How SecurityScorecard CEO Aleksandr Yampolskiy grew SecurityScorecard to $144.3M revenue and 1.7K customers in 2024.

maybe you've seen one of their free reports or use them in a plg motion we're going to dive into the full growth story today potential IPO plans net dollar retention Revenue growth and more please help me welcome to the stage Alexander Yoli from security scorecard good to see man it's been way too long it's been way too long you remember that photo shoot from the the last time we were in your office that was fun I remember the photo shoot was a lot of fun and I think we hav played football you kicked my butt I know you just set me up you wanted me to tell you everyone you kicked my butt but that was great so we we interviewed you back in 2022 already so just the quick sort of sound bite and then we'll go back into the full story growing from 70 million bucks to 130 million bucks of Revenue did it come from adding new customers or was it expanding current accounts more both I knew pick one if it what came drove more growth so big Focus for us today is expanding new customers because what we do is we Pioneer the concept of how to quantify cyber risk we built a platform just like credit scores our security scores are used by over 2,800 customers worldwide nine of a top 10 Banks governments in 46 different countries insurance companies but the average deal size is about 30 to 40K okay right so a simple math is that if we help 10% of a customer base better operationalize a product and really adopt it to manage their third body's report to the board we're going to double our Revenue without acquiring a single customer so upsell and providing more value to existing customer base is a big Focus yeah well let's get into the backstory uh it's not going to be 20 minutes it's going to be over the eight minutes so we'll talk fast but talking about your focus on customer success and growth there your experimentation framework which is great based off a book we'll share the book in a second then we'll wrap up with what you view as a CEO's job and how you've capitalized the business as well so jumping into sort of customer focus uh just for people to understand what you do today help us understand where you're at how you got there you spend a minute on this sure well I was a chief security officer at Guild group and before that worked at companies like Goldman soch Oracle Microsoft and I saw a big big problem like a big epidemic that's only getting worse well interconnected to each other everything is moving to the Cloud yet you have absolutely no idea how secure your information is if you upload it to Dropbox or if you store code on GitHub or you send your paperwork to firm so we pioneered a way to measure and quantify risk from outside and we built a software the idea appeared in 2014 was in 2014 just a sketch in a napkin zero customers two people zero revenue and uh we created a new industry to measure and quantify risk all the way into today where 70% of the Fortune 100 uses us as a paying customer as a paying customer about 500 employees 70% of Fortune 100 going to probably finish this year between when 130 to 140 million ER did you personally code the original MVP I wrote the original MVP and my development team is still complaining about the code that I wrote and trying to eliminate it for the past 10 years so in hindsight I should not have written on the first code you won that war though it still works it's still there now this is what website looks like today just so you guys can all get your bearings on what they're offering again you maybe have seen their their reports floating around in terms of the plg bottoms up motion uh Revenue growth goes like this and you've gotten to this point using and you call it sort of your experimentation framework so let's spend about a minute and a half on this framework help us understand what we learn from these two tests look the big lesson in the past 10 years is that ideas we thought were good end up being bad and I and many ideas we thought were bad ended up being good right so on the right that's the big flop that I was proud of uh but I had this idea that we need to build a new functionality for insurance companies to look at concentrated risk if you have multiple companies storing your data how do you look for similarities if everybody is hosted on that so we took a 10 person team four months cost us millions of dollars to build a feature and then I didn't bother training the sales team I did not bother marketing did not add a single dollar of Revenue even though when I was starting this I was so sure it's going to be differentiator for us on the left one of our developers at the time uh that was back in 2016 who's now a founder and a CTO of his own company um he said you know what I'm going to code up a widget where somebody can go to your website put in a URL and I'm going to send you a report with your score like literally nobody asked him to do it he just did it on a weekend and that became one of a lead uh leading Legion uh mechanisms for us for multiple years where people wanted to find out the score how many people have downloaded that report all oh I mean there's over 880,000 companies who downloaded this report and so the point is most companies overvalue great ideas cheap quick experimentation always beats great ideas and that's the culture you want to build and a simple framework that we use that was actually uh it's a really boring horrible book but I'm going to summarize for you the whole idea over here should they buy the book and just read no just Google it and Mike shre is actually our advisor we've been working with them for a long time but here's the idea 5 by five by five take five people five days $5,000 if somebody tells you it's going to take me two months to build a feature I'm like okay how do you do it in five days they're going to give you Blank Stare and say it's impossible I'm like okay maybe you can marck it up maybe you can send it to 10 people see how many people download the report and either prove or disprove hypothesis but we really adopted this experimentation framework in every team technology product marketing sales because it really starts driving agility and um you know failure should be exciting if it's done in small increments and so this experimentation was quite crucial for us over the 10 years let's jump into part two CEO job and capitalization of the business so let's talk first on capitalization um obviously you have quite a funding story again we had the privilege of getting up and I actually took a snip here of the magazine it was great putting on the cover this magazine sold very well by the way so you have a second career if you ever want to go we'll flip to your story here and what you'll see when get to the feature story here on security scorecard of the point 71 million bucks a billion valuation and you told me had 200 million cash in the bank that was the fosb table where you kicked my butt we built your everything graph up there on the upper right talking about specific product launches and on the next page in the bottom right uh you were kind enough to talk to us a little bit about how you had the equity structured which again we we always publish those in the magazine a lot of good data in there I want to talk about that cap table right that pie chart a little bit uh because it's a theme right folks are thinking about how do they capitalize the business you did your first round in 2014 2 million on 6.2 post let me just ask you this looking back at the ceed all the way through the series D any regrets about how you structured any of these deals or the timing so the one thing that I really was careful and the previous speaker spoke about it make sure to nego like the valuation matters a lot less than all the other things you negotiate the 1X liquidation preference the control and the structure of the board very very important you know if you start agreeing to high evaluation because of some bells and whistles participating preferences and coupon mechanis Ms you kind of screwed especially in this environment so what I'm very proud of is that we never really took a crazy valuation we always made sure that we have good composition and control of the board to this day very very important so the board how many today five people seven three there should be more they about seven seven eight people on a board and it's a even split common and preferred is an even split along with Independence but make sure you retain board control that's very important otherwise you'll get fired as a Founder regardless of whether you're doing a good job or a bad job by the way if it's your baby you want to control the company right uh make sure you don't agree to any crazy kind of coupon participate in preferred structures and be careful who you partner with the best investors are not going to bother you they're not going to help you nobody's going to help you you're in by yourself no matter who promises what to you but the worst investors will actually give you better advice and and really create more headache for you so I'm quite proud that we man did a good job when you launched did you and your co-founder you split 5050 at the start or were you majority I was a majority shareholder okay because your idea yeah okay got it like significant like 60 70% and he was 30 802 8020 okay fair enough well then all this is going to be wrong all right because you didn't own 50%...