How Cylynt CEO Chris Luijten grew Cylynt to $7.7M revenue and 100 customers in 2021.

hello everyone my guest today is ted morocco he is a co-founder and ceo of silent a cyber security firm that provides sas based anti-piracy license compliance and software monetization technology for the world's leading software companies before that he was co-founder of the eda company awr corporation which was acquired by national instruments in 2011. awr a leading high frequency analog design company has played an important role in the design of semiconductors used in locations all right ted you ready to take us to the top absolutely yeah let's get started nathan all right for folks that haven't heard of silence maybe they're not in the security space what do you guys do uh basically what we do is we we uh we started out addressing piracy so software piracy as i think everybody knows is a big deal um we're honest in a specific area of anti-piracy where we're not really concerned about music or consumer piracy but um companies that are that are using inappropriately software licenses for expensive uh applications so design tools so my background a lot was from semiconductors and semi the semiconductor industry was one of the industries that um i had a front row seat to a great deal of piracy you know with my previous company and we started this company me and my co-founder chris lauten uh we worked together on the piracy problems while i was at awr and when we sold the company i became really excited about you know taking everything that we had learned over the years of working together and starting another company a commercial venture to really help uh primarily on premise software vendors deal with piracy and since we've done that the company has evolved we're now working on usage analytics and we're we've expanded our perspective and we've rebranded as silent you know today as part of a broader vision to give on-premise companies on-premise software vendors the same kind of visibility that sas companies have where you can see who's using the technology are they properly licensed are they using all the features and the functionality in the tools and how can you use that um data to really generate more revenue so i'm not sure i'm following can you can you tell me well first off what year did you guys launch the company uh we launched it in 2014. okay 2014. and sorry when did when was awr required awr was acquired in 2011 and i stayed for three years during i was down there with you and frequently in austin uh with with national instruments during the transition and after we had transitioned the company um i left in 2014 and be became a co-founder with chris at uh what we were then called smart flow compliance solutions okay and what um what was the sale price back in 2013 for awr yeah um it wasn't disclosed i i i guess the public information there was an earn out it was a little complicated but i think the the publicly disclosed number was 57 and then there was like an earn out that was quite a bit more that brought the number up you know i i see and it looks like it was just it was just resold recently for like 160 million by cadence right correct yeah so cadence design systems bought it from from uh national instruments yeah for around 160 correct yep interesting okay cool so you then use that capital to seed silent in 2014 with your partner is that accurate correct yeah we chris and i chris is also a successful entrepreneur he has another company called itca with very strong cash flow i had you know kind of income or from the sale of awr so we bootstrapped the company for the first couple years we became profitable around 2018 and um you know the companies has no funding you know we're we're self self financed and and we're profitable and we love that how much did you guys pump into the company yourselves personally before you turn profitable in 2018 do you remember not yeah of course you remember i had to write those checks um we we put about uh probably in two to three million dollars into the company over over that period of time um but you know we were we were pretty close to break even early on and and we didn't invest that far ahead of the curve but um you know we we were we were always we were we were well run you know and and pretty fiscally conservative through the early years um and yeah i don't regret that at all you know we could have raised money at the time but you know the dilution in the strings that can come with the early funding it can be very dilutive to founders so i would advise against that if you have the financial wherewithal to not have to do that and help me understand today when companies are paying you for your technology what are they paying you per month on average um around around a thousand dollars per how many users the most companies yeah uh probably around uh 10 i would say on average and we have about you know we we have a couple with with close to 100 users so they kind of tip the scales a little bit but i would say we have about 1500 users that's great across how many companies are brands uh around um a hundred less than a hundred yeah okay so take me back to your first customer you sold and and what was the pitch then what did you sell them okay so um part of what really made this company possible was the completion of a um a legal case that i was involved in against a chinese telecom company that was stealing the awr technology and we won a very significant summary judgment against this company and it became very um um newsworthy so uh some of the other companies in the in the electronic design automation industry in the semiconductor industry noticed this and when i left the company i brought a lot of credibility because i kind of was involved in proving that you can protect it number one this kind of technology is being widely stolen and that there are technical means of protecting it and there are processes that you can put in place to protect your intellectual property so that allowed us to go talk to some of the large large players you know publicly traded companies uh billion dollar plus companies about what they could do about this and uh we were able to get some pretty marquee uh clients from the very start of the company all because of the press surrounding you successfully defending awr technology being stolen by the chinese i think it was a credibility i mean i think that a lot of a lot of people had this philosophy that there are people who will buy and there are people that will steal and never the twain shall meet and that there really was no way to kind of fill that gap between people who are stealing uh intellectual property and people who want to buy it and there is a huge amount of gray area between those two things this licensing of software is very complicated so there's inadvertent overuse there's blatant piracy and there's everything in between and the way that you you uh take advantage of the way you monetize this opportunity is you need good data and and that's really what what silence is all about is telemetry data to figure out how intellectual property is being used how how it's um maybe being abused or overused and over deployed and figuring out a way to amicably bring these clients in and get them to true up their licensing and to pay for what they're using and that was the other thing i think that was very deceptive is that a lot of clients kind of think that this is uh a hostile discussion or leads to litigation and that's the exception that's not the rule in most cases you know software companies want to use they want to pay for the intellectual property that's running their business and they want to be legally licensed so we show we show customers how you can do that how you can actually have pleasant meaningful significant conversations that lead to bigger contracts so ted let me try and repeat this back you so i and my audience clearly understand what you're selling i am a founder or a company at scale or a billion dollar fortune 500 company that sells some sort of physical on-prem device to companies let's say i sell to company y yeah company y i install the on-prem software they pay a license fee a servicing fee whatever and they say we're going to start with 10 seats so they're paying me a license fee for 10 seats but they don't even realize it but my technology takes off with their company and before you know it 60 seats are using the same on-prem software but they don't even know they should be paying me for the 50 extra licenses your technology will ping me and say hey you should be billing them for 50 extra licenses because we see there's more people using it yes yeah there are all kinds of ways that things get over deployed and you know for example but that's the use case is that the main use is that that is right that is the use case and okay and and the you know there's a tremendous you know this is why sas is so successful is because with sas you know what people are using and you know how much they should be paying with on-prem it's still the wild west of chaos where you might have channel partners who are selling um there's evaluation licenses that get over deployed and then cracked with key generators there's a million different ways that the that the horses get out of the barn and and and all of this replication and over installations that take place that are outside of the eula um and companies just don't know how to track it how to measure it and how to monetize it and and that's where we excel you know we know how to identify who's using it how to look at the licenses to tell a counterfeit license from a legal license from an over-deployed legal license or an educational understand being misused you...