Dean Sysman: Betting on a boring problem and scaling Axonius past $100M ARR
Download MP3Welcome to Inside the Network. I'm Sid Trivedi
Ross Haleliuk:I am Ross Haleliuk.
Mahendra Ramsinghani:And I am Mahendra Ramsinghani. We have spent decades building, investing, and researching cybersecurity companies.
Sid Trivedi:On this podcast, we invite you to join us inside the network where we bring the best founders, operators, and investors building the future of cyber.
Ross Haleliuk:We will talk about the hard parts of the founder journey, launching companies, getting to product market fit, raising capital, and scaling to an exit.
Mahendra Ramsinghani:And, yes, we will also be talking about epic failures.
Sid Trivedi:But, Mahendra, we're here to make the founder journey easier.
Mahendra Ramsinghani:That is correct, Sid. But we cannot make it too much easier because startups are hard, and, of course, you already knew that. Alright, YouTube. Enough. Let's get started with this week's episode.
Mahendra Ramsinghani:Guest today is Dean Sysman, cofounder and CEO of Axonius. He brings a contrarian message. Do not start a company unless unless you absolutely have no other choice. Tempered by the failure of his first startup, Dean has a good reason to issue that fair warning. His first startup, Cemetria, was a deception security company that went through the ups and downs.
Mahendra Ramsinghani:They got accepted by Y Combinator, which was a high point, but then they struggled in the noise of a hype driven market. They could not raise additional capital and eventually had to shut the company down. But that failure did not break Dean. Knowing what he now knew, having seen this battlefield of startups, he absolutely had no other choice but to start again. Now this time around, Dean two point o is a bit more savvy, a bit more mature, and a lot more strategic.
Mahendra Ramsinghani:His company, Axonius, crossed 100,000,000 in ARR in just under five years, has raised over half $1,000,000,000, and has valued over 2 and a half billion dollars. Dean Spap has been unconventional from the start. Teaching himself to code at a very young age of 12, winning an international robotics competition at 15, and at 21, leading a team in Israel's elite unit 8,200. In our episode today, Dean shares what those high stakes environments taught him. Responsibility, resilience, and why startups should be your last resort.
Mahendra Ramsinghani:We dive into the lessons behind his first failure and how that helped him to create a new category, cyber asset management, and his recent 200,000,000 capital raise to fuel his growth by acquisitions. From a military cyber ops leader to building a unicorn, Dean's story is a reminder that in this world of startups, failure can slow you down, but it cannot stop you. Dean shows us that you can turn that failure into a gift, and you too can use your skills and tenacity to make our digital world a much safer and a better place. Let's get started.
Sid Trivedi:Dean, welcome to Inside the Network.
Dean Sysman:Thank you. Thanks for having me.
Sid Trivedi:I've heard you were a really bright kid growing up in Israel. You taught yourself to code at 12, and you won an international robotics competition at 15. What sparked your passion for computers and cyber as a kid, and how did those formative experiences really shape that that trajectory of being a founder?
Dean Sysman:Yeah. I think it's just my lack of success with people that drove me to my love of technology and computers specifically that when I started to play video games as a young kid, it was so fun for me. I wanted to create my own game. And then when I learned about programming, that made it even more interesting because instead of just playing a game with fools you're trying to win, you can actually create the rules and create your own world, and that made it, like, a big passion for me. And then when I got the opportunity to be in the robotics competition, when we won the gold medal, we got back to Israel.
Dean Sysman:Like, we got our fifteen seconds of fame. Right? We're in, like, morning shows and newspapers and whatever. And I suddenly realized, wow. This isn't just something that's fun for me.
Dean Sysman:I can actually create impact on other people by this work that I'm doing. So that was sort of how I got down the path of understanding the meaning and the fulfillment of doing very interesting things with computers.
Sid Trivedi:And was cyber ever a, you know, topic that that was interesting in those early years, or did you ever consider, you know, hacking and trying to get some of these games for free?
Dean Sysman:Yeah. So funny enough, I never had a way of getting into hacking or cybersecurity. And, actually, my biggest topic, it's which is ironic today, that I really loved was when I did my bachelor's degree before the army. The biggest topic that I love was actually AI or machine learning. That's what I did my bachelor's degree and course in and my research seminar.
Dean Sysman:But then when, obviously, I got into the army without talking about what I did there because I can't, it's pretty obvious that I have a lot of cybersecurity experience. And I was fascinated by the story of hackers as a kid, but I was never able to really learn anything. I did, like, try and read, you know, the 2,600 magazine and Freck and all those kinds of things. But, honestly, I just was never really able to understand it well enough to start to practice it.
Ross Haleliuk:Very interesting, Dean. I've written extensively about the IDF and its elite unit eighty two hundred and the impact this unit has had on the cybersecurity innovation and the startup ecosystem globally. You were leading a team at the Unit eighty two hundred by the age of 21. What did that intense experience teach you? What did you learn that has later on informed how you build companies, how you navigate situations as a leader, and, ultimately, how you operate as an executive of a of a security company.
Dean Sysman:Yeah. So I got into the army when I was 19. I'd already finished my bachelor's degree. I already knew how to program pretty well. And I had never really had any person around me my age that that was as deep into computers as I am.
Dean Sysman:And then I got into the army, into this very special secretive course that was part of the intelligence community around cybersecurity, and I was with these 30 other kids, same age as me. And once I got to know them, I was, holy, you know, holy shit. These guys are way smarter than me. Like, I am one of probably the least knowledgeable people here about programming or or networking or cybersecurity or OS internals or all that kind of stuff. And as the course progressed, I just realized how much the bar could be higher.
Dean Sysman:And that's one of the things that makes Unit eighty two hundred so special. They can pick whoever they want out of the age group that gets into the into the age of getting drafted into the army. But the other aspect that I think people don't talk about enough is as soon as I finished the course and I got assigned to the section I'm in, they put me into a team. They said, hey, Dean. This team is working on this project.
Dean Sysman:Now this project had a technical angle, but it was part of this, you know, country level, national level intelligence project or requirement that this technical need tied to that, you know, intelligence project or intelligence need. And they told us, look. It's your team that's working on it. If you guys fail, then the whole intelligence goal is not gonna be met because it's, you know, it's part of the requirements chain of it working, and there's nobody else. Right?
Dean Sysman:It's like, we were five guys. You're it. That's it. And you sort of realize, wow. My family back home don't know anything about what I do, but they're depending on me to help make sure that they're safe.
Dean Sysman:And, you know, some people, like, at that age might not be able to embrace that level of responsibility, and that's completely understandable. But if you can embrace the level of responsibility, you realize, woah. I have five years now in the army. The people who do my concourse and and, you know, our officers, and end up doing a service of five years at least. And you're like, I can dedicate myself during these five years.
Dean Sysman:And, one, I will be able to do things that I'm very proud of for my country and and for my family and the people I know. But secondly, I'll benefit from this professionally in a in an immense way because I'm gonna be working alongside people who are way, way smarter and deeper in technical knowledge than I am in a very competitive way. All I have to do is to go all in. Right? I have to seriously immerse myself.
Dean Sysman:And, you know, I I would be, you know, doing all nighters just to try and be able to succeed in what we're doing at any point in time. In those five years, I really dedicated everything I could to trying to be successful. And me and my two cofounders and Axonius to, you know, to in the future, we did some amazing things together. I don't think I'll ever, as as an IC, will do things that are more meaningful than what I did there. And and, you know, the three of us, we got a lot of different awards for it, even the highest commendation you can get for noncombat activity.
Dean Sysman:And I'm insanely proud of everything we've done there in a very different way than, you know, our success in the private sector.
Ross Haleliuk:Dean, we had Tomer, the CEO and and founder of SentinelOne, at the show talking about some of his perspectives about the, Unit 8200 as an outsider, as some not go to the unit. And I'm curious, from your perspective, there is a lot of talk. Like, almost everyone in in the cybersecurity space or probably everyone in the cybersecurity space knows about the unit's existence. They know that they do something very, very deep and interesting about cyber. What is it in your view that people don't fully understand or don't fully get about the unit and the reasons why it is so powerful in producing and then raising that next generation of cybersecurity founders?
Ross Haleliuk:Like, what is something nonobvious in your view?
Dean Sysman:Yeah. So we we talked about the responsibility factor. Right? Like, the love, like, the people who embrace that responsibility, it drives them to be very, very committed and, like, really have that mentality of you can't quit because there are other people depending on you.
Dean Sysman:It's much bigger than yourself. But I think maybe the other thing is that the the unit, just like any by the way, any government organization in any country, in any place is bureaucratical. It's broken. There are a lot of stuff in there that don't make any sense. And one of the things that I think is the unit also taught me a lot about how to do enterprise sales because, like, there are so many conflicting rules.
Dean Sysman:There are so many conflicting and people with different incentives, sometimes fighting with each other over the same goals, sometimes having completely opposite goals even though they're trying to achieve the same things. And you have to sort of learn how to both be very successful technically in a in a world class way to achieve what you're trying to do, but you also have to learn how to, like, get through all this, like, organizational sort of, you know, obstacle course to figure out how to get the whole organization to actually achieve what you want. And that's very true for enterprise sales. Right? Like, sometimes you'll go to a person who might even be the economical buyer, who might even have the budget, they'll say, oh, I wanna buy this.
Dean Sysman:But that's never, like, the whole story. Right? They have their colleagues who they wanna get their approval, or, for example, they wanna make sure that the team who's gonna own it are up for it. They have to make sure they're not competing against any other objective that the company is doing. They gotta make sure that, you know, there's all these feathers you don't wanna ruffle, and you have to create this, like, momentum to create a win in an organization that's that's not a small number of people.
Dean Sysman:So I think that's also a big part that nobody's really, I heard, has talked about. Like, the bureaucracy of the army helps you understand how to do enterprise sales. And by the way, to some people, it becomes crushing. Right? Like, some people can't handle it, and they they go crazy.
Dean Sysman:But some people, if you just, like, understand it is the way it is, the only thing you can do is to understand how to how to play that game. You actually learn a lot that helps you in the future.
Mahendra Ramsinghani:Yeah. Dean, it's interesting how you you sort of correlate this with playing a game and going back to your video games childhood. Like, if you look at hurdles as, you know, the ping pong game or a Mario game, then you can easily overcome them. Now 80 to 100 has also taught you something that that it's like a mindset that if you don't do it, who else will? Who will?
Mahendra Ramsinghani:Right? And that mindset sort of is a very interesting one. You have translated that mindset into telling a lot of your entrepreneurial friends that do not start a company. Do not start a company unless unless that's your last choice. So help us understand why Axonius was your last choice, and how does that philosophy play out in in building companies?
Dean Sysman:Yeah. So I my upbringing, my my childhood, and, you know, all the way until I became until I joined the army and then became an adult and independent, Me and my family went through a lot of challenges, both economical and social, and that made me from a very young age realize that I have to be independent, and I have to earn everything I would want out of life. Right? I'd I'd never be gifted anything. I'd never be given anything.
Dean Sysman:And I always set out to say, like, I wanna find something that I'm passionate about that makes me feel like it's creating meaning for me in my life, but, obviously, also, gonna make me successful. It's gonna make me be able to provide for my future family and be able to get the things in life that I never had as a kid. And I think that's what made me really entrepreneurial. Right? That understanding that you just can't depend on anybody else for what is the most important things that are in your life.
Dean Sysman:But, you know, now having been through, you know, our my first startup, which was called Symetria and wasn't a great success. And and by the way, Mahindra, you know, we tried to raise funding from you as an angel. We you said no and rightfully so, very smart of you to do that because we were in a in a bad market position to be in, bad category, and we didn't even execute the best out of that category. But that taught me a lot of lessons that I took into Axonius, and we built up, you know, an amazingly successful company that's delivering so much value. But it's never worth it.
Dean Sysman:Right? Like, if you're trying to think of the outcome versus the amount of stress and emotional hardship and dedication and sacrifice, I wouldn't be able to tell anybody that it's worth it. Actually, I think it's much more beneficial to be an investor, which two out of three of you are are already doing, so you guys are way smarter in your life choices than I am. But to be an entrepreneur does something that that has no comparison, which is you feel like you really created something that's bigger than you. Right?
Dean Sysman:When I met my wife, we started to talk about Axonius as her adopted kid. And even today, you know, we had a son that was born five weeks ago, and we constantly talk about how our kids make us prioritize between them. Right? And Axonius is one of those. Right?
Dean Sysman:We have our daughter. We have our son. We have Axonius. And the three kids, I gotta prioritize between them depending on on, you know, who needs who needs my attention at any point in time. And we really feel that way about the company.
Dean Sysman:So I think if you don't want that level of responsibility, if you don't want that level of commitment, if you don't wanna feel like your identity is very deeply wrapped up with the work you do, then you shouldn't do that. So there's a quote from Elon Musk that I love without getting into into the persona of Elon Musk, but I love the quote. I think at some point, this was during, you know, the the inflationary period couple years ago, somebody asked him, you know, what are your words of encouragement for entrepreneurs? And he said, if you need encouragement, don't be an entrepreneur. Right?
Dean Sysman:Like, that's what it boils down to.
Sid Trivedi:Well, you talked a little bit about Cymmetria, so let's let's go into the first founder journey before we get into to Axonius. Right after finishing in the military and and unit eighty two hundred, you cofounded Symetria, which for context for our listeners is a was a cybersecurity deception startup. And at the time that you did it, deception security, I remember this, was the number one category identified by Gartner. I think, you know, many folks don't realize this, but there were several major players. It was considered very, very interesting, you know, a submarket to go after.
Sid Trivedi:And you went through YC. You're part of the summer twenty fifteen batch. How did that opportunity to work with your first cofounder, Gaudi Efron, come about? And what was it like building your first company as a, you know, 20 founder and really learning those ropes?
Dean Sysman:Yeah. So I was coming up to the end of my army service, at least the initial commitment. And I loved what I did in the army, and I would keep doing it. But, honestly, one of the things that's really hard for me is I have to if I can be obviously a leader, but if I follow somebody else, I really have to believe in them. Right?
Dean Sysman:Like, I I really have to say, like and at that point in time, actually, the leadership in the in the unit that was above me, I just didn't I just didn't believe in them. Like, I it was very hard for me to follow them, so I said I'm not staying. And I left I left at the end of of the five year tenure. And I was like, what am I gonna do afterwards? Because I knew that if I have like, I'm gonna join some regular job somewhere, I'm gonna go crazy.
Dean Sysman:And I knew I didn't know enough about the world to be an entrepreneur. I was like, I I know technically, like, really well a lot of stuff in cyber, but I have no idea what it's like to run a company or build a product or sell to a customer. So I just started to ask people around. Hey. Like, what do you think should I do?
Dean Sysman:And one of my best friends today in the industry, Ron Ryder, who was the founder of Crosswise, now the one of the founders of Centra, and was, you know, in the same place as me in the in in the unit. He introduced me to this guy. Said, look. He's very experienced. He has an idea.
Dean Sysman:He already started raising some funding. He's looking for a technical cofounder. And by the way and, you know, let me say something controversial. Right? Like, knew that a person like that who doesn't already have a technical cofounder, like, it means that something's wrong with them.
Dean Sysman:Right? Like, because if you're that experienced, if you're like, you know, people know you, you're that successful, why don't you have a technical cofounder? And and I met him. I'm like, let's see what this is about. And I understood, like, he's one of those people who has, like, these amazing strengths, but, also, most people don't understand him.
Dean Sysman:It's like he's not you know, he's sort of an acquired taste, and I have a lot of, you know, admiration and respect to him. But I understood why, you know, some people might not get him. I was like, great. I know exactly why I'm a match for this guy. I loved his idea, and his idea really appealed to me coming from an offensive background.
Dean Sysman:Right? And the idea was, let's just take, you know, what people talked about as honeypots, which are these tools to detect attackers by basically laying a trap, right, inside the network. The only advantage a defender has is they know their network better than the attacker. So if we put these things out there in the network that nobody knows about, only attackers are gonna interact with them. But nobody ever took that to be, like, an enterprise level solution.
Dean Sysman:Right? It was all these, like, open source tools and everything. So that was the idea. And to me as an offensive cyber background person, that really appealed because I was like, woah. That would actually really, you know, deter me or slow me down or frighten me.
Dean Sysman:And here's where, you know, you start to realize that that was the wrong perception to what makes a successful company because I wasn't thinking from the perspective of the customer. I was thinking from the perspective of the threat. And, you know, we joined forces, and then we start we wanted to continue raise our it was at that time where you don't just get a blank check to you know, with no idea. Right? You got you actually had to do a real angel round, which is like you start to raise from a bunch of different small checks and you sort of rolling it up.
Dean Sysman:And one of Gotti's great strengths was he's so good at creating relationships with people. And somehow, we got you know, we went to the Bay Area. Somehow, somebody told us, you should join YC, and we didn't really know what it was. And back then, YC was way smaller and also didn't have almost any Israeli founders that went there. But, you know, we heard about it.
Dean Sysman:We said, like, wow. This is, like, so super impressive, and we joined there. And to me today, that's really funny because some people are very, like, famous today, like Sam Altman. You know, we would just, like, spend, you know, just days in the office with them, just spend talking to him. And and by the way, he's as unique of a mind as as you think he is.
Dean Sysman:Like, everything he says sounds like a pitch. Like, literally, like, you would ask him this question. He doesn't have any answers besides, like, the most concise, most accurate way to phrase something. It's it's, like, insanely amazing. And Paul Graham, also the like, he he's very similar in that way too, maybe a little more thoughtful and more deep.
Dean Sysman:But what YC really taught us is that you have to really understand how fundraising works by understanding what are investors looking for, not like what your customers are looking for, not what has made great companies be successful in the past. You really have to put yourself in the shoes of an investor just like the best product strategy is when you're able to put yourself in the shoes of the user and the customer, which is sometimes are two different people, but sometimes it's the same person. So that, you know, that led us to raising our series a, where it's about $50,000,000. And we started to get some customers, and our product was was pretty good. And it actually worked in many ways.
Dean Sysman:Like, we caught several very, you know, high level threat actors. We even did one APT report around a threat that was unknown before us and, has been tracked as a nation level, actor since then. But, ultimately, the problem with cyber deception was that it was a Ferrari. It was the thing that you only buy after you've already bought everything else and, you know, you still felt unprotected and you still wanted that extra thing. And the worst part about about cyberception is the the greatest challenge in cyber is that you wanna avoid selling insurance.
Dean Sysman:Right? You wanna avoid selling. We're gonna reduce the risk of something bad happening that you can't measure today because then how are you gonna get, you know, justification for it? How do you, you know, do pricing discussions? Right?
Dean Sysman:Nobody wants to spend a lot of money on insurance. They wanna see the outcome. They wanna see the value immediately. Right? So it was very hard to sell cyber deception because nothing would happen.
Dean Sysman:Or if something did happen, you just get lucky. But most of the time, nothing would happen. And then, you know, people started to say and this is not just us. It's also the other companies in the space. Well, you should run a pentest or have a red team try and attack and catch it.
Dean Sysman:But then it becomes this, like, such a convoluted sales process. And even if that's successful in catching the red team, it's still not that impressive. Right? Like, you know, okay. Maybe the real threat is not gonna be how do you know that the real threat you're gonna catch and not the so that's when I realized, like, the business dynamics of how you demonstrate value are even more important than what, you know, your vision is for the value you're delivering.
Dean Sysman:If you're not able to show value quickly, then it doesn't matter what's gonna be the end value that you think you're gonna deliver.
Ross Haleliuk:I'm curious, Dean. Today, a large percentage of the cybersecurity startups comes out of Israel. But if you look at YC, you mentioned that at the time when you joined, there weren't almost any, startups from from Israel. But then even if you look at it today, there aren't all that many proportionately to the number of startups coming out of the country. Why is that?
Ross Haleliuk:Like, why is YC not as attractive for, Israeli startups, especially for the Israeli cybersecurity startups? And, also, would you join knowing what you know today, if you were to build a cybersecurity startup, would you join YC, or would you not?
Dean Sysman:So I think the both answers are tied to each other because we actually thought of going through YC with Axonius, but what ended up happening was we didn't expect to get funding quickly for Axonius. If you want, I can ask me that question. I'll answer why. But we thought it'd be really hard to get funding, and we were surprised that a fund that specializes in giving the first large check of funding to a team with just an idea, no like, nothing else besides an idea, They just gave us their funding, and then that sort of eliminated our ability to go through YC for a bunch of reasons. Like, if you already get a large seed round check with nothing, then it's sort of conflicting to go through YC for a bunch of reasons.
Dean Sysman:So we didn't end up doing that. And I think Israel has become so, like, such an expert. The Israeli ecosystem, I mean, has become such an expert at identifying and funding early stage cybersecurity companies that there isn't that much of a of an advantage of trying to go, you know, and apply for YC and and, you know, work really hard at at getting into it for much less money and, you know, obviously, much lower valuations at that at that funding level.
Mahendra Ramsinghani:You know, Dean, just to sort of finish up on Symetria and the lessons that came out of that first rodeo, if you will, you know, there are so many different angles to this, and you as an individual have now come out of it and built a very successful company now. So obviously, you've learned some lessons and you've applied it. You know, the other angle that Sid and I often chat about when we are two beers down is this whole category of deception. I mean, Sid mentioned that it was the number one category. I mean, there were six companies.
Mahendra Ramsinghani:And I remember this very distinctly. There was a conversation I I was having with one of the I would put this person in literally top 10 in the world when it comes to cybersecurity. I mean, this guy is off the charts smart. And he said, if I have a good deception, I don't need any of those security products. I mean, just think about it.
Mahendra Ramsinghani:There is so much depth in that that if I have a good deception, I know that the attacker is in my SIM, my firewall, none of those matter. Right? My destruction is the most important thing. And still that category kind of just didn't go anywhere. So maybe that's a separate conversation about why can some categories take off and others don't.
Mahendra Ramsinghani:But to your journey, and you've now successfully come out of that symmetry journey, what are some of your top lessons that came out of that, quote, unquote, failure?
Dean Sysman:Yeah. That cybersecurity effectiveness and the effectiveness of selling a cybersecurity solution are a Venn diagram with only partial overlap. Right? And what that means is there are very effective cybersecurity solutions that are very hard to sell and make into a successful product or successful business, and deception is one of those. That's why the open source projects have been around for so, so long, and yet, you know, that hype cycle that we went through sort of died out.
Dean Sysman:And now it's just a feature maybe in some other products, maybe not even a feature. Like, it's not nobody will will claim that that's their competitive advantage today. And and by the way, there's also the opposite. Right? There are, like, very good products to sell for cybersecurity.
Dean Sysman:They are completely ineffective and don't do anything, and, I'm not gonna mention any of them. But, like, obviously, there's some major companies who have added, an endpoint protection capability that if you know anything about how to research something, you realize, like, this is all bells and whistles and doesn't protect from anything, and yet it's billions of dollars in revenue somehow. You see that? And that's like a very that was, to me, as a technical cofounder, like, the most important lesson that allowed me, I think, to become a CEO and be successful is that, like, those are very separate dimensions. What is a successful business sale of a product and also what's an effective cybersecurity product?
Dean Sysman:And the the magic happens when those two overlap, but they are almost completely interdependent of each other.
Sid Trivedi:You you talked a little bit about Symetria, and we've kind of dived into what happened with deception. Let's now talk about Axonius and how a boring idea, you know, the the area that that Axonius was targeting was was considered if if we were to say deception was the hardest thing, the the vision the initial vision for Axonius at the time that you were thinking about it was certainly not in the bucket of, you know, top you know, number one category for Gartner at that time. How did that boring idea become a unicorn? And, you know, the idea for Axonius you shared came to you while you were still at Cymmetryia, and you saw companies that were struggling just to inventory their devices. You you famously called, you know, Axonius the Toyota Camry of cybersecurity.
Sid Trivedi:It was the pitch, you'll remember this, that you used to win the 2019 RSA sandbox. It was a you know, the Toyota Camry was not flashy, but it was an essential car. Tell us about how Axonius got started. How did you convince two unit 8,200 friends of Free and Avidor to come and join you in tackling this unsexy asset management problem. And what was that moment like when you said, hey.
Sid Trivedi:I'm gonna leave Cymmetria, and I'm gonna pursue Axonius.
Dean Sysman:Yeah. So everything started with us working with a very, very large, you know, American company that we were, you know, deploying our solution, and then we discovered something that we saw this IP in their in their network that was touching our our decoys, our honeypots. It was even starting to deploy code on some of them. We look at the code. We see it's a very well researched group by, you know, a lot of different other vendors that was attributed to the Chinese government.
Dean Sysman:So as a cyber deception company, like, what's a better outcome than finding a Chinese APT in the in the network? Right? So I go to the to the team there, and I tell them about it. And they're like, okay. Great.
Dean Sysman:Like, you know, let's keep working. And I'm like, what? Why, you know, why is this your reaction? I was expecting shock, surprise, like, something. And they were like, listen.
Dean Sysman:We got tipped off that this was happening, and that's one of the reasons why we start to look at deception. So that's why we brought you guys in and others. But the other thing is there's not much we can do about it now. And I knew, like, the incident response basics, right, is like, hey. Here's here's the infected machine.
Dean Sysman:We have the IP address. We have the host name. Let's go research this. Right? Like, let's go inside that machine, see the file activity, the process activity, network, identity activity, all that kind of stuff.
Dean Sysman:And then we can map out the thread and and continue to do internal response. Right? But they told us, like, we have no idea who this machine is owned by or or what's managing it. And to me, that was a shock because I had naively assumed that an organization of that scale, one of the best funded security programs in the world, right, like billions of of dollars, they had no idea, like, what was really going on in their environment. And we spent many hours just trying to go through all their different controls, going through the SIM, going through the NOC, just, like, trying to identify what this endpoint that was infected was, and we never did.
Dean Sysman:And to me, like, my mind got really obsessed about that problem because it was so hard for us to sell deception because everybody was like, look. You know, I'm not gonna buy deception if I don't have endpoint. I'm not gonna buy deception if I don't have email security. I'm not gonna buy deception if I don't have a firewall. Right?
Dean Sysman:They're like, you know, this is, like, the last of the line. And then I realized, like, these people don't even know what they have. Like, this is the thing you solve before anything. So I started to to ask so many people like, hey. Like, if I'd asked you today to tell me how many Windows devices do you have, what would you do?
Dean Sysman:And the more I asked, the more people were they were asked. They're like, look. I'll give you some range, but, like, I have no way of really knowing the exact number. And I started to realize that this problem was happening because the IT environment started to become very fragmented in terms of number of controls and number of environments. Right?
Dean Sysman:Like, if you go far enough into the past, computing environments were very homogenous. It was like one operating system, one device, one network, one management tool. But the more time has passed since then, the more products, the more controls, the more networks, the more access points their organizations have. And then you end up with these, like, a lot of different pieces to the puzzle that nobody knows how to put them together. And everybody was still trying to solve this in one of the legacy ways of, you know, what people would call asset discovery or network discovery, right, which would be either to scan the network or look at network traffic, or they would assume that they could just deploy one agent on everything, and that will be their solution.
Dean Sysman:And we knew from working with every every team that we worked with, that never works. Like, nobody got their, you know, one agent on everything. That's that's impossible. And nobody really understood what was happening in their network just from looking at network traffic. So that's what led us to realize, hey.
Dean Sysman:First of all, there's this problem here that impacts everything. Right? Like, everything starts from understanding your assets, whether it's moving to the cloud or patch management or instant response or even m and a. Right? Like, all these things start from understanding your environment.
Dean Sysman:And the second thing is that sort of everybody gave up on thinking that there's a better thing. Right? When I would talk to people, they're like, yeah. You know, it is what it is. And there were just so many companies that promised that they could solve this with their network or agent based technology that everybody was just cynical and just accepted that it's never gonna be great.
Dean Sysman:And that's the opportunity that we saw. And when I went to my two cofounders of Free and Avador to talk about this, they had no idea what I was talking about. Like, because they they didn't really they were still in the army when I approached them. They were both about to finish their service and thinking about what to do in the private sector and their, like, you know, career post army. And I was just like, look, guys.
Dean Sysman:This idea, I really believe in it. It's, like, very fundamental. Every team suffers from it. And here's this new technological approach that can solve it, and we're the only I think we're the best team in the world to try and solve it using this new technology. And they didn't really get what I was talking about, but what had sold them was, first, we had gone through everything you can imagine together.
Dean Sysman:We probably know each other better than our spouses and for better or worse. But the second thing, told them, listen. To me, I'd already failed in my previous company. It did end up getting acquired, but not for a great outcome. I have no public sector experience.
Dean Sysman:Like, if I fail this time as an entrepreneur, that's it for me. Like, who's gonna bet on me a third time? So I'm all in. I'm committed. And I actually told them I already told my cofounder, Agadi, and so much I'm I'm leaving.
Dean Sysman:I'm all in. And I think that show of commitment to them was what convinced them because they didn't get the idea, at that point, right, because they hadn't really seen it enough. And I think this is my last point, because it's a long answer already. But companies in the world of cybersecurity and I think also in enterprise software in general go through their go to market success in three different really different ways depending on what's the problem they solve. The first one is if you're going after an existing budget line, an existing category, and you're just doing it with a new technology.
Dean Sysman:This is the classic next gen something. Right? Next gen firewall, next next gen endpoint protection. And there, your buyer is very mature. They know exactly what they're looking for.
Dean Sysman:They have usually an RFP that's, like, a thousand different items. And every POC, every deal is competitive because there's obviously an the incumbents already. So the way to win there is very similar to sports. Right? You don't need to win by a mile.
Dean Sysman:You just need to have one more point once somebody blows the whistle. So it's super, like, narrow, and most of the time, the companies are successful there. And you can look at all the next gen something. They're a very sales focused, like, organization. They're really, really great at sales, understanding how they're gonna win a deal.
Dean Sysman:They still have to do other stuff really well, right, like product and marketing, everything. But if your superpower is sales, you're gonna win that kind of motion, like, very effectively. Mancalito and CrowdStrike are, like, the best examples of that, I think. The second category is when there's something completely new and nobody knows what to do there. Right?
Dean Sysman:So cloud security or now AI security or, you know, mobile or whatever. There's, like, this whole new area of technology, and people have no idea what to do about it. So what they do is they flock to the biggest brand or, like, the most attractive brands. Right? So for example, in in cloud security, like, most people, for the first CSPM they bought, they had no idea what to evaluate in a CSPM.
Dean Sysman:Right? What would they do? They would go to their colleagues. They would go to their partners. They would go to the people they respect.
Dean Sysman:They're like, what's the best out there in cloud security? And they would, you know, pick on a three and then just, like, POC it. Right? And there, the companies who are most successful are the ones who are able to create the most, like, biggest and most attractive brand and not necessarily, like, from a big company standpoint, but more from an innovation standpoint. And, obviously, Wiz did, like, a, you know, historically successful story in doing that.
Dean Sysman:But then there's the third kind of motion, which I think is ours, and I have one very good other example of, is that when it's not a new area, and it's also not a next gen existing thing. It's sort of when a bunch of different problems sort of shift around, and they become something else gradually. Like and nobody noticed. Right? Like, nobody came out and said, like, hey.
Dean Sysman:It's the age of, you know, cyber deception or whatever. It's just, like, slowly things drifted along. And then when you talk to the practitioners, you ask them, hey. Is this painful for you? They'll say, like, oh, man.
Dean Sysman:It's one of the most painful things I've ever done. But then you'll ask them, well, how many products say they solve this? And they'll say, oh, I can give you a 100, but none of them really do. And that was the journey that we went in. And that sort of category creation, you have to really name the problem in its new way, in its present way that it is.
Dean Sysman:And the best analogy I give for that that's similar to ours, and that's what we did with cyber asset management. Right? Like, we create that category. We named it that way. Gartner embraced enforcing, and it was and became Chasm.
Dean Sysman:And then we actually called Chasm dead, and, you know, we can get into all of that. But another great analogy is what I think Datadog did with observability. Right? I remember when we started, I'd start to hear about Datadog. I'm like, what is this thing?
Dean Sysman:And I'm like, is this a debugging tool? Is this like a application performance? Is this like a log management? And it was none and all at the same time. I was like, what what does all this mean?
Dean Sysman:But then you realize once they called observability, you're like, ah, now I get it. It's like all these different past solutions now have to work together to solve the present problem. And that's what we saw when we created Cyber Asset Management.
Ross Haleliuk:Dean, Axonius has raised nearly 600,000,000 and hit a 2,600,000,000.0 valuation, surpassing, 100,000,000 in ARR in just four and a half years. As a first time CEO, how did you manage challenges of such a rapid, fast growth? And also, what key principles helped you maintain the company's culture as it scaled and grew and execute as it went from a small start up to such a big global unicorn?
Dean Sysman:Yeah. So the first thing I will tell anybody to explain what a high growth organization or team is is that there is always something broken. Like, always. There is not a single moment in time where everything's working correctly because you're just trying to meet the pace of growth with your own execution and your own buildup. There is never enough time to think ahead.
Dean Sysman:You're almost always just reacting. So every every morning, you start by seeing a bunch of stuff that are feel like a crisis, but then you realize, oh, that's just like every day. That's what it feels like. And you sort of have to embrace that and understand that in order to to be able to manage it and just try and internalize that the way you respond to those challenges is way more important than preventing them in the first place. Right?
Dean Sysman:And it it becomes like an organizational muscle. Do your people, you know, break down and cry when there's a huge mistake or huge fail that happens, or do you use that opportunity to say, like, okay. Here's the learning that we can have from that to avoid that in the future. Right? It's like the Shaquille O'Neal, like, I either win or I learn, which I've said many times in in the most embarrassing places where I I've lost and outside of business as well.
Dean Sysman:So it's easy to say, but it's incredibly hard to implement in in an organization. And the way to do that is you have to lead by example. At least that's that's how I've seen that it works for for me and for us. I'll give you some examples. First of all, if I make a mistake or if I'm wrong, I try to be extremely vocal about that internally instead of hiding it, right, or instead of avoiding it.
Dean Sysman:Because the more as a as a CEO or as a cofounder, I talk about the mistakes I do, that gives people the the mandate and the safety to talk about when they make a mistake or when they had a failure. And if you don't talk about those things, you'll never be able to get to the point of learning from them. The second thing is is to prioritize speed to value rather than minimizing mistakes. Right? And that's also another like, it sounds like it makes sense, but day to day execution to really show the examples of that is really hard.
Dean Sysman:So, for example, keep saying the enemy of perfect is the enemy of great. Right? You know, at some point, you just gotta, like, okay. Just ship it. Like, you know, stop spending more time on this.
Dean Sysman:Sometimes speed and iteration is way, way more important than just getting things perfect or alright, and that applies to almost everything that you can think of. Even I remember in the beginning, we something that really, really worked well for us is to really define what is a proof of concept, what is a proof of value of our solution. And we sort of really forced ourselves to say what's the minimum amount of things that we need to show to make somebody buy because everything on top of that is just wasting time. It might be, you know, nice for the customer to see or maybe even we might get a bigger price, but that's not important because we're they're gonna get those value. They're gonna get those features after they become a customer, and we're gonna still have that opportunity.
Dean Sysman:But we wanna minimize the amount of time that we're being tested to a minimum. And you really gotta hit those, like, core wow moments, those activation moments very clearly and as fast as possible. Because if you're gonna try and maximize the amount of value you show, it's just gonna turn into an endless, you know, science project. So I think being able to lead by example, by doing those things, that's what makes an organization be able to consistently be a high growth organization.
Mahendra Ramsinghani:And, Dean, just to build up on your notions of speed, speed to value, you know, we're now looking at this AI wave that is upon us. You know, there is obviously a lot of hype. That is a reality. Customers are reacting in different ways. So we'd love to hear Axonia's plans to use AI.
Mahendra Ramsinghani:And secondly, what are you hearing from the market? What are you seeing from the customer's vantage point?
Dean Sysman:Yeah. So first of all, from, like I told you, I feel like, AI was my passion until I got into cyber. And now when I'm in cyber, the world has rediscovered, like, what AI is capable of, and I feel I feel FOMO for the first time in my life. I'm like, wow. I I wish I was I was part of this.
Dean Sysman:But then, you know, I realized that there's so much that we can do as part of this revolution. It is a revolution of what technology is enabling us to do. The first is how to secure the use of AI. Right? So in our platform, we don't only discover devices.
Dean Sysman:We discover everything in in the environment, identities, vulnerabilities, but most importantly, like, as well, both installed on devices but also SaaS applications. And then we realized that people need to keep track of which AI apps they're using and what's going into those AI apps. Right? And we start to see that our customers were using our SaaS application discovery in the narrow goal of let's see which LLMs people are using, which other type of GenAI tools we don't know about, and is our corporate data going into those things. Right?
Dean Sysman:So that's a use case today that we we provide to our customers. And the second is how do we utilize AI to make our platform more effective. And this year, we launched a new product in our platform around identities where we don't only just discover all the identities organizations has, human, nonhuman, you know, service accounts versus, you know, regular workforce and and all those. But we've also realized that it's very, very hard problem to get the access of identities correct. And in the age of AI, that problem is gonna get, like, exponentially much harder with AgenTeq AI, and a lot of the mentality around access management today is gonna just get destroyed by the way people want to use AI agents because there's so many best practices today that are around manual granting of of access that are just not gonna be relevant for the future anymore.
Dean Sysman:And what we're trying to do with our identities product is to help organizations, first of all, take all of the manual aspects of that and be able to automate that or at least be able to make that as automated as possible. But also, secondly, use AI to try and and leverage the understanding of your organization to do access and entitlements and all of that and the right and permissioning in in a leverage way. Right? So have the AI offer what is the right access, what are the right access changes, how to manage that. So we've seen some amazing outcomes by using that technology to do that for organizations.
Dean Sysman:I mean, I think we're just scratching the surface. Right? This is just the start of what we can we can do with with AI for that.
Sid Trivedi:As we get towards the, you know, the last part of our conversation, Dean, we would love to chat a little bit about m and a strategy, and you're in a very unique spot in that you're a private company founder and CEO. And I remember when you and I'd envisioned this conversation, you said, hey. This is one of the unique opportunities, Sid, where I can be super direct. And you actually had told me that we have an acquisition. It hasn't yet been announced, Sid, but I would love to come on the show and talk a little bit about the thinking and strategy behind it.
Sid Trivedi:So let's talk a little bit about the Cynerio acquisition and even beyond that as you think about strategy. And maybe let just let's set the stage before we go into all this. Axonius just made its first ever acquisition. Yeah. It bought Scenario, a health care IoT security company.
Sid Trivedi:It was labeled as an all Israeli deal. Some of the newspapers and you know that newspapers in Israel are pretty, you know, direct with with random numbers, but we've heard it was somewhere around $200,000,000. What was the strategic reasoning behind the move, and why did you pick going into health care? And why was Scenario the player that you chose to enter that new kind of subsegment in health care security, new sub segment? Yeah.
Dean Sysman:Excellent question. So let me start on unpacking the the layers here. So first of all, the reason that I wanted to talk about this was one of the things that I've realized as my, you know, job grew in scale is that most of what I do today and the most of the value that I create is decisions. Like, I would not you know, if I'd go out and and sell our product or if I go and and write code, I'd create value, but the leverage the highest leverage that I have is over decisions. And what that means is the better decisions I can make, the more value I create in my job.
Dean Sysman:And the only way to make better decisions is to learn. So I spend a lot of my time learning. I, obviously, am a huge fan of of your show, and I read a lot of your content outside the show. And I listen to earnings calls, I really try to understand what companies do. And one of the things that I never really found a great source of information around is how companies approach acquisitions.
Dean Sysman:Like, it was this thing that, like, never anybody really talked about deeply, and I wanted to share how we got to find our strategy around that, especially as we did our first one, I mean, just just announced it. So when we started to think about acquisitions for the first time, it was actually very early on. It was you know, maybe we were two years in or three years in, and we started the company in 2017. So way back when when the world was a a much rosier place, there was no pandemics or or, you know, huge economic crises or wars going on everywhere. And things were, like, very optimistic.
Dean Sysman:And, obviously, 2021 was, like, a huge peak of of hype and valuations. And we were starting to think about, you know, how do we expand from our first product offering? And like I said, you know and by the way, I haven't even said what we do until now in in detail. What we discovered was that the best way to see everything in an organization was to connect to all their existing products. Right?
Dean Sysman:So what we did was we built a lot of integrations. Today, we have over 1,300 of of those called adapters that you basically just give an API or user credential access to any of your existing tools. It could be cloud tools, endpoint tools, identity, network, whatever. And then we do the work of putting the puzzle together. We take all the different pieces, and we know how to put them together.
Dean Sysman:We show you everything you have, and that started from devices. But very quickly, people start to tell us, you should do this for other things as well, like show me all of my identities. And then the one thing that people start to tell us is around SaaS applications. Show me all the SaaS applications I have. I have no idea what we have.
Dean Sysman:So we said, okay. Interesting. There are these other smaller startups who that's what they do. Maybe we should think about an acquisition. So I started to talk to all of these companies and their CEOs and founders, and I started to, like and this is me, like, starting to grow into understanding acquisition.
Dean Sysman:I'm sure I was I seemed like such a noob to some some people I talked to about that. And I was like, hey. What would you think if somebody offered to buy your company? And they would, like, give me the random, oh, we're we're not for sale. Like, we're gonna be a unicorn, and, you know, thanks for for asking.
Dean Sysman:And then I sorta started to learn a little bit and got more advice from other people. And I would just start to ask people like, hey. What would be a great outcome for you guys? Like, yeah, obviously, you wanna be a unicorn or whatever, but, like, most companies get acquired. What would be a great outcome for you?
Dean Sysman:And I'd still hear, like, at that time in 2021. Right? Like, I remember there was this one company who did end up getting acquired, by the way, afterwards by, like, one of the large cyber vendors for, like, a few $100,000,000. But I talked to them when they had, like, their first few customers. Like, literally, they were just starting to generate revenue, and they had raised $5,000,000.
Dean Sysman:And I asked them, what would be a good outcome for you guys? And he said, yeah. Like, 250,000,000 at least. I wouldn't consider anything below. I'm like, dude, like, you raised $5,000,000.
Dean Sysman:You just started to get customers. Like, what is that? And I think back then, I was too naive that people would be honest, and it was just like you know, they would just, like, say their dream and not, like, what they realistically would wanna do. But I got a little disillusioned, and it was also the times of the day. So I actually decided to do something else.
Dean Sysman:I said, hey. Instead of buying a company, why don't I buy the product market fit? And what I realized was the reason why it's so hard to build a new product was not because you need another company. It's because you it's hard to do product market fit. Right?
Dean Sysman:So I was like, let's do this experiment. And we actually call this Axonius X, and it's a team in our company. We just hired three founders who are gonna start another company, and I told them, hey, guys. We're gonna give you, like, the same risk equation of, like, a great outcome. If you do a great job, like, you're gonna have an an amazing, like, outcome for yourselves, But you don't have to deal with fundraising.
Dean Sysman:You don't have to deal with legal. You don't have to deal with, you know, you know, HR and all that kind of stuff. And you're gonna have access to a lot of customers. Just go out and get the product market fit and just do that. And that's how we built our SaaS management product.
Dean Sysman:We hired those three founders who had all gone had, you know, exits before successful exits before. We had made them a team within our company and made them go after product market fit. But that's how we started to look at acquisitions. And then we start to realize when does an acquisition make sense. It's not when you can build it yourself better, or it's not when you just have money or equity do you wanna throw around.
Dean Sysman:It's only when you wanna move in a certain market direction and product direction that if you try and do it yourself, you're never gonna catch up, or you're you're gonna miss a very important point in time in the market. Right? And from the day we started, customers always told us, hey. You should go after understanding non IT devices better. And today, we discover all of them.
Dean Sysman:Right? Like, we discover every IoT, OT thing in your environment. We actually sometimes discover them better than the products that are focused on that because all the products in that market are around network traffic. Right? See the network traffic, understand what is the OT, IoT device because those things usually don't send stuff in an encrypted way.
Dean Sysman:They send, you know, everything plain text over the wire. And that's the best way to identify those things. But sometimes we would even discover stuff that they wouldn't because it's very, very hard to get network coverage over everything unless you have what we have, which is connecting to all the different data sources and then discovering what are the network areas that have activity. Right? So we would see these things, but then we wouldn't be able to get deeper into them because they're very verticalized.
Dean Sysman:Right? Like, medical devices are very different than, you know, factory robots, and they are very different than point of sale systems. And the more we expanded our platform, the more customers would tell us, hey. We just wanna be able to do everything in your platform, and everything's a lot of things. Right?
Dean Sysman:But that's sort of what led us to realize in the world of non IT, there are all these teams who have this very deep industry knowledge over something that it would take us so much time to learn or so much time to get into value from. We're just missing on the market opportunity that's worth it to make an acquisition because acquisitions are very hard. Right? Like, they you spend a lot of time until you find who who's the right fit from a deal perspective, and then you also have to find the right fit from a culture perspective. Right?
Dean Sysman:Are these people gonna work well with you the day after? Do they really wanna be employees in your organization? Do they really share the vision of what's gonna happen in the future? And that's why so many acquisitions fail. Right?
Dean Sysman:And you can even see in the world of, like, cyber physical systems, there was the initial wave of acquisitions that most of them failed, and none of those products are the leaders in the market right now. The leaders in the market are the ones who are start ups back then. And when we looked at that field, the one that by far was the most interesting was the medical or health care side of things. It had the the biggest, you know, revenue potential. It had the most important technical expertise.
Dean Sysman:It was the most different from IT that you can get. And we realized that the team of Scenario, we knew those guys from 80 to 100, obviously. Right? And we saw, like, an amazing cultural fit. We saw an amazing product and strategy fit, and that's what made it really make sense for us to go after.
Dean Sysman:And that was after a process of many different categories that we expected to make acquisitions in. And by the way, I think we gave offers to about four companies before we made this acquisition. And and those offers, by the way, were in other categories and other things that we thought of acquiring in the past, and we just never got to an agreement with those companies. And by the way, some of them had bad outcomes. Like, some of them have closed by now.
Dean Sysman:Some of them, I think, would have wished that they would have taken it, and there were some that ended up getting a great outcome. So it's
Sid Trivedi:Sounds like buying a house in Silicon Valley. That's what it sounds like.
Dean Sysman:Yeah. Yeah. For sure.
Ross Haleliuk:Take us behind the scenes of the of the of the Cynerio acquisition. How did the deal come together? What were some of the biggest challenges in pulling it off? I'm going to assume that this time around, you probably weren't going around and asking founders how much money they would like to be to be happy. So you have learned something.
Ross Haleliuk:Talk to us towards that. And Yeah. Also towards what you've learned so far about executing m and a while still running a high growth company.
Dean Sysman:Yeah. So I'm a very direct person, just my nature. And I also think that in many ways, it's, like, much more valuable to to do things sometimes that way. And, you know, even my wife, on our second date, I asked her how many kids do you want us to have? And my wife was as direct as me.
Dean Sysman:That's what like, it was love at first sight. We, like, talked about our entire future life within, you know, the first few hours of meeting each other. I mean, that was, like, amazing. But if, you know, you go on a date with someone, you tell them, hey. You know, when are we getting married on the first date?
Dean Sysman:It's probably not gonna work. And that's what I had to learn about m and a and acquisitions. Neither party wants to seem too interested because it's gonna hurt them in, you know, whatever potential conversation I'm gonna have later on. So it's sort of like this, like, inching towards each other. You sort of start to have to find these ways of inching towards each other.
Dean Sysman:And, you know, for those out in the audience who don't know what corp dev is, if you talk to somebody who has a corp dev title, their job is to either acquire you or to get enough information about you so they can compete with you. Those are the only two reasons why a corp dev person's gonna talk to you. So you better know which one it is because, otherwise, you're you're at risk of of really hurting yourself. And they will never tell you that, by the way. They will never tell you my entire job is to either spy on you or acquire you.
Dean Sysman:They'll tell you, look. I'm into making strategic partnerships and, you know, these, like, strategic initiatives. They say the word strategy a lot, which and once you know what that means, then you're fine with people saying it. But I remember I got very confused about these things in the beginning. Like, what's the difference?
Dean Sysman:There's, like, another guy who runs partnerships. What's what's the difference between a strategic partnership and a regular partnership? Like, would you tell those people they're not strategic? Like so it's it's sort of like just the game. Right?
Dean Sysman:We talked about the game. There are the rules to the game you have to understand. So when we start to think about acquiring something in this domain, you sort of just try and start to inch towards other companies. You would get an introduction either from them or or for you, or you'd end up having a deal together. Right?
Dean Sysman:Like, we have we have joined customers with almost every vendor in the cybersecurity world because of the way our product works. So we already know, like, about a lot of products, how well they're working, what kind of customers are using them. So we sort of have a we have a cheat code around corporate development because we know all those things. We can see when products become really popular or not. We can see which products are declining.
Dean Sysman:So you start to talk to other companies, and you start to give them a reason to inch towards you. Right? I mean, you start to say, like, hey. You know, the the enemy of my enemy is my friend. Right?
Dean Sysman:Like, I would say, like, hey. We're both competing against this. Like, let's let's start to work together more. But I think the real important part is you have to know when to flip the script. Right?
Dean Sysman:Like, you have to know, okay. We've been dating long enough. Do you wanna get a court? Like, let's let's talk about that. Let's put that on the table.
Dean Sysman:And knowing when to do that and knowing how to do that, I think, is what ends up making making that strategy successful versus unsuccessful. But I'm also speaking from a very small amount of experience. Right? Like, I'll be very interested to hear what I said on here in a decade from now when I'm much smarter about m and a and acquisitions and co dev because it's incredibly hard to get right. The vast majority of them don't end up being successful.
Dean Sysman:And, you know, we talked about Tumor and SentinelOne. You know, the the best outcome that happened from the cyber deception space was Ativo that got acquired by SentinelOne for, like, a half billion. At least that was a report number, half $1,000,000,000. And, Sid, I even remember I was talking to you about Ativo right when I left, you know, Metro. I was like, what?
Dean Sysman:You know? Because you were an investor. I'm like, what do you think is gonna be the outcome here? It's gonna you know, this doesn't work as a category. But, you know, evidently, you did well.
Dean Sysman:But, look, Sentinel One acquired them, and they sunset that product recently, I think in the last few months even. So, you know, I don't know how they would say that it went for them, but it doesn't seem like it ended the way they perceived it would. And those outnumber the successful ones by a lot. But when you see the successful ones, man, they're like game changers. So let's take the other example of, like, CrowdStrike with Humio, which is what made their, you know, SOC and and Synprox immensely successful.
Dean Sysman:I remember when I heard about that acquisition, I was like, man, SOC is is already oversaturated. How does that make any sense? But, obviously, like, from a platform perspective, it worked really well, And it matched the market trend of the of the unbundling of of SIEM or, like, the rebundling of SIEM, let's call it, from being the things that stuff bundled into to being the thing that bundles into other stuff. So it's really interesting in retrospect what worked and what didn't.
Mahendra Ramsinghani:And, Dean, recently, Axonius has announced a $200,000,000 round in part to kind of build up on acquisitions. So, you know, this strategy of growth by acquisitions is something that that could look very interesting in this next phase of journey. Look. I met you a decade ago. You were a very technically savvy nerd, and here we are ten years later.
Mahendra Ramsinghani:It's my good fortune to see you blossom into this wonderful CEO building a global company. So I could bet that your next ten years could be very interesting. Give us an insight into how this 200,000,000,000 could be deployed. Can Sid and I send you all our portfolio companies to get acquired? Or what are you looking for?
Dean Sysman:Yeah. So when you start a company, you have to choose between, like, sort of three outcomes. Right? The first is it could be a lifestyle business, or it could just be profitable and you run it. As soon as you take any any money from investors, that direction is closed off because no investor is gonna want you to run a lifestyle business if they invest in you.
Dean Sysman:So the other two outcomes is you're either gonna get acquired or you're gonna become an independent large scale company. Those are the only two outcomes that investors would would be happy with if you take their money and they invest in you. And those two outcomes are actually very different. Right? Like, if you know you're if you had a crystal ball and you knew you would get acquired versus becoming a public company and and, you know, very long tenured independent company, you would make very different decisions even maybe from a very early stage.
Dean Sysman:Right? There's so many factors that play into this. Right? Like, do you really wanna hype yourself up as the most technically sound product in one very narrow area that's more acquisition target, Or are you really thinking about becoming a platform having multiproduct and offering a lot of different value to your your users? And that's more of a, like, independent public company mentality.
Dean Sysman:But it's also a lot in, like, your everyday decisions. Right? Like, think about legal. Right? In every single deal that you close as a vendor, you have this risk equation of how much time do you spend reducing the risk in the legal and financial contract that you have with the customer.
Dean Sysman:And I could tell you the the spectrum there is, like, very wide. Right? Like, for a company that wants to be public, there are things that are very important. You might even lose some business because you're gonna say, I'm not gonna take on these terms. But if you're just looking to get acquired, like, take any any deal you can get and just, like, get the growth up, get the error up.
Dean Sysman:Like, who cares? That risk is somebody else's at some point down the line. So those decisions make a very big difference as to what kind of path you're gonna get into. And the most important, if you wanna get acquired, then realize that. And there are two very, very important things that I think most people don't understand about what it means to get acquired or what makes you attractive to get acquired.
Dean Sysman:The first is don't maximize your valuation. Right? Like, I've seen so many companies and founders that, like, think the higher evaluation, the more successful you are, and that, in most cases, is absolutely wrong. It's actually most of the time the opposite. Like, obviously, you don't wanna dilute yourself for no reason, but also the higher valuation, the less likely it's gonna make for you to get acquired.
Dean Sysman:And it makes it very, very hard if your valuation's, like, really high and and bloated and all that. So if you wanna get acquired, don't maximize your valuation. Keep it realistic. Keep it fair. Keep it good.
Dean Sysman:Right? Like, don't, you know, don't work against yourself from a dilution perspective, but, also, it's a vanity metric that can hurt you. The second thing is that companies don't acquire companies. They acquire a business need. Right?
Dean Sysman:And when when a company acquires something, it's because that's their only way that they think they can achieve a high priority need. Right? So nobody will acquire a business just because it's good. Well, maybe PE, you know, private equity does. But by the way, this is another thing that I learned that I'll share with the audience who doesn't.
Dean Sysman:Private equity is nothing to be ashamed of, but they will always look at you under a financial perspective. Right? At the end of the day, that's what a private equity fund is. They're trying to find numbers that make something a good acquisition. And what that means is they they really don't understand or will pay for the potential of your business.
Dean Sysman:They will pay for what it is at that point in time. So nobody wants to maximize on being acquired for private equity. Everybody wants to be maximized for being acquired by by what corp dev people will call strategics. Right? Again, the the use of that word that has a thousand meanings that nobody really knows until they know.
Dean Sysman:So strategics or or, you know, are the vendors. Right? They're like the Microsoft, the Cisco, the CrowdStrike. And sponsors, which I don't know why people use that word, but that's the word, that's private equity. So everybody's like, how to get a strategic versus a sponsor is basically code words for you want, you know, Palo Alto to pay for you because they're gonna pay a lot more than what Tomo Peralta was gonna do.
Dean Sysman:Right? So if you wanna do that, what you have to think of is what is the most important priority for that strategic. Right? And you can see the biggest deal, the biggest acquisition deals, or, like, the most lucrative ones, that was a strategic buying something that they had to show the world they are not they are not behind in their strategy. Right?
Dean Sysman:Google and cloud security, Palo Alto and identity. Right? You can keep going down the list. Like, if a large strategic acquirer wants to show the world, hey. I am not gonna be behind on something, that's where they put a lot of money in acquisition.
Dean Sysman:So that's my advice on that.
Mahendra Ramsinghani:Dean, as we sort of come to the end of our program, what does the crystal ball look like? You know, we look at the geopolitical challenges, regulatory and financial challenges. When you look at the future of cybersecurity, every company is trying to be the platform, wondering to rule them all. You know, tell us what do you see in your crystal ball for the next few years.
Dean Sysman:So I'm I'm real really curious to see what's gonna be the rebalancing of private to public cyber companies and how that will also impact organizations' ability to to secure themselves. Because I think, you know, when I talk to customers today, they tell me there is a very clear line as to what tools are valuable for me, what platform are used between, like, the platforms that are strategic to me, and I'm gonna move as much investment as I can to them and buy more products. And if you don't make that line, you're just a point product, then I'm gonna look to to sunset at some point. And the reason, by the way, is not because of funding because it's cheaper or more expensive. It's because of manpower.
Dean Sysman:It's because you can train your person that knows the CrowdStrike endpoint to also use the four other CrowdStrike modules, but you can train that person to know how to effectively use five different products from five different companies. And I think that the way we're gonna see how the IPO market, you know, receives Netskope and and where the multiples go there and and I'm saying that's because that's at the current time of this recording, the next big, you know, cyber IPO that's about to happen. But we're gonna there's a big backlog of other companies, including us that are pre IPO companies, that are taking this platform approach and are becoming strategical vendors for these customers. And I wonder how that's gonna play into, you know, best of breed versus platform that people are using. One of the things that we've seen as very successful for us with customers is we'd love to be the place where you get all the advantages of a platform.
Dean Sysman:Right? It's like people can be trained on having a lot of different capabilities and features all within the same platform. But because of our integration approach, we allow you to use the point products you already have and not need to replace or maybe even understand which are duplicative and reduce that number. So I think that's the biggest aspect of how things are gonna change for security teams and security companies over the next few years.
Sid Trivedi:Dean, thank you so much for joining us. Thank you for being a regular listener from the early days, and thanks for coming on and sharing your vision and and perspective and kind of learnings, both positive and negative, with our listeners.
Dean Sysman:Yeah. It was a pleasure. And please keep doing this podcast and having these amazing people on. It's it's an it's a wealth of knowledge, and I'm I'm just happy to continue being a listener. And thank you for having me today.
Sid Trivedi:Thank you for joining us inside the network.
Ross Haleliuk:If you like this episode, please leave us a review and share it with others.
Mahendra Ramsinghani:If you really, really liked it and you have some for us, wrap it on a bottle of Yamazaki and send it to me first.
Sid Trivedi:No. Don't do that. Mahendra gets too many gifts already. Please reach out by email or LinkedIn.
