Cygilant Revenue, Valuation & Funding (2017)

hello everyone my guest today is vajay bassani he's the serial entrepreneur with the track record of building successful businesses delivering enterprise class solutions before starting his current company sigilent he was he founded app iq an application storage resource management provider acquired by hewlett packard in october 2005 and web managed technologies a policy driven content delivery solution provider required by network appliance in august 2000. vijay are you ready to take us to the top that's correct yeah okay good so tell us about uh sigilant what do you guys do and what's your business model how do you make money sigin is in the business of helping companies of all sizes uh with cyber security specifically our motto is that every company respect to the size of the company deserves a enterprise class security program to protect themselves against never-ending cyber attacks as well as compliance mandates and what's the business model is it a pure place ass we are a sas security as a service provider okay and what's the average i mean are you talking enterprise or small business what's the average customer paying per month would you say we tend to focus on sub 500 employee company segment and the the average uh payment is anywhere from you know 25 000 to 50 000 per year per year okay got it so on the low side we'll say 25 000 annually which what does that come out to about 2 000 bucks a month and um walk me through more the back story here so you had some successful exits in your past why jump into the cyber security space and what year did you launch the company in so if you look at the cyber security space in the last 15 plus years we have seen the market evolve pretty rapidly um now i can't i tend to compare cyber security to something similar to the human medical field where the the new problems continue to come up every you know two three years and the old problems don't go away just like the way in humans now the new the old diseases continue to exist and the new diseases continue to be invented and uh while we discover new drugs the the old problems health problems continue to be prevalent out there similarly in the cyber security space in the last 15 years plus we have seen that the 15 year old problems don't go away they're still very effective and every not 12 to 24 months a new type of threat or new type of headache is invented or introduced into the market segment and new types of technologies are introduced and as a result we have seen in the last 15 years the securities staff sorry security stack uh continue to get uh more and more complex and in addition to that cyber security by its nature is a very complex area and to manage these technologies you need expertise uh somebody coming fresh out of school will not be able to uh do an effective job they need hands-on training so you like that because the better the barrier to entry is a bit higher barrier to entry is higher and also the challenge is extremely difficult uh the problem that we're trying to solve is very very difficult to solve so did app iq i mean did that touch cyber security like why were you uniquely positioned what did you learn already about cyber security prior to starting the company um actually you know when we started sigil and you know we used to be called eiq networks and what year was that by the way in 2001 we started the company uh initially we were in the in the firewall analysis and sim log management space and over time we realized that it is not just the technology that is going to solve the problem we need people processing technology to really effectively help solve these never-ending escalating cyber security threats for our customers and and in the last about four years ago we went and said no we need to provide an effective comprehensive complete solution to the market segment because majority attacks are beginning to take place in this segment with market segment and this market segment tends to have no few challenges one is they're always challenged with security budgets thereby destroyed to be small they tend to have no very very few number of security professionals on the staff you know in our survey we found out that 75 percent of this market segment customers tend to have uh two or less security professions on the team so if you are serious about security uh you need 24 7 vigilance in terms of understanding what is happening getting visibility into your environment and actively monitoring your environment to figure out what where the potential weak links are what are what is being exploited so vijay i think sorry i don't mean to cut you off but i want to get as much in as possible in the time that we have so i think i understand kind of where you're going and why it's important but for use i mean where was your brain at in 2001 when you launched this thing and also i i thought you said you sold app iq in 2005. so were you working on this company while you were still building app iq that is correct yes got it okay so so did you build sigilent because you needed that product at app iq and then you said wow actually a lot of people need this uh actually we we started i started two companies at the same time separately i and when we started sigilent at that time there was a need for firewall analysis uh and reporting and over time that evolved into security information event management log management uh space and in the last of as i said this space has evolved and the company has evolved and our strategy has evolved over time now when you sold in 2005 to hewlett packard i mean was that a meaningful financial event for you or was that like a soft landing kind of thing that was a very meaningful uh exit okay what was the exit was it public uh it was sold for about 280 million dollars 280 million and how big was the team when you sold it we were as a company over 100 people okay and what did your founding team look like was it just to you or i had two other co-founders got it and did you bootstrap that company or raise we raised a ton of vc money like more than 100 million about 30 plus million dollars about 30 million now what about on on this one on sigelent have you raised capital are you bootstrapping we initially we bootstrapped and then we raised uh our money to date we have raised total of 38 million dollars okay so you're very much a creature of pattern then huh that's correct all right and what are you at now today in terms of total customers on using the platform we have uh several hundred customers using this uh uh sigillin platform right now okay so can we say maybe between 300 and 600 is that fair that's correct yeah okay great and what are you doing to acquire these customers i mean you're in the mid market this is a very kind of popular space you have no before that's kind of in stew they're kind of playing below market lower price points and then you have very and then you have enterprise solutions above you charging you know a million per year so you are focused in the middle how are you acquiring these kinds of customers we are we use inside sales model so we have a pretty decent sized it's our sales team we have about 30 plus people oh wow and what's the total team size in total we have 170 people in the company 170 okay 30. so wow so about 20 of the team is inside sales great and they're following a typical playbook or have you altered the playbook at all yes we do we do have a typical inside sales uh playbook uh we also have a small number of channel partners okay does now if you look at kind of new revenue each month what percentage comes through channel partners versus direct via your channels i would say about twenty percent comes from the channel apartments person from uh exact sales okay and how do you how do you incentivize the channel partners are they taking thirty percent of acv or what we tend to give anywhere from ten to thirty percent of the ac you're a nice guy well no we we do care about our partners you know you cyber security guys you're supposed to be tough you're supposed to keep the bad guys out but you're giving away 30 so that's good you make your channel partners happy that's correct yeah all right now as you're building a company you're looking at scale talk to me about unit economics i mean what do you like to keep your payback period under we tend to our goal is to get it below 18 months okay what are you at now like 20 we are not closer to 20 plus okay 20 plus okay how do so are you able i mean that's much longer than what most people try and be at but are you able to kind of afford that because you've raised cash so you don't have a huge cash gap problem that's correct and also because of the problem that we're trying to solve we tend to have pretty good stickiness so our churn rate is very low how low uh is negative turn rate okay so net negative revenue churn net negative revenue churn so as a result now we we can uh confidently say that we will be profitable and we can make pretty decent amount of money over the top over the long run yeah when you take that churn number and you just do it i know this is a little bit unfair but you do it just on a logo basis annually what is churn on a logo basis gross annually on a dollar basis on the local basis we probably have you know anywhere from two to five percent turn rate annually on annual basis that's really still really good yes and the dollar return rate including the expansion and cross-sell it's uh we have negative children how negative uh we are averaging about three to five percent that's that's that's pretty good okay that's good and then um are you i mean are you losing a lot of dollars every month like how much do you have to make in terms of expansion to get that get back to even growth very small very small amount like less than five percent that's what i do well okay so that's really healthy now what are some of the levers you're pulling to drive up contract value year over year is it just number of seats or number of device covered or is it other feature you know aspects so for us at sigilant we want to be the most customer-centric company in the security space if you really look at it security by nature it's very difficult to deliver um we as a company have ingrained in our dna that we want to focus on customer centricity so now we are one of the first companies to publicly announce our net promoter score we put it on our website uh we have the best in nps and ces course in the industry we really focus on making our customers successful not just get a check box against a compliance regulation but all actually helping them detect issues provide them guidance on how to go about fixing them before they become an enterprise-wide problem and that has been helping us expand our seats in our customer uh over time and also increase the total amount of money they're paying us over time and considering these healthy economics you know very low churn super high mps score what do you assume lifetime value is of these customers we believe that it's going to be over five years over five years okay and i mean people can do the math right so at over five years and annual contracts you know over 25 grand you can assume you know on average what people are people are worth you know well over 125. easily yes yeah because that's the minimum that's good yeah and then backing back to your payback period you know 20 months there and people are paying about two grand a month you're just i want to make sure i got this right you're willing to spend about up to 40 grand to acquire these guys uh something around around that 450 grand uh is going to be our attack yep and that's a that's fully weighted including salaries of on-boarding and sales teams right that's correct yes do you do a lot of direct paid stuff or no um we do when you sit down at paid you're talking about uh advertisements that's right uh we don't really uh you know what we have done is we invest heavily in the seo side of the business uh we do you know pretty good amount of outbound uh calling and in terms of kind of growing the company how fast are you growing year over year we have been averaging over 100 growth rate for the last three years that's incredible that's incredible yeah i mean at a minimum if you got 300 customers paying at least two grand a pop per month which takes you to the 25 grand a year acv on minimum i mean you're well over the you're well over the you know eight million dollar ar run rate at this point right yes yeah have you bro well i won't push you more there but when do you what what year what year do you think if you keep doubling i mean what year do you think you'll break call like 50 million we expect to be cash flow positive uh sometime next year okay and uh i think from there maintaining the the profitability margin is very important for us it's not just the top-notch growth we believe that we can build this business into a 20-plus percent net margin business we have a pretty very healthy gross margin like above 85 now given that we have a human component involved with in in our service delivery it's not a pure software as a service rights we also have actually service component attached to it uh we are driving towards seventy plus percent gross gross margin okay that's that's still super healthy so i mean look if we assume we're doing somewhere around tennis right now you're doubling year over year i mean is it fair to say you think does 2020 look realistic for a 50 million ar correct yeah awesome we'll have vijay we'll have to have you back on we'll be glad to be up okay very good let's wrap up here with the famous five number one what was the last business book that you read um the the last business book uh is uh the uh michael porter's book it's a summary of michael gore's book understanding michael porter yeah that's a good one number two is there a ceo you're currently following or studying uh i love jeff bezos i've seen ever since i read the uh the everything store book i have started paying very close attention to how he runs the book and what he how he runs the company and what he focuses on that has been a very good model for us from a customer centricity perspective number three what's your favorite online tool um audible yes that's a good one lots of books and uh how many hours of sleep to eat every night i i sleep over eight hours that's good that's really healthy what's your situation married single you have kids i'm single single no kiddos yet with uh with a four-legged uh uh kiddo that counts that counts all right no kidding vijay how old are you i'm 51. 51. last question take us back 31 years what do you wish your 20 year old self knew i was in engineering college i just finished engineering college at the time uh getting ready to come to the us for my mba what do you wish my advice what would i advise i would do i would give um i would not do anything different than what i did nothing necessarily different it's not something you regret it's just something you wish you knew i wish i knew so i would say that having born in india i think if i had uh educated myself more about the us that probably would have helped me better um yep if i had to go back and think about it that would be one thing i would probably do differently there you guys have it from jay he would have learned and studied a little bit more about the us earlier on in his career he's had many successes his last company sold for well over 240 million bucks to uh hewlett packard at the same time that he launched that company actually also launched his current company uh sigilent which is focused on the cyber security space for the mid market with the annual contract values well north of 25 grand annually he has over 300 customers doing over 8 million a year in revenue almost doubling year over year for the past three years on track to continue doing that with super healthy unit economics five percent gross logo turn annually and negative five percent net negative revenue churn so healthy growth payback periods a little high but he can afford it because they've raised about uh 38 million bucks so they have some time there and the customers are very very sticky thank you so much for jay for taking us to the top thank you very much for your time