Slavik Markovich: Building Descope & Demisto—brewing coffee and connections in the US-Israel tech scene
Download MP3Welcome to Inside the Network. I'm Sid Trivedi.
Ross Haleliuk:I'm Ross Haleliuk.
Mahendra Ramsinghani:And I am Mahendra Ramsingani. We've 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.
Mahendra Ramsinghani:Today, we are joined by Slavik Markovich, CEO and cofounder of Descope, an identity and authentication startup that launched with a $53,000,000 seed round. Slavik is a seasoned cybersecurity founder with a passion for tackling complex challenges. With 2 decades of experience, Dscope is his 3rd startup. Most recently, he was the cofounder and CEO of Demisto, a leader in the security orchestration and automation space. Within 4 years of its launch, Palo Alto Networks acquired Demisto for $560,000,000 Prior to Demisto, Slavik co founded Centrico, a database security startup that was acquired by McAfee.
Mahendra Ramsinghani:In our conversation today, Slavik shares some practical advice on building products, raising capital, and managing globally distributed teams. In this episode, you will hear some interesting stories about board pivots. For example, Demisto started off as an endpoint security company, but then ended up as a leader in the security orchestration space. How did that happen? What is the importance of engaging with prospective customers?
Mahendra Ramsinghani:And most importantly, how did the team draw insights from evolving technologies like Slack? Slavik also shares the importance of a good game of poker and how that is helpful in raising capital and, of course, good coffee and how that might help you to land a great cofounder. Today at Descope, Slavik and his cofounders are on to the next challenge, identity and authentication. Tscope solves the password problem while focusing on developers and engineering teams. It sells with a bottoms up self serve adoption motion.
Mahendra Ramsinghani:Now this is very different from Devasto which focused on cybersecurity teams and sold top down. Here, you will find out how Slavic and its cofounders continue to challenge themselves and grow and evolve as markets and technologies change. Get ready for an episode packed with insights, wisdom, and practical advice from a proven founder who is embarking on his 3rd and potentially the largest opportunity. Let's dive in.
Ross Haleliuk:Welcome to the network, Slavik.
Slavik Markovich:Thank you for having me. Happy to be here.
Ross Haleliuk:We will split today's episode into 4 parts. We will start by discussing your background. Then we will cover achieving product market fit, raising capital, and finally, what all founders want to hear about, getting to an exit. Let's kick things off with your origin story. What got you intrigued about cybersecurity?
Slavik Markovich:I think, like, a lot of, folks, my age at least, we all started by trying to hack games to remove, like, protections from the games. So I think a lot of folks basically started there with your early, you know, commodores, and then like the the 86 instruction set. And I think I got introduced this whole thing by playing games on my compatible IBM 86 instruction set and learning the assembly there and just hacking away by patching the game and removing stuff and so on. So it was all kind of a PPS systems, and the like minded people that just stay you spend nights on that while, you know, going to school, I guess. So, yeah, that was the start, but I think the official kind of cyber journey started in the Israeli Defense Forces where, you know, you had to emphasize cybersecurity and, which was part of kind of your job there, I guess.
Mahendra Ramsinghani:So IDF, was sort of a training ground for you, Slavic. And then over the past 2 decades, you've built 3 separate startups. The first one was Sentrygo, database security. The second one was Demisto, SOAR or security orchestration automation remediation. And now the third one is Dscope. So you've been doing this for 20 years. How is it different this time?
Slavik Markovich:I guess, first of all, I guess I'm a very boring person. That's what I know to do. So I don't even try to do anything else, trying to create something in cyber and and so on. I think, generally, I always went to ideas that interested me and were, you know, a bit of a challenge from a technological perspective or from a process perspective and so on. And the early days of database security, that was, like, super interesting to me because, say, at the time, there were no good products that protected database activity.
Slavik Markovich:So that was interesting. Then talking about, SOAR, security orchestration, automation and response, it was basically about the process and how there was not enough manpower and the, you know, the automation aspect of it, but also the chat ops and so on. And this scope, I think, is probably our largest, like, term in a sense that this is like, the identity space is so important, and it also touches each and every one of us because, say, everybody hates passwords. You know? Everybody hates doing, like, these whole challenges of security and multifactor and so on.
Slavik Markovich:And so if you can make it as secure but less frictionless and help companies build that like that, I think that is an interesting challenge. So, generally, each of my start ups was something that I was interested in, and the scope is slightly different in the sense that it doesn't even sell to cyber people. We actually sell a lot to the to the engineering folks, to the CTOs, VPNs, and and and so on. So it's slightly different, but it's still, you know, the challenge is what kind of got me started here.
Sid Trivedi:Your first startup, Slavik, you talked a little bit about it. It was called Centrico, and it was a database security company. What problems were you solving, and and how did McAfee, which ended up acquiring the business, how did they hear about you?
Slavik Markovich:The reason I think it's a kind of a lesson for a lot of founders is try to solve things that, you know, you understand are painful for you. And so I did some consulting to Sony PlayStation at the time here in Foster City, and we implemented the bidding system, the 1st online gaming system for PlayStation, which was actually pretty interesting. And one of my bragging rights is I have my name on a lot of the games that were out in the in the credit draw at the time. I'm talking 2003, 2004, and so on. So that's, that's my bragging.
Slavik Markovich:Right? But beyond that, what really surprised me was that I, as a consultant, could access the database of all Sony customers with, like, billing information. And it wasn't encrypted, and it wasn't protected against administrators, basically. And so I said, oh, that can't be right. And how can we protect it in a way that is as close to the database as possible, but not being controlled by the database administrators?
Slavik Markovich:And so this is a Sentrygo was actually a very challenging technology because what we did, we reverse engineered all the relational databases like Oracle, Cypress, DB 2, SQL, SQL Server, and and so on. And they we attached directly to the memory of the database to derive the activity. So I will say for, like, 3, 4 years, I was basically dreaming in assembly, like, seeing memory structures, living inside IDA Pro, and and and all of that. So it was very technologically challenging, But the problem that we solved is still super interesting. How do you monitor database activity, especially for privileged access?
Slavik Markovich:And so if your DBA looks at your salaries or there's a SQL injection hack and then your application becomes done, it does things that they they shouldn't do, I I you know, it's still very relevant. So, that's how we we kind of started. And we actually approached McAfee because they had like a server security kind of unit. And databases were like a lot of the data center were like one of the crown jewels, the most important ones. And we kind of went and sold together to a bunch of companies.
Slavik Markovich:And this is where I met my cofounder, Rishi. And the business was, like, very successful, and then it's just naturally progressed to the next stage, I guess.
Ross Haleliuk:Yeah. As you've mentioned, the acquisition sponsor at McAfee, Rishi, and you became friends and eventually, cofounders of Demisto. Demisto was not a normal Silicon Valley cybersecurity startup. 4 of the cofounders were spread across different continents coming together. What are the main challenges in building a company culture under such circumstances?
Slavik Markovich:Yeah. So we it it's kind of funny because, say, 2 of us were here in the Bay Area, 2 of us were in the Israel, and I think it works or it can only work if you have full trust between the founders. And in my case, I worked with the the Israeli founders, in one case since 1997, and in the other case since 2,006. And so I knew them really really well, and we would just work together. The other aspect is that it's there is sacrifice here.
Slavik Markovich:Right? You you get to go on calls at, like, midnight, and they get to go on calls at midnight, so it only works if everybody is just pulling in and working together. And the third I would say is that we had full trust because we, from the get go, said, we're not gonna worry about how we split the pie and everything, we'll be equal in everything throughout this entire journey. And so that was like, there was no thinking, oh, he gets more shares than me, or he gets more salary than me. It was all very, kind of completely open and and very collaborate.
Slavik Markovich:And, yeah, Rishi and I, I like to think that I seduced him away from McAfee just by getting him hooked on good coffee. So when my office had, like, a decent coffee machine in the office, because the McAfee coffee was shit. So I had a private machine in in my office, and his office was next to mine. And I would say, hey. Come on.
Slavik Markovich:Yeah. Let's drink coffee in the morning and so on. And we started chatting. This is how we kind of, you know, created a strong connection, and we continued the to to start something together. But, yeah, it was it was pretty funny because prior to McAfee, I didn't know Rishi.
Mahendra Ramsinghani:And to this day, Slavik, Kiro, I I remember the first meeting we had, you, Rishi, and me. And I asked you, so how did you guys meet? And you both look at each other and at the same time say, I guess because we love good coffee.
Slavik Markovich:So it's it's actually a bidirectional process. Right? Because I got him to appreciate, like, good coffee, And he slowly trains me to eat more spicy food. So I you know, Indian food is somewhat spicy, and I did eat spicy at all. And slowly, I'm kind of getting there.
Slavik Markovich:I'm still a wuss, but I'm getting there.
Sid Trivedi:Any advice for the founders on coffee machines that you'd recommend?
Slavik Markovich:I I think, generally, invest in that. You know, coffee makes the the start up work. We have a Breville here, which is pretty decent, I think. It, you know, it dumps, it does the grinding, the mill, frothing, everything. But, you know, find your right beans, find your right coffee machine, and invest in it because that's important.
Sid Trivedi:Well, you know, let's move on from your background to talking a little bit about achieving product market fit. And, you know, Demisto aspired initially to focus on endpoints and endpoint security and then pivoted into security orchestration. Walk us through that light bulb moment when you realized, hey, we're not gonna look at endpoints anymore, no more endpoints, and how you found the groove for an integrated SOAR platform.
Slavik Markovich:Yeah. So we initially started, I guess, because we were at McAfee. McAfee is somewhat famous for being an endpoint company. We initially said, you know, endpoints are kind of interesting, and the EDR market just started, you know, going. And they there were, like, some really cool companies out there, and some of them actually had, like, peer to peer databases, like Carbon Black was there, and they had a challenge with performance.
Slavik Markovich:And, like, we said, you know, we can probably solve it better from a technology perspective. And so this was the the the thing that we started with, and we created, like, a really cool peer to peer database distributed queries, like super smart. We were very happy about it. And then our sales 2015, we could have said, okay. Let's schedule a bunch of meetings with CISOs.
Slavik Markovich:And we had probably, I think, like, 35 meetings with the different CISOs where we presented the idea and the overwhelming response was another endpoint. No, thank you. And we were like, oh, shit, that's it. That's not good. So during those meetings, we actually started people thinking and asking them, okay, so what are the big problems that you're facing and what's challenging you?
Slavik Markovich:What's keeping you awake at night? And they're all talked about, like, this huge amount of alerts, not enough manpower, and the need to do something smart about that. And we looked at each other. I remember Rishi and I kind of looking at each other and saying, wow. That's actually a pretty good idea.
Slavik Markovich:Let's, you know, invest in that. And so we we started with, this idea of playbooks and automation and the connectors to various security tools, And we did a lot of our ideation at the time. Slack basically started, like, getting traction. And we did a lot of ideation with Slack team that we created. And the, you know, during one of those ideations, we looked at Slack and we said, oh, you know what?
Slavik Markovich:This interface actually is amazing. Let's bring it into the this space as well. And so we kind of invented the whole chat ops for security in the source space, and it almost all came came up, like, via accidents. Right? A lot of people from seesaw, like, just inspiration as we went and ideated, and, this is, you know, this is how how it started.
Slavik Markovich:I think that we basically convinced both Gartner and the customers that it's not only about automation. It's the whole incident management. It's automation. It's chat ops. It's the war room, and the integration together, And we we basically kind of led the charge where all the other players kind of copied us.
Slavik Markovich:And so we we were really happy. Like, oh my god, they're copying us. That's good. We're like, we're leading. So, this is how it started.
Sid Trivedi:Slavic, you mentioned kind of talking to those 35 CSOs and getting their feedback and them helping you kind of move from endpoint to to to SOAR. Any advice for founders who don't have those you know, CISO connections on how they should get that type of feedback? Because that was very much critical. You know, you you may have gone down the endpoint road and then competed with CrowdStrike and Cylance and Cyber Reason, all of whom were kinda built a few years before you. Yeah.
Sid Trivedi:So it would have been you know, you'd be trying to catch up. And that advice was very helpful.
Slavik Markovich:Yeah. I think, it's super important to get feedback. Like, one of the early things, and I have an amazing story about that in the army. One of the most amazing things that we learned is always to get out into the field and ask the practitioners, like, the real questions. So in the army, we had, like, this huge distributed system that did something.
Slavik Markovich:It doesn't matter what. But we saw one army base where every morning at 8 a. M, the system would reset. And we didn't understand what's going on. We went, we did like log analysis, we tried to do remote debugging.
Slavik Markovich:We just couldn't understand. And then, we said, you know what? We just don't know what's happening. Let's go and visit that army base, which was up north. And, we went there, and we're looking at the system.
Slavik Markovich:Like, we're sitting in front of it. It's like old boxes. We're sitting in front of it, and, like, we're waiting for something to happen, and then this older gentleman, like, one of the the commanders there, just comes in and says good morning to us. We say good morning to to him, and he goes to the coffee machine, then unplugs our system, plugs in the coffee machine, and then makes coffee for itself. And apparently, that was his routine.
Slavik Markovich:Like, every morning, he would plug the the system and and plug the coffee machine. And, that kind of I still remember it because it kind of landed this whole thing that unless you actually visit and go to the field, you just cannot understand what's really going on. And so even if you don't have the right connections, even, like, there's ways to get to those, would be customers. VCs can help. You know, other founders will be happy to help you.
Slavik Markovich:There's, like, multiple routes to get those opinions. And in fact, what I saw is that a lot of the thesis actually are happy to talk with you. They're happy to talk with founders because you actually eventually solve their problem. So I would recommend never to build something, like, inside your own, like, office and just build something without talking with your prospect.
Ross Haleliuk:100%. Like, having done product for for quite some time, yeah, I've learned it very early in my career that you have to get out. You have to you have to get real feedback, understand how people in the in the trenches are using different products, like, what problems they're facing and so on and so forth. Because it's so tempting especially now in the age of social media, it's just so tempting to listen what people say, you know, publicly and then assume that those are the real problems, but the reality is very different. Like, there is so much noise, and the vast majority of the people who are sharing about their problems are not really talking about the real problems, but talking about the problems that impact probably 0.1% of the market.
Ross Haleliuk:Anyway, let's go back to the product management. Tell us more. How did the team prioritize on early features and navigated trade offs and navigated also the customer feedback? In particular, the one piece that would be quite interesting to hear about is how did you navigate the conflicting feedback? Because, yes, as you're right.
Ross Haleliuk:Right? Talking to sisters is important, but you talk to 10 people, and you will get 10 different opinions. How did you how did you make sense of all of that?
Slavik Markovich:Yeah. It's a it's a pretty funny. There's, obviously, a lot of your own experience and your own opinions that, you know, you have to take into account. Sometimes, you would need to dive deep into the feedback to understand, like, the core of the feedback, but we actually simplified it a lot, and we basically prioritized our first customers. So we would do a POC, and the feedback would be, okay, you need to do x, y, and z, and you have to have, like, those connectors.
Slavik Markovich:So we actually prioritize based on those POCs, early customers, and we were really, like, ravaged, crazy about those, that first engagement to make it successful. And so I still remember, like me and Rishi would used to seek at the, you know, at the stock of the customer, just see what they're doing and just go back with homework and just implement and run from there. So it's a like the first enthusiasts, early adopters, customers, I think are really important. And then as like if you got conflicting feedback, you you basically just I think use some of your experience here. There's a I don't know if there's, like, a silver bullet here to just, you know, how you know, rule of thumb that that's how you you take this feedback and not that feedback.
Ross Haleliuk:That does make sense. And I'm curious, sort of taking it taking a step further, how did you know that the feedback you're building upon is going to have a broad applicability to the market versus you would be building, like, a very niche product for a very small segment of customers, which does happen so often in cybersecurity. Like, it's just so common to see founders identify an angle, go out, get some feedback, and it sounds like they're on the right track until they learn that maybe 2 years later that there is only 15 companies on the planet that actually have that problem.
Slavik Markovich:Yeah. Yeah. I think it's a you know, I I'd love to take a lot of credit for, you know, what what we did. A lot of it is just lack because what we did was very applicable, very widely because all companies need automation, efficiencies, you know, and they all kind of face the same things. What we did do is try to first have this north star of where we're aiming and kind of go through the features kind of that will get us to that north star.
Slavik Markovich:That's one thing. And the other, we super emphasized platform capabilities. Sometimes to to our I think disadvantage. So we try to build as generic as possible, and then if one customer wants to use it like that and the other wants to use it a different way, it still would work because the platform was super generic. So we built a generic workflow.
Slavik Markovich:We built a generic like a drag and drop a wizzy wig at the door that you can build the incident pages, whatever, however you want it. And we built the generic incident management platform. And so, and from there, on the one hand, we could actually solve a lot of the use cases without having to redo a bunch of things. But on the other hand, because it was so open ended, until we learned how to be very opinionated, we went into very long POC processes because customers just said, oh, I want to do that. And said, sure.
Slavik Markovich:Yeah. You can do that. And then, oh, I want to do the other thing. Yeah. Sure.
Slavik Markovich:You can do that. And so you could do so many things that it just was never ending. And so until we learn to focus and be very opinionated about what we could do, it just kind of went all over the place. So I'd say have a North Star, build a generic platform, but have opinions.
Sid Trivedi:Talking a little bit about, you know, category creation versus going after existing categories that are crowded, you've kind of done both. With Demisto, you were helping to create the SOAR category alongside a few others like Phantom Cyber, you know, Oliver Fredricks and Saurabh Satish were building that company. We are small investors there. Paul Nguyen was building Invotas, if you remember. So there were a few players in SOAR, but it was new.
Sid Trivedi:It was a relatively new category, and you were helping to educate the market, and that was an uphill task. And when you compare that to Dscope today, you're going after a very established market, and there's some pretty established players like Okta and Pig and Microsoft that are out there, and the market understands what's going on. And your goal is really around, how do I differentiate from the market and how do I explain to the customer where I'm different? What's your advice for founders on how to pick between these 2 effectively necessary evils? It's kind of, you know, a no win scenario, but how should they pick between the 2?
Slavik Markovich:We don't necessarily kind of thought like that. Like, hey. It's a new category or, hey. It's, like an established market. So we kind of looked at the problem.
Slavik Markovich:We like the problem. We like the space. And then we kind of said, can we do it better than what's existing? And obviously, if it's completely new category, then you say, oh, you know what? Yeah.
Slavik Markovich:We can do better because there's not a lot of things out there. And when we looked at the customer identity and access management space here in the school, we actually saw that they're, like, really, I'd say, older companies, like, Bing and, you know, Microsoft in a sense, and Okta, and and and so on. And there is, like, a bunch of new startups, but the old companies are old. So in a sense, you know, if you innovate and then you can easily out execute them, and a lot of a lot of them, I think, are are just very hard to work with and were not very developer friendly. I think a lot of the new companies, they didn't have the enterprise experience, and so they were, like, really cool kids, but they don't know anything about selling to enterprise and enterprise features, and so and so I think we we we took a hard look at the market and saw that the market is huge, and we can really execute much better than the others.
Slavik Markovich:And, that was our, like, thinking of, hey, let's do that. This is also one of the reasons where it's a different funding. Anyway, I guess it's another section of this podcast, but it's a different funding dynamic. Because for an existing market, when you know exactly what you want to do, this is why we raised so much money in the beginning because we didn't want to worry about hiring more people or, like, getting enough breathing room to to build the right product versus when you're just building a category, it's all about experimenting. And so you don't know exactly what will work and where you're gonna go and what what you'll do.
Slavik Markovich:And so you raise way less than that and don't over hire and and so on. So from my perspective, it was mostly about, oh, this is a cool problem. And then can we can we build something better?
Mahendra Ramsinghani:That's a very interesting, you know, segue into our funding conversation, Slavik. You know, when you're looking at a big market, you're going after solving a mega, mega problem. And especially when the legacy innovators have not yet innovated as fast enough, especially now that you look at the world of AI and how things are changing so rapidly, it's good to be in that place. And also the logic of raising a $50,000,000 seed round. You know, Dscope raised a seed round that made headlines everywhere, right, compared to the $6,000,000 seed round that you raised with Excel, that I remember being a part of that conversation when, you know, we were sitting at the table.
Mahendra Ramsinghani:By the way, when 3 of us met, we did not eat Indian food even though there were 2 Indians. And one of you, I think we went to a burger joint, if I remember where we are. I still have the picture of that burger, by the way, and the T shirt as well that we saw, right? So the question for our founders and our audience is as follows. There is an art form and a science of raising money.
Mahendra Ramsinghani:The science is very simple. Everybody knows that. Hey, you get your pitch deck, there is a cam, there is, the tea, etcetera, etcetera. Right? Everybody knows the formula.
Mahendra Ramsinghani:But the art form is somewhat, you know, way at times. It is dependent on market conditions. It's dependent on your background as a founder. You've already sold a century ago in your 1st cycle, etcetera, etcetera. So help our audience to understand the art form of raising capital.
Slavik Markovich:Yes. Again, I don't want to claim too much credit here. I think a lot of it is just timing and luck and being at the right place at the right time. But I think it's all about, like, the story you tell. Right?
Slavik Markovich:You have to have a convincing story of why, why now, why you, all of those things. And I think I think we had that both in the Demisto and in Discove. So it's all about the story. And then it's slightly about playing poker. So I don't know if you know, but I I play poker quite a lot, and I play every Thursday with a team of folks.
Slavik Markovich:And and so the there's a bit of a poker going on between you and the investors, and, you know, juggling a bunch of investors and so on. And that's also a a, I I think, a kind of an art, where I'll give you an example and, you know, Jake knows that. In the beginning, when we talked with Accel so we we like Jake a lot. He was, like, you know, young, did a lot of, you know, operational work. He understood what we're trying to build, and and and so on.
Slavik Markovich:And so we said, oh, we we would love to work with Excel. It's really good. And then, internally, we said, okay. What are the terms of the deal that we would want to accept if we, you know, they're given where we're where we're aiming, and, you know, what are the laws that we were willing be willing to accept. And when we came to those discussions with Jake, I remember he started with our highest option, right, which was really nice of him.
Slavik Markovich:But, at the time, like, I looked at Rishi, and Rishi looked at me, and I immediately got to said, oh, Jake, you know what? It's like very disappointing. I expected much more from Excel. I expected, like, you know, and, you know, I think that you really understood what we're aiming for. And and and so there there's really poker going on.
Slavik Markovich:And, he he then raised the offer by a lot, but I also think he played poker with us. And he's, so we didn't go all the way to where he was willing to go. And so there's kind of an art there as well in negotiations.
Mahendra Ramsinghani:And so besides coffee and playing poker, you know, making sure that you cast a wide net. You mentioned as a product journey, you talked to 35 CISOs.
Slavik Markovich:How many VCs were in the mix here as you were playing this game? I think at the time, we're probably like 8 that we were serious with that we we kind of engaged. And, honestly, we were very close with, you know, signing a different term sheet, and, Jake was just moving so fast, and we liked the interaction with him so fast that we kind of stopped some of the other processes. But I'd say we probably were serious with, like, 8 of them, and got to, like, a partner meeting with, like, 4 or something like that. Very cool.
Slavik Markovich:And then and then kind of juggled between them.
Mahendra Ramsinghani:Very cool. Very cool. You know, I want to share a story here for our audience about how, you know, there is this dynamic that, VCs versus founders, and somewhat the dynamic ends up being, many times it ends up being somewhat negative. And the story here is as follows. So Jake calls me, Jake Flomenberg, Tri Accel, he's now with Wing Ventures.
Mahendra Ramsinghani:You know, he's a dear friend to a lot of us now. Jake calls me and says, Hey, Mayankra, have you raised your fund yet? So this was the time when I was raising my fund well. And, you know, I played poker with him.
Slavik Markovich:I said,
Mahendra Ramsinghani:What's up? I didn't give him that. So I said, What's up? He said, It was a great opportunity. Axel is putting in 5 and a half 1000000.
Mahendra Ramsinghani:It's a $6,000,000 round, and you have, like, 1 week. So I remember, like, talking to Rishi and you that day, and then driving down to, Montague or somewhere where we met. And then on the way back, the I was thinking like, oh, shit, I don't have the capital to invest. So so I remember calling a friend in India. I said, I need some money, and my friend is bantering with me saying, hey.
Mahendra Ramsinghani:We're a developing country. Money comes from America to India, and you're asking me for money. But he was a childhood friend, a dear friend. And so he wired me the money the next day, and 48 hours later, the money was in your account. And so, you know, the story the lesson here is that founders help VCs to become successful, too.
Mahendra Ramsinghani:You know, it's not just the one way around where so my fund won the best performing company is Divisto. Thank you, Slavic Rishi. And that that allowed me to raise my fund too. So, you know, the lesson here is that, you know, we are all human beings. We're trying to solve problems.
Mahendra Ramsinghani:And many times, founders look at VCs as, like, ah, whatever, money. You know, there is a negative sentiment. But sometimes, you know, people like you and Rishi were kind to, you know, VCs like me or founders like me. You know, it's a great dynamic. So I want the founders to also understand that in your success lies success for investors, life success for your customers, life success for the community.
Mahendra Ramsinghani:So think about the responsibility that you carry and work with any everybody in a in a nice way. I mean, here you are. Your next seed round was $50,000,000 So no wonder investors were chasing you so aggressively for your next stop. So thank you for all
Slavik Markovich:your help. We kind of had this oh, for sure. We kind of had this rule of, like, no assholes. Life is too short. Just be kind and enjoy the journey.
Slavik Markovich:I think it actually reflected, throughout both for employees, and, you know, we keep close connections with our VCs, you know, with the with the pretty much everyone we work with, and they I think you can see it also when we started the scope. The first, like, 20 employees just came from the previous, you know, work that we did with Demisto. So, so we we basically just got a lot of the old gang back together, and they continued to do it together as well. So, you know, I think we're all kind of well, maybe some of us are, like, too old to, you know, to not enjoy the journey.
Sid Trivedi:Let's talk about the series a Slavic. You raised the series a at Demisto just a year after that seed round that you raised from from JAIC and Excel, and you bought in $20,000,000 in that series a round. What milestones had you accomplished? Was it something that you were planning to raise or were you preempted? And how did those milestones differ from your initial projections?
Slavik Markovich:Yeah. I think it was like almost a mistake. So when we when we kind of started eventually going to market, it was Q4 of 2016, and we actually got amazing traction. We did have sales guys, like it's just me and Rishi selling, and, you know, Sisush wanted to talk with us, and we closed the decent amount of business just by ourselves. And so we said, oh, you know what?
Slavik Markovich:We actually have product market fit. It's all amazing. And I think we closed the quarter, like like, 640 k ARR, which is an amazing Q1 for any company. And then we said, that's it. Like, we we found the product market fit.
Slavik Markovich:Let's go raise money. And so we we actually started a process, and we raised $20,000,000 towards the end of q 4. And, we brought in the time clear sky. And, also a funny story because I was visiting the Israeli office, going up the elevator, and I had the backpack of silence for some reason. And, this guy approaches me and says, oh, silence.
Slavik Markovich:I know this guy. I've been investor in them. And, we kind of got talking, and the this was Alex from Clear Sky, and this is how we got basically to know each other. So it's completely coincidence. But anyways, we brought the money, and we immediately said, oh, we have the $20,000,000.
Slavik Markovich:Let's hire a bunch of sales guys, and just let them run. And, guess what? We actually failed completely. So q one of 2017, we closed a single deal, 100 k. That was, you know so we went from 640 to a 100 k because we didn't understand it's a completely different story where you have founders selling, who fully understand the problem and the product, and CISOs are happy to talk with, and it's a completely different dynamic where you have sales guys going and selling.
Slavik Markovich:And so it was really funny, the first board meeting that they have with now the new investors with this guy, and we're saying we're sitting there and saying, you know what? None of our, you know, theories and none of our projections actually worked out. It was terrible. So, from from that perspective, we actually raised before we found the repeatability in our go to market, which was a pretty funny and stressful and stressful. And I have to say that the our investors were super patient with us.
Slavik Markovich:They were super, like, guiding and understanding and so on. So I it could have been a very different discussion, but it was actually a very good discussion because they still believed in the vision, believed in the North Star. And then, you know, then it was just execution. And we actually finished that 1st year with 4,400,000 of ARR. So 1st year outstanding was actually amazing for us, but it started very badly.
Ross Haleliuk:So knowing what you know now, what would you have done differently if you were to go back to that time?
Slavik Markovich:I mean, generally, you know, it worked out really well for us. It it didn't work out badly. But I would actually say that you need to find the repeatability. You need to find to move away from founder led to, like, process led where you find some like, a real go to, you know, product market fit, and then you can actually raise without having this huge dip in the in the middle. So first is we all know that first, like, 10 deals, the 10 customers, they're all closed by the founders.
Slavik Markovich:Right? The founders have to hassle, do whatever it needs to be to happen, and just close those deals. But that doesn't say anything about the scalability and and the repeatability of the pieces. And then starting that engine, I think, is important before you pour more money into it, which we didn't. Right?
Slavik Markovich:We we we poured a lot of money, and then we saw the engine doesn't work. We need to kind of backtrack and and kind of build the engine from the ground up. And so that, I think, is an interesting lesson to learn. But, again, because the timing for our product was really good, we we could afford making a lot of those mistakes because the trajectory was just going up anyways. So those mistakes were kind of fixed on the fly while, you know, while running and, you know, it worked really well.
Ross Haleliuk:Interesting. Yeah. So going back going to the series b, 2 years into the Demisto's journey, you have already raised a 40,000,000 series b round led by Greylock. Did you feel at the time that the company was overvalued? And how did this funding round change your company's trajectory?
Slavik Markovich:So it was really funny. That was one of the most, I think, competitive rounds because we were chased by everybody. And, honestly, like, even looking back, I think we were undervalued, not overvalued. Like, when we raised, this 40, 43,000,000, we actually had, like, really good visibility into, like, 15, 1,000,000 of ARR. And, eventually, we ended the year at 21.
Slavik Markovich:So the the growth and, like, the trajectory was the hockey stick. And so, you know, I think it was first of all, everybody was chasing us in terms of business, but we really loved the interaction with Braidock. You know, Sarah and Nasim, they were like really smart, did their a lot of their homework without bothering us, and and, like, we the interaction with them was great. And so we decided to take money from them even though we had higher valuations and higher term sheets in in our hands. And, unfortunately, we didn't have a lot of time to enjoy interacting with them because 3 months after, we already had the conversation with the Palo Alto Networks and and were acquired.
Slavik Markovich:So I think we closed around in, like, October of 2018 and, like, in the in January of, 2019, we already had, like, handshake with Palo Alto Networks. So we we had all the money in the bank still, and we we made the and for them, I think the return on investment was pretty nice because they we tripled their money in, like, 4 months. So they invested, like, 31, I think, of the round, and they got, like, 93 of the round in, like, few months.
Sid Trivedi:You talked a little bit about Palo. So let's let's talk about exits. And Demisto was acquired by Palo Alto Networks for $560,000,000, and that was about 4 years from from when you originally founded the company. Give us the inside scoop on those negotiations, why you made the decision to sell, what were the challenging parts, what were the exciting parts. It's not obvious, you know, when you describe all the numbers being at 20,000,000 of ARR, growing the company at the rate that you were having raised $43,000,000 more, that you should go and sell.
Sid Trivedi:So I'm I'm very curious to hear a little bit about what was going on between the 4 of you and the board as you are trying to go through that process of deciding.
Slavik Markovich:Great question. Honestly, I think, you know, hindsight, we probably made a mistake. You know, we shouldn't have sold it. Now the business is huge with Palo Alto Networks. They're like I think that probably they're one of their best acquisitions for sure.
Slavik Markovich:At the time, we didn't even envision selling. Right? So when Nikesh approached us and said, hey, let's meet for, like, we want to learn about your business and so on. Again, I I didn't even think about, you know, acquisition at this point, and in my head, Palo Alto Networks was always like a firewall, like, next gen firewall company. So, okay.
Slavik Markovich:Sure. Yeah. The best I I I thought, hey, Maybe we can actually do some work together and, maybe go to market together and co sell or do something like that. And that that was, the best. So I didn't even prepare for the week.
Slavik Markovich:I came to the meeting, and I'm going into this huge boardroom, of Palo Alto Networks, and I see a lot of people. And then, like, I I thought I'm meeting Nikesh, but I apparently, there were, like, 6 people in the room, you know, the cofounder Nir and the VP of Corp Dev, and Lee who was the chief product officer and the cash app engineer, and a bunch of folks. And I'm like, I didn't prepare anything. Then we basically went presented the the regular customer presentation that we had. And right in that meeting, Nikesh is like, while I'm presenting, I presented the stuff, and then Nikesh is like, would you think about doing something more strategic?
Slavik Markovich:And I will say, we just finished the the round, with, great. We sold, like, a huge trajectory for us, and we and so I said, no. Look. Talk with us in, like, a year where we were, like, much bigger and so on, and we just left like that. And and I thought, okay, that's that's pretty much it.
Slavik Markovich:And then the guys started, like so he sent me WhatsApp message. The big WhatsApp pay user sends me WhatsApp message. Hey, man. Come to my house. Let's eat breakfast.
Slavik Markovich:You know? Let's talk and so on. And they eventually, you know, he started kind of mentioning some numbers. And when when, like, you throw numbers, then suddenly I have the duty to kind of talk with the board, and, like, discuss it internally, and it became suddenly it became serious. I didn't even expect it to be.
Slavik Markovich:And in our head, we as cofounders, we said, Look, Palo Alto has tons of customers. With them, our product can actually reach many more. It's going to be like huge. So that was one thing, and, like, even the the integration with all the product products and so on was really interesting to us. Then we also had the financial, you know, aspect.
Slavik Markovich:If it's a internally, we said if it's above half a $1,000,000,000, we'll contemplate it. If it's below, we're we're not. So that would that was the line in the sand for us. And at at the time, look, we're talking about 2018. Right?
Slavik Markovich:So the multipliers were not like, 2021. The like, having, like, 25, with 30 multiplier was considered amazing. Right? So that was kind of the 9% and I have to say that our VCs basically didn't want us to sell. They actually pitched and told us, don't do it.
Slavik Markovich:Don't make a mistake. A hint to it again, they were probably right, but we as as cofounders felt some pressure because it was a big financial number. So, you know, life changing for most of us or even all of us. And the other thing that, you know, Palo Alto did really well, they said, look, if we're not going to buy you, we're going to buy your competitor. And so, think about it.
Slavik Markovich:Our biggest competitor was acquired by Splunk, a huge company. Now, the second competitor is going to be acquired with Palo Alto Networks, And you're suddenly facing those huge companies, and you're like the last man standing. It's not a comfortable position to be in. And so we had some concerns. And and they honestly also, they were very generous financially, you know, both in a founder extra retention and whatnot, and they and and also in terms of all the employees.
Slavik Markovich:So everybody basically landed in Palo Alto Networks, and everybody found a place, and so that was really important for us as well. And so we eventually decided to actually sell, which was a, you know, I don't regret it, by the way. So just just to be clear, I think it was the right decision at the time. It was very hard to predict 2020 and 2021 in terms of, like, valuations and craziness.
Mahendra Ramsinghani:I know that, you know, some of the VCs tried to stop you from that exit. I was not at that table, but I'm very glad that you sold. I mean, speaking of life changing, you know, it has a downstream effect on many of us, so thank you again. You also did something very interesting. You know, a lot of founders, after they get this whole acquisition process done, whenever we talk to them, there is this, like, I can't wait to get out.
Mahendra Ramsinghani:You know, I've got my golden handcuffs, and I hate this mothership, blah blah blah. But you're consistently even at, McAfee, you spend a lot more than 6 months or 1 year. And there, you seduced Rishi with your good copy, but you you stayed with the mothership to help them. And then even at Palo Alto, I remember several conversations I would have with Rishi. You, post acquisition, and you would share that, no.
Mahendra Ramsinghani:These guys are good. They're they're treating us well. We are enjoying. And most importantly, we're building a fine trajectory here. What advice do you have for founders on post acquisition, you know, dynamics?
Mahendra Ramsinghani:How should we see the mothership with both strategy and joy and compassion?
Slavik Markovich:Yeah. I guess, you know, I I had multiple experiences by being acquired and I think Palo Alto Networks actually is a really good acquirer in the sense that for the most part, in the beginning at least, they live alone and they're very thoughtful in how to integrate into their like main business. So from that perspective, I think I have only like compliments to them. So that was actually a really good experience. And I think for the first probably, like, year and a half or maybe even beyond that, I think I I found myself being, like, extremely busy just landing the ship, integrating, thinking about the next step of the journey within Paro Alto, and then training all the sales guys, meeting customers that they wouldn't have met otherwise because they they have a huge reach, and so they really kept me busy from that perspective.
Slavik Markovich:Obviously. And I was very open, and I think we were all open with them. We said, this is not like a life like, we're not gonna stay there forever. But we did. We stayed there for almost 3 years.
Slavik Markovich:Rishi actually stayed the full 3 years. And they I think we generally enjoyed our our time there. So if I compare it to, like, McAfee as as an acquirer, McAfee was not doing a great job there. Like really, it was it was pretty terrible. And even though I felt responsible for for my team and I had to stay and land everything and so on, I couldn't wait to just move on.
Slavik Markovich:Here in Palo, I think the the experience was much better, and you can feel that they are still very hungry to win and to go out there and just grow the company and and and continue just winning. So the hunger aspect was was was there. Having having said that, you know, I think my skill set is much better utilized in a startup versus a larger company. I like to make decisions fast and move faster than even like Apollo Alto will move. If you have a large ship, just changing direction or or adding more stuff just takes a long time.
Slavik Markovich:In the startup, you can make a decision and tomorrow it happens. In a part of after that, once you make a decision and like 6 months down the road, it actually happened, which which is fine. I mean, it's this is just the nature of the of the business. But I feel I enjoy startups much more than a bigger company.
Mahendra Ramsinghani:You are now investing as well as serving on the boards of many startups. What is your advice to founders? And what are some observations that you have experienced in this role?
Slavik Markovich:So first of all, I think as investors, we are probably pretty stupid investors, I have to say. So all I care about is that the problem actually is interesting. The technology is cool, and I want to be part of the journey. I think we're again, we're pretty lucky in the sense that we don't invest other people's money. It's just our money.
Slavik Markovich:And so we can afford being stupid about, like, oh, maybe the go to market is not gonna be that great, and maybe, you know, the founder is not as experienced and and so on. And, we don't care because we want to be part of the journey. So for from that perspective, we think we are not making the same the same decisions as a like a traditional investor or traditional VC would make. But we do invest quite a lot in areas that interest us, be that like cyber, AI, enterprise software, all of those things. And I think what I really care about is seeing the passion of the founders about the problem, and, you know, seeing in their eyes that they just want to, you know, devour the problem and then solve it and just go about it and and hustle around it and do whatever necessary just to make the problem go away.
Slavik Markovich:And so that is, I think, the most important thing, just having the the team passionate and understanding and and so on. Obviously, all the other things are super important, the TAM and, like, go to market and and and and so on are critical, but the first thing that we really want to see is the the hunger in the founders' eye. That's I think is is super important. And that would be my advice, like, try to solve something that you care about. That you know, that you care, that you're passionate about.
Slavik Markovich:Life is too short. Don't suffer through something that you don't really care about and just because you think it would make a good business. That's that would be my my advice.
Ross Haleliuk:That is a good advice. And as we're moving towards the end of the episode, I'm curious, if you could go back in time and give yourself one piece of advice when starting the scope or let or let's just say when starting Demisto, what would that be?
Slavik Markovich:So I actually had the benefit of doing another startup before the Centrico that we talked about. And I think I actually learned the right lessons from that startup to my future career startups. In Centrico, I actually did not know a lot about, you know, what it means to be a founder and startup founder and so on. And I honestly burned myself out. So the first two years of Centrico, I worked, like, probably, like, 18 hours a day nonstop for, like, 2 years straight.
Slavik Markovich:And then I had a complete meltdown, and, I just couldn't see or couldn't sit in front and like think about, you know, the business or the technology or anything like that. And I think when we started Demisto, we actually talked among us, the founders, and we said, let's try to make something different. Let's have a much better work life balance, come home, see the family, work out a bit, things like that, and I think that's completely changed how we went about both the and how we go about the scope. So kind of think of it as everybody says that think of it as a marathon and so on, but you actually have to be conscious about it and do it. And so that is one thing that I think I learned a lot.
Slavik Markovich:Now if I again, hindsight is easy. I think if if I would now have advice for my, you know, demistole self, I would probably, like, do my funding differently, as I mentioned. I might have not sold the company at the time that I sold it. You know? All of those are decisions that you can, in hindsight, probably think differently about.
Slavik Markovich:But I think the most important for me was this approach of, hey, you know, 5 pm, let's go home. Let's go work out, let's talk with the family, and so on. You can work at 10, you can go at 10 pm and go back to, you know, working, but have this window of time to actually take a breather. So I think that that's probably one of my most important advice to founders is just make sure to take care of yourself. Otherwise, nobody's going to do it for you.
Slavik Markovich:Right? So that's super important.
Mahendra Ramsinghani:Yeah. Thank you, Slavik. And I think this notion of work life balance and founders especially caring for their own selves, if that awareness does not trigger in, you know, we've seen situations of burnout. We've seen situations of frustration and impaired decision making as well. So that's great advice.
Mahendra Ramsinghani:And as we wrap up our episode, let's take a look at the crystal ball here. Your journey in IDF and going back in time to the gentleman who would unplug the machine because his coffee was more important was a classic insight of how, you know, staying in touch with customers is important. But that was database, then you got into orchestration and automation. Now you looked at identity. But the world is changing.
Mahendra Ramsinghani:You know, you look at the amount of capital that's flowing into cyber. You look at the geopolitical forces. You look at how regulators are paying a lot more attention. In fact, in one of our previous episodes, Sid described that RSA, there were several people from Washington, DC spending time at RSA. So you have this confluence of macro, micro, and a lot of competition.
Mahendra Ramsinghani:If you look at the next 5 years in cybersecurity, what are some things that you see or what do you predict?
Slavik Markovich:So first of all, I think that, and it's no surprise to anyone, AI is going to be more prevalent in every aspect of your life, I guess, not just the of of cyber. Autonomous agents that make a lot of, like, work done for you, I think, is very interesting. Identity, in that case, becomes very interesting as well Because then authorization and what can the agent do on your behalf is is suddenly, like, very interesting. Like, you want to give him something, but you don't want to give him everything. Not your passwords, but maybe so so that becomes, like, super interesting.
Slavik Markovich:I think generally, I would see a lot of, you know, in my particular area of, it's and and and space, I would see a lot of, moving away from passwords to other means of authentication, which, you know, one of the big reasons we started the scope, I think. And if you see my shirt, like, kill dash 9 passwords, that's what we're trying to do generally. So things like passkeys and other options, I think, would be the future. And so that's another thing. And what you know?
Slavik Markovich:And we all know that it's very hard to predict 5 years ahead. The way that AI changes, like, 6 months ago, Things were completely different than today. And so we'll we'll see, I think, a lot of, innovation, but also a lot of, like, wasted, how shall I say it, a lot of burned money on thin wrappers around AI, which don't have necessarily any substance. And so I would probably advise a lot of caution here not to overinvest, burn money on things that not necessarily have the right values. But overall, I I think, you know, AI is is going to be prevalent across the board in in many of the, you know, new innovations that are coming.
Mahendra Ramsinghani:Wonderful. On that note, Slavik, thank you again for the inspiration, the decades of work you've done as a founder, and most importantly, being so open in sharing, your journey. Thank you so much.
Slavik Markovich:Of course. Happy to do that and happy to be here, and thank you guys for hosting me.
Sid Trivedi:Thanks, Lami. 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 feedback 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.
