How Redseal CEO Ray Rothrock grew Redseal to $51M revenue and 250 customers in 2020.

you're gonna love this interview just got done editing it i'm glad i got it live for you i'll be in the comments for the next 30 minutes hanging out answering any questions you have in fact leave a comment below about data points or what you think is going to happen to the company and i will respond to every comment additionally if you're just loving the content click the thumbs up and i will go and check out your profile as well and give your videos some love as well in the meantime enjoy the interview hello everyone my guest today is ray rothrock he joined red seal as ceo in february of 2014 it's a cyber risk modeling company prior to red seal he was a general partner at venrock one of red seals founding investors at venrock he invested in 53 companies including over a dozen in cyber security um he's on the board of checkpoint software technology and original event rocker investment and team eight both tel aviv-based companies all right ray you ready to take us to the top yes sir nathan let's go all right so let's first touch on red seal people that missed your first episode in terms of what you do and then i want to touch on the virus and how you're kind of remodeling things so what does the company do well we do a lot of things we primarily model the network uh and what i mean by that is we create a software model by which you can investigate how your network's been put together and what it's good at defending we do a calculation of vulnerability calculation or we can prioritize your vulnerabilities in a context of the network so there are really three big things we do visibility we identify all the assets that you need in that network which is believe it or not there's a lot of visibility software out there but it always misses something we always find it there's compliance obviously getting to be a bigger and bigger deal now than ever and then there's risk management and that's when we do the vulnerability in the network context and give you a prioritized list of what you need to fix and how to make it better and so our an enterprise space smb market uh mostly large enterprises with complex networks people that are migrating to the cloud people that have software defined networks and people have wired networks which believe it or not that's everybody's got one of those yep and about how many customers are you serving now today we have 250 customers okay a large port of our base is u.s government they represented about a hundred and those 250 we're in all the intel agencies all the military and most of the civilian side of the government so they're they're a huge part of our business interesting okay so how you know obviously you know about a month ago or two a month and a half ago now at this point covet hits the united states right and so you know a lot of sas seos are being impacted when you last came on the show back and i believe it was september of last year so a couple months ago you'd articulated you know 250 customers acvs in the 200 000 ish range so people can kind of back into your revenue your own private equity company so they probably can provide you some cushion but how are you thinking about the potential you know recession and virus specifically yeah well you know being a former vc uh having lived through this is my fourth uh sort of capital market crisis if you will regardless of how it got started uh one cannot take enough precaution there is no penalty to being extra careful so we have in fact uh even before this really became top level news starting in first part of march we started thinking about q2 we expect q2 to be down 20 25 we have asked our employees to take a reduction in pay which they have uh we are uh continuing supporting our existing customers and encouraging more expansion more face-to-face time uh and so uh we've tried to keep the level as we used to say in the vc business keep the bridge at the same height and lower the water so that the gap to get the ship through stays the same we'll see how that goes uh we haven't basically we have increased our safety buffer and our cash and balance sheet capabilities uh and our our investor has been very supportive they've not put another dollar in not necessary and we're going to get through it on our own so about two months ago pre-virus you obviously had projections on current cash in the bank and if we had no new revenue how many months of runway you have now post post virus how long have you extended your runway to uh we've we've uh given ourselves two quarters okay uh you know uh well without without revenue yeah it's about two quarters okay got it and so um walk me through like the communication during this time is critical for any sas seo with their team how did you have the conversation with your team to ask them right to basically be furloughed a reduction in pay well no furlough just reduction in payment okay part of my strategy was to keep everybody employed to keep everybody working on the problems to keep supporting our customer base that's really really essential so that we get through this time we'll will survive uh this time to thrive on the other side so yes frequent communication so twice a week uh one of my senior management teams puts out a memo i put out something on friday uh actually i switched to making video conferences which everyone just loved uh you know it's a little bit more personal you can see where i live and how i operate uh it's been been quite effective and that uh is really what it's all about you know transparency right now is going to be job one so uh telling everybody we expect a down draft asking you know sort of making them all part of the team let me give you can i just give you one little 30 second story so uh we're you know we have customers uh that have a lot of operations in india one very large corporate customer on the east coast the united states was doing an upgrade in india last night last night and it failed uh there was a problem and uh the phone rang at midnight and one of my tech support guys picked up the phone as he's supposed to and he did and he worked all night to get these guys up and up and running turned out our software was all good they had done a some sort of uh configuration problem on their end but it took him a while to sleep it out and make it happen that's the kind of dedication you need and it's a kind of commitment that my team has to keeping our customers up and running and as secure as possible in this environment and last night would have been april 2nd because we're recording this here on april 3rd yeah last day thank you exactly right literally i got up this morning and there was an email you know here's the case here's what happened and uh gary did a great job well so ray how many how many full-time members of the team are there today 150 uh on my payroll here in the united states canada and japan and uk but we have about 50 people also offshore in various uh organizations in india and vietnam how many 200 all in how many engineers uh here in the us about 53. what about total but 90 90. okay and how many quota carrying sales reps uh i have uh 16 commercial i have eight federal so what's that 16 and it's 24. yep so so here's my here's my question dude that memo you sent out last friday give us a little taste of i mean what did that exactly sound like like did did everyone take the same cut or do different roles take different cuts or well everybody took the same uh my goal was that we're gonna we're all gonna sacrifice a little bit in order to survive uh there are no special dispensations now you know if someone's got an issue they can bring it up and we'll deal with it but uh to my amazement interestingly one of the other people that was affected by this reduction her husband had just been laid off uh so the fact that we didn't lay her off you know she was ecstatic you know the the downside right now that the rumors and the rumors just people talking stuff there's a lot of bad news going on right now so so i figured what we you know keep people employed and keep my customers up and running you know those are two very wonderful outcomes what i mean can i ask you what cut on a percent basis did you ask everyone to take are we talking like 50 or 10 percent or uh it's it's more to the for i don't want to put the number specifically out there but it's more to the the latter not the former okay so more like 10-ish not like 50. yeah yeah yeah yeah for how long well we don't know so you just told them indefinitely until until further notice yeah until further notice interesting um so let me let me throw some other scenarios at you because i want to take advantage of your expertise being inside of other companies via your vc days some other ceos i've had on uh that are maybe around your skin maybe slightly smaller have done some other things so let me give you an example uh one of them basically took so their last vc round uh valued them at 100 million dollars they took two percent of the company or two percent of the unallocated options option pool for employees and basically said hey can we pay 30 of your salary instead of paying you cash award you stock so that when you come out on the other side of this everyone now is a part owner of the company because they took equity instead of stock do you like that approach i do like that approach...