How Coro Went Channel-First to Sell Mid-Market Cybersecurity (SaaS Open 2024 Talk by Co-Founder Dror Liwer)

Introduction and Event Context

Nathan Latka

00:00Quick context. This was recorded March twenty eighth and twenty ninth. So a couple weeks ago at my live event, saasopen.com. We had a thousand software CEOs there. If you missed it, we hope to see at the next one, September fifth and sixth in New York City, saasopen.com. But for now, let's jump into the recording.

Dror Liwer

00:18>> He we hired him as our CRO. He looked at our plan, he said, you guys are nuts. We expect to end this year at around $100,000,000, and we're building a billion dollar ARR company.

Nathan Latka

00:33Hey, folks. If we haven't met yet, my name is Nathan Latka. I launched and sold my first software company back in 2015 and went on to write a book about it, which you guys made a Wall Street Journal bestseller purchasing over 30,000 copies. Thank you so much for that. After the book, I launched this show and one went on to create founderpath.com. I raised a large fund to do non dilutive deals with b to b software

00:59founders. So far, we've invested in over 400 software founders totaling a 150,000,000. Here in 2024, we're doing three to four new deals per week. So if you're looking for capital and don't wanna give up equity, go sign up at founderpath.com for free to get your offer. Alright. Let's jump into the interview. So first,

$100M Series D Announcement

Dror Liwer

01:20>> an announcement. So, if you were here during Nathan's session, he mentioned that I have a big announcement to make. And because the SaaS Open stage is where you break big news, I'm here to tell you that this morning at 6AM, we announced a $100,000,000 Series D round led by One Peak out of London. So

01:46>> I need you to do something for me. I'm going to speak to the camera. This is a shout out to One Peak. And David Klein and his team. Thank you for believing in us. Give it up for them. Thank

02:01>> you. So I am going to talk about something that is

Channel-First Strategy Overview

Dror Liwer

02:07>> a little unusual for most startup founders. And this is all about channel first strategy. How many of you have a channel program in place? Okay. How many you have a successful channel program in place? Cool. So very much a minority. So the entire storyline today is going to be about how we went from Okay growth to explosive growth by leveraging the channel.

Revenue Growth and Three-Year Trajectory

Dror Liwer

02:37>> So first of all, let's start with the session. So one, you can't skip direct. We'll talk about that. Not all channel partners are alike. And of course, the right channel is what we call a force multiplier. So this is the Coro revenue growth year over year. We've been growing 300% year over year for the last three years straight. This year, we expect anywhere between 200 to 300% growth over last year. Again, the numbers are becoming very

03:06>> large, so those leaps are becoming very difficult.

Coro's Mission in the Mid-Market Cybersecurity Space

Dror Liwer

03:11>> So we expect to end this year at around $100,000,000 and we're building a billion dollar ARR company in the cybersecurity space. I should have said Coro is the world's first and only modular cybersecurity platform that is targeting the mid market. So if you look at cybersecurity in general, the entire industry is either a focus. There's about 2,700 vendors. They're either focused on the enterprise market or they're focused on the consumer market. And really, what they're trying

03:42>> to do is they're trying to shove an enterprise product down a mid market company's throat or a consumer product down an SMB's throat. And we came to the table and we said, enough of that. We're going to build something that is unique to this market and target this market in a way nobody else has. So we've built a product from scratch it's a SaaS product that cover basically all aspects of cybersecurity that a mid market company

04:08>> might need. So as you can tell, in 2019, we had a very respectable zero revenue. And we've grown since then very aggressively, including during COVID, including during all kinds of conflicts and so forth and so on. So

Product Launch and All-in-One Offering

Dror Liwer

04:26>> when we launched the product, it was cybersecurity for SMBs. So we literally went into a dark room and built something that we thought they would need. So we built something for the first time that we called an all in one. So instead of buying multiple cybersecurity products, we made it very simple for them to consume it. It's one product that covers the user, the endpoint, the network, the cloud, the data, the email, everything in one system.

Direct Sales Model in 2020

Dror Liwer

04:58>> In 2020, we launched it aggressively into the market with a very much old school direct sales model. So we had a team that basically, out of Chicago, that cold called into organizations and sold them cybersecurity. And you have to understand that when you look at the small businesses or the mid market, the deal size is relatively small. So a cybersecurity company normally sells a deal size of anywhere between $700 to $1,500,000 We are a fraction of

Hiring a CRO and Shifting to Channel

Dror Liwer

05:32>> that. I'm talking to companies who are 200 employees, 500 employees, not 30,000. So we needed to figure out a really good way to scale this thing. And direct sales, while very important, didn't cut it. In comes in 2021, this fine gentleman, Jim Tarantino, he we hired him as our CRO. He looked at our plan, he said, you guys are nuts. You can't sell direct. You need to sell direct, but you also need to build an aggressive

06:02>> channel program, which means other people are going to sell your stuff.

06:08>> And, you know, I don't know how many cybersecurity people you know. We are a very suspicious bunch because that's our job. And the concept of relinquishing control and letting somebody else run with our product was a very difficult thing for us. Jim convinced us, and he brought this guy, Tom Turner, who's our, there's actually a thing called, channel chief. He's our channel chief. He's been doing it for twenty years. And he very meticulously started building a

Reimagining the Product as a Modular Platform

Dror Liwer

06:40>> very aggressive channel program at Coro. In addition to that, what we heard from the channel was that our all in one concept was really good, but very hard for them to sell. Because all of their customers basically already had some sort of cybersecurity, So our story of, oh, rip it out and put us instead was a little bit difficult. And in 2023, we reimagined our product as a modular cybersecurity platform. It's basically the same thing, but

07:11>> we allow customers and partners to consume it module by module. So if they want email security, they can just get email security. If they want endpoint security, great. They can just take that. And really, the entire approach with us and with our partners is a land and expand. So we go in selling endpoint security, and then we slowly try to displace everything else. And that's the training, and that's what we're doing. In 2024, we're making a

07:38>> massive investment in channel. This is how many of you have been to CPE in Las Vegas, Channel Partners Expo in Vegas? Incredible show. It's about 9,000 people that are all channel that are coming out there to basically do deals, find out what else they can sell. And I'll talk about what I mean by channel in a moment. So we had a massive booth there. We actually won best of booth in the show. And we brought in

08:06>> a very large team. And basically, it was a statement. We are here. We're serious about the channel. And this is what and the channel is very important to us. And we're here to build with you and support you.

Direct to Channel Mix Over Time

Dror Liwer

08:21>> So here's an interesting graph. This is our direct to channel mix. So we started with pure direct. 2022 was still very much direct. I'm sorry, 2020 direct. 2021, channel becoming a little bit more 20%. Right now, we are at about 70% channel. 2023, we ended at 70%. And in 2024, we expect it to be 85%. Now, why are we even keeping direct? If channel is so successful, why keep the direct? Two reasons. Direct is our way

09:01>> of testing the market with new products, new concepts. Our channel partners don't have an appetite for testing or adventures or new stuff. So when we came up with a modular cybersecurity platform, the first people to sell it into the market were our direct people to show that you can actually sell it. And then you go to the channel partners and say, you see this stuff actually sells. You can actually make money on this. So this is

09:28>> why in the previous slide, said you can't skip direct. You can't go all channel immediately. All the companies that sell predominantly through channel have a direct arm as well. Even Cisco, which I think is about 90% channel, has a direct team. And that's because you need to prove to the channel that this stuff works, and the only way you can prove it to them is if you can sell it. And you can't just expect them to

09:53>> sell it if you're you can sell it.

Channel Partner Count and Types

Dror Liwer

09:57>> So again, we grew our channel program very aggressively. We're at about 300. And actually, this is a little bit old. But we plan to be close to 1,000 channel partners by the end of this year. Now when I say partners and channel, what do I actually mean? So for us, there are three different types. There is a lead exchange channel. So for example, we have some companies that we work with that basically they throw leads our

10:24>> way and they get a commission. We close the deal. They don't do any of the actual selling. They do the introduction, and that is it. We have service providers, which are our largest channel. Those are MSPs, MSSPs, and so forth. These are people that already have a relationship with that mid market small business, and they're selling them normally IT services. So what have we done? We came to the table and told them, now you can sell

10:52>> security effectively, safely, and very profitably. You see, building that big stack that they had to do in the past and trying to sell it into the enterprise was easy, not easy, but doable, and they could make money on it. But selling that expensive stack to the mid market or small business was completely impossible. Definitely not something they could make money on. And then my favorite, and this is where you guys come in as well, is extensions.

11:18>> It's companies that can actually extend we can extend their service. They might be able to extend ours. I want to pause for a second and tell you an observation. Before coming here, I got about 20 LinkedIn emails from people in this show, in this conference, basically trying to sell me, which is fine. I believe that founders have three jobs, sell, corporate development, fundraising. That's that's that's what you need to do in life. Right? So selling is

11:50>> really, really good. But the thinking was, buy my service. Coro, why don't you draw? Come listen to what my service can do for you. And I think that's great, but that's missing a much, much larger opportunity. The opportunity is, how can we help each other? How can we gain access to each other's customer base and grow both our businesses exponentially as opposed to one deal at a time. So I want to give you a great example

12:17>> of that. But before, I want to show you a very ugly graph. See, the channel

Channel Partner Economics: The Month-Six Dip

Dror Liwer

12:24>> is expensive to maintain. And if you look at that, an average channel partner will start generating revenue about two months in and become profitable for you only five months in. So the expectation that a channel will become profitable immediately and you're going make money on them immediately is the wrong expectation. You need to know that you need to invest in the channel, and you see that there is an actual dip in month six. Anybody can guess

12:56>> what that dip is?

12:59>> It's the commissions you pay them. Right? They started selling seriously in month five. You need to outlay their commission, and there is they're barely making even for you, so that commission dips you. And it's a very painful check to write, especially if you're not a very profitable organization. But it's an important one. I always say to our the channels channel partners at CP, one of the guys said, oh, you're gonna have to get a truckload of

13:28>> cash to pay me my commission because I'm going to sell so much Coro. And I said, I'm not going to get a truckload. I'm going to drive the truck and bring it to you. Because I think that if they're successful and if I'm paying them a lot of commission, that means that they're making a lot of money for Coro. Okay. So I want to jump into what is a good channel partnership. What does a good channel

What Makes a Good Channel Partnership

Dror Liwer

13:50>> partnership look like? So it depends on the who, the what, and the why, or as I call it, audience, incentive, and reason. But the thing is, they're not separate. So the best channel partners that you're going to have are the ones that are in the center there of the Venn diagram. If you only have two of these three, it's not going to work. It's just not going to work. We've tried it numerous times. What do I

14:12>> mean by that? Audience. Audience means that they must be selling your channel partner or potential partner must be selling to your ICP. If they're not selling to your ICP, the likelihood that they're going to be successful is zero, not 2%.

14:30>> There has to be an incentive for them. And the incentive doesn't necessarily have to be money. I'll show you something very interesting in the next few slides. But there has to be a really clear incentive for them to go out and sell your stuff. And three, there has to be a reason. And the reason here is actually not theirs or yours. It's their end customers have to have a reason to buy whatever it is that you're

14:57>> selling through the channel partner. If all three don't exist, this is going to be what I call a paper partnership, a very nice contract that your legal team is going to file somewhere that's never going to generate revenue. So I want to give you a quick story. So

ComplyAuto Case Study

Dror Liwer

15:19>> wait. So yeah. Okay. So quick story. In 2003, the FTC, the Federal Trade Commission, established something called the safeguard rules. The safeguard rules were rules that defined what is the responsibility of a company from data protection perspective and cybersecurity perspective. Imagine 2003. And and and then they tried to push it through. They tried to push it through. Didn't become a reality. In 2021, the rules were amended and included a lot of cybersecurity things

15:59>> that were supposed to be enacted by December 2022. The rules were so harsh and people suddenly understood that, holy crap, the FTC is now going to go after me if I have any kind of financial dealings with anyone. So historically, the FTC and the federal government in general went after the big enterprise as far as rules are concerned and fines and so forth and so on. Suddenly, this rule said anyone with financial dealings that are electronic

16:35>> with anyone has to have a cybersecurity program in place to be compliant, or else they must cease to do that part of their business. So the people that got affected were private trainers, stores, people that you would never think about, and car dealerships. There are over 9,500 car dealerships in The US. They are the second largest originator of consumer loans in The US. And this rule basically said either comply or you can't offer loans to your

17:14>> customers anymore, which is a huge part of their business. Well, there is a cyber secure a company, a SaaS compliance company called ComplyAuto that was providing a compliance platform to car dealerships in The US. Of the 9,500, about 4,000 of them were on that platform. And then they said they came we've met each other. And they said, Okay, we sell them regular compliance, EIP and employee compliance and OSHA compliance and all the rest of the

17:46>> stuff in this platform. How can we now sell them cybersecurity compliance as well? We worked together. We created a joint offering, went to market, and virtually all of their 4,500 car dealerships are on our platform today. This was one of the fastest

18:09>> onboardings we've ever had with a partner. Why? One, remember what I said, audience. They're selling to my audience. I'm selling to mid market. Car dealerships are mid market. By the way, the car dealership that you're driving by and you see a car dealership on the road, it's normally part of a conglomerate of anywhere between five to 20 of them. So it's a mid market business. It's about 2,000 employees,

18:36>> and they have an inventory of anywhere between 20,000,000 to $50,000,000 So it's a real business. So one, the audience was spot on our audience. Two, they had a really good incentive to sell us because that would mean that they can generate brand new revenue and create stickiness with their customer base. And three, there was a reason. Their customers needed this because if they hadn't done this, they couldn't have offered loans to their customers, which is why

KPIs for Measuring Partner Programs

Dror Liwer

19:06>> also the onboarding was so, so quick in this realm. So just a couple of KPIs before I get off the stage. So how do you measure a partner program? One, how many partners do you have? What is their activation rate? Activation rate is basically the difference between paper contract and actual producing contract, where the partner actually produces revenue on your behalf. Activation rate varies dramatically depending on the industry. Partner retention, if they stick with you, that

19:42>> means that you are a good partner to them. And then partner engagement, how engaged are they with you, and year over year growth. That's for your partner program. How do you measure your partners? Because they need to know that you're measuring them as well because you're in a symbiotic relationship. And what we do, actually, we have financial incentives that are driven by those KPIs. So for example, how much revenue did they source? How much revenue did

20:07>> they influence? What's the number of active deals? And of course, the all in cost of acquisition. So we covered a really good story around a really successful partnership. I didn't have time to tell you about the unsuccessful partnerships, but grab me over lunch or for coffee and we'll talk about them because we had a lot of them as well. You learn through it. Get a lot of partnerships that there's one partnership that cost us millions of

20:40>> dollars and moved nothing. And then an example of ComplyAuto is a great example of a relationship with a SaaS company that is symbiotic. We offered them something they needed to offer their customers. Their customers needed it. We had a love fest. So I'd like to leave you with this. When you approach another SaaS company, us, for example, don't think about selling us on your software. Think about how can we leverage each other well beyond that

21:11>> one sale. Yeah. So if you sell us your SaaS, that's great. You get 300 people on your platform. But what if I told you that there is an opportunity for you to make 100x that if you build the right kind of relationship with other SaaS companies? And I actually think that SaaS companies are the most ripe for this kind of

21:34>> collaboration. So with that, any questions we have?

Audience Q&A: Going Channel, Resources and Commissions

Dror Liwer

22:01>> Yeah. Okay. So how did we make the decision? We felt we had no choice. And when you know, you hire a really senior guy into your executive team, you've got to let them do what they say they know how to do. And he came in and he looked at our plan and he said, you guys are nuts. We need to go channel. All four founders were very nervous. I can tell you that for sure because relinquishing

22:27>> control you know, we are cybersecurity people and we're Israeli. Relinquishing control is not part of our vocabulary. Right? So relinquishing control and and letting other people run with our destiny was really difficult. The second question, resources. So we do have a channel partner program on our site. There is some information there, but there is tons and tons of data about channel partnerships and programs. And there is an analyst firm called Canalys that focuses only on the

22:58>> channel. They're a little expensive, but their content is amazing.

Nathan Latka

23:04Anything else?

Dror Liwer

23:05>> Yes, sir. I can't hear you.

Nathan Latka

23:09I'm old. How do you think about commissions? I

Dror Liwer

23:15>> couldn't hear the question. I'm sorry. How do I?

23:23>> Ah, great question. How do I think about commission split and the duration? The only way this works is if your partner doesn't think you're out to get them. So I'll give you an example. Anybody here from Microsoft? Great. Microsoft screws their channel program partners. What do they do? They give them a nice 30% commission on the first year and a nice 5% commission on the second year when the customer renews. What does that create an incentive

23:53>> to the channel partner to do? Churn the customer. You know? Now Microsoft thinks, oh, who's gonna churn us or Microsoft? And they're somewhat right, unfortunately. Oh, I have the Oscar. So so my point is we not only continue to pay the same amount, we actually increase the amount depending on volume. If the if the partner generates more volume, we will actually give them better commission over time because our our objective is to make it as lucrative

24:27>> for them as possible so they sell much more of Coro and much less of anything else. I'm sorry. The music is on. Catch me later and ask me questions.

Nathan Latka

24:37Thanks very