December January February you know in that range we'd be we'd be crossing over into that sort of uh you know uh cash flow positive point so that's an option right so you know we're out there talking to people like sure we're not going to take a deal if we get to really if we get a reasonable deal and you know it's again it comes down to like well are these terms and is the 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 Darren before we wrap up yeah I could understand what you're saying it makes tons of sense where are you today though in terms of total customers actively using a platform yeah we got about 190 customers on our platform right now 190. yep well that's great okay well I mean at that minimum at that minimum uh ACV you told me earlier I think you said 7 500 bucks what would be 1.5 million bucks of AR something north of that right now it's quite a bit north of that um yeah it's it's north of two so it's you know we're we're we're we have eyesight on uh on three in this quarter in this next quarter so uh you know that growth has been pretty years you can break four or five million or no be pretty much on the doorstep before okay okay and you're on track to do that you think you got it right now we are that'll be exciting if you do it now just to wrap us up here you said what would now that we know more than numbers what would you consider terms yeah I mean like when you start seeing things like 2x participating and stuff like that I think those become you know I I and I'm hearing stories of people being sent these two and three acts participating sort of terms which kind of remind me of the olden days before uh you know people of you know they're going to invest the the company or founder-friendly terms and standardization and of terms started to to materialize you see some some terms like that so yeah they can be terms uh other terms could be like influence solution no that just treats that's a patch is treated at the end I mean when you think about dilution today it's obviously a function of valuation and money raised right so what would you consider percent of dilution for the stage your company's at and your growth yeah I mean I I think that that most good funds and good deals are still looking somewhere between 12 and 18 some maybe 20 percent um ownership in a round of of a series a style rounds so you know anything in that range is is I think acceptable very good well that makes a ton of sense we're ruining for you in the meantime let's wrap up with the famous five number one your favorite book 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 uh a lot of our blogs and a lot of stuff like that and reading a lot of cyber 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 try to figure out where the needle's going right so like California's new Privacy Law stuff like that number two is there a CEO you're following or studying no number three what's your favorite online tool for building the company my favorite online tool for building the company um we use a sauna a lot for for building out projects planning that's pretty pretty important for us and number four how many hours of sleep do you get every night between seven and nine and Darren what's your situation married single kids married no kids zero kiddos and how old are you I am 48. last question something you wish you knew back when you were 20. oh God I can make a whole podcast about that um I think I wish I knew when I was 20. um yeah I mean I probably wish I knew uh 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 guys 2007 he launched a tool for music festival to manage their events in Canada called Marcato by 2014 he was counting customers like Bonnaroo and Coachella ultimately grew it into 2018 to 2 million bucks in aor profitable basically boost chapter of 14 people sold it for a five to ten X multiple and then got into carbide because he was frustrated with all the security protocols he had to do at his first company Marcato now today carbide has raised a seed sorry a pre-seed a seed most recently that seed was in 2021 they broke 500k of AR at that time raised 4.1 million today over 2 million in AR targeting 3 million by end of Q3 and 4 million by the end of the year already serving 190 customers helping them do things like sock 2 compliance get expertise in the cyberspace along with three very powerful feature sets and featured tiers Darren thanks for taking us to the top thanks for having me one more thing before you go we have a brand new show every Thursday at 1pm 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 our poo CAC LTV you name it they share it and the buyers try and make a deal live it is fun to watch every Thursday 1 p.m Central additionally remember these recorded founder interviews go live we release them here on YouTube every day at 2PM Central to make sure you don't miss any of that make sure you click the Subscribe button below here on YouTube their 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