SaaS Interviews with CEOs, Startups, Founders
1208 Will This $250m+ Valuation Company be DeFacto Security Rating Standard?
14 Nov 2018
Chapter 1: What is the main topic discussed in this episode?
focus on your team.
Chapter 2: What inspired Dr. Yampolskiy to start SecurityScorecard?
He launched Security Scorecard back many years ago after he realized a big vulnerability at his prior company and said, wow, I could get fired for this. I've got to create a standard. He's now focused on creating the standard security metric, which hopefully gets used by many, many companies. Launched it in 2014 today.
He's working with over 450 customers, doing north of $2 million per month in revenue, hoping to break that $25 million AR mark later this year, doubling year over year. So healthy growth Net negative revenue churn, which is obviously a healthy metric to be at. $80,000 on CAC is a max less than 12-month payback period.
Lifetime value to CAC, obviously super healthy with his team of 130 people based in New York. This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines.
We went from a couple hundred thousand dollars to 2.7 million.
I had no money when I started the company.
It was $160 million, which is the size of many IPOs.
We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is Alexander Yampolsky.
He's a recognized expert in the security field, running his company, SecurityScorecard.io, which is the leader in security ratings used by hundreds of customers like GE, McDonald's, Pepsi, and many others. Before founding the company, he was CIS, so at Gilt Group, and has held lead technologists and security roles at Goldman Sachs, Oracle, Cinchcast, and Microsoft.
He's a published author and active speaker in the security and software development communities and has a PhD in cryptography from Yale University. All right, Alexander, you ready to take us to the top?
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Chapter 3: How does SecurityScorecard measure a company's security posture?
We want to create a new language for how companies talk about security. So we want chief risk officers, board members, CFOs, regulators, we want them to start using scorecards as part of an everyday dialogue. We want people, just like people bake into contracts 99.9% uptime requirements, we want people to start baking into contracts minimum scorecard requirements. Mm-hmm.
And that's the vision we're trying to create. And so half of our company is dedicated to product and engineering because we believe that ultimately, I mean, if you have crappy technology and really good sales and marketing team, that's only going to last you so long. If you have an amazing technology and crappy sales market and execution, then people are still going to value your technology.
Luckily, we have good technology and good sales market and execution, but we're dedicating... Quite a lot of people in a company towards product innovation.
How many months does it take you to get back your CAC on a customer?
Chapter 4: What is the business model of SecurityScorecard?
You know, customers pay us up front. So, you know, and given the retention rate that we have, you know, we see in very good economics metrics. I don't want to disclose it, but, you know, we see in very good efficiency.
Okay, but in terms of payback period, I mean, it sounds like you're south of six months if they're paying you all up front.
It depends. We're under a year.
Okay, that's fair enough. Under a year. And just to be clear, if you're under a year and average ACV is 80 grand, it means you're willing to spend up to 80 grand to acquire one of these customers. Where are you spending that typically?
see very good network effects out of what we do because if you have a company if you have a company who is using us to monitor 10 000 plus of their suppliers naturally those suppliers also want to know what their scorecard is they want to know how to get better they want to know how to how to improve for example suppose you have a very important marketing relationship and uh
that marketing relationship says, I'm going to put in $2 million into Nathan's podcast, but we're concerned about your security. Well, it's going to be an incentive for you to sign up for security scorecard because you want to make sure you're protected. So the very strong network effects that we're seeing. We're seeing good return on investment from conferences from events.
For example, we did a big splash at RSA. We launched a new product recently called Bridge Insights that nobody else in the market has that measures concentration risk. We're spending heavily on events and just brand recognition.
How much a year on events would you say more than a million? I'm sorry, say again? How much per year on events would you say more than a million?
Yeah, we're spending more than a million.
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Chapter 5: How has SecurityScorecard's customer base evolved?
All right, very good. I like the vision. Let's wrap up here with the famous five, Alexander. Number one, what's your favorite business book?
Sure. So one of my favorite business books is... Behind the Cloud by Mark Benioff about how he created Salesforce. It's a very good book where he talks about the history of Salesforce, many of the tricks that he used to build it. And that's one of my favorites.
Number two, is there a CEO you're following or studying right now?
Sure. Well, I'm a big fan. You know, I'm a big fan of Elon Musk. I think that he's a very inspirational guy. He's a very smart guy. I met him a couple of years ago at a Sequoia capital offsite. And I, you know, I learned a lot of interesting things just from a casual conversation with him. When I asked him, how does he know that what he's working on during the day is really making a difference?
He said to me at the end of each day, he reverse engineers his day and says, how did I spend my time? Which meetings did I attend? Who did I speak to? Were there things I could have delegated? Were there things that I shouldn't have been doing? And that was very good advice. So yeah, Elon Musk is one of my favorites.
Number three, what's your favorite online tool for building a business?
So I like to use Evernote. I'm a big fan of Evernote. How I start each day and each week is I basically create a list in the beginning of each week. And I say, here are the three most important tasks that I need to get done this week. And here are the batch tasks that I just kind of need to get done, but they might not be as important.
And I always ask myself, if I do these two or three things, how am I going to advance the vision? How is the company going to be better? So I use Evernote religiously every single day.
Number four, how many hours of sleep do you get every night?
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Chapter 6: What metrics indicate SecurityScorecard's financial health?
And I answered, well, uh, the job of a goalkeeper is to prevent the other team from scoring. And the person said, no, that's wrong. The job of a goalkeeper is the same as it is for every other player in the field. It's to win the game. It doesn't matter if you're a soccer player or goalkeeper, you're all a single team. You all work towards the common goal.
And so one thing I would give advice to myself if I met myself at 20, think more about how to build cohesive teams. How do you get people to follow you? How do you get people to work together? It's a bit of a cliche advice, but high-performance teams are what make or break a company. It's a huge, huge difference.
Guys, there you have it from Alexander. Focus on your team. He launched Security Scorecard back many years ago after he realized a big vulnerability at his prior company and said, wow, I could get fired for this. I've got to create a standard. He's now focused on creating the standard security metric, which hopefully gets used by many, many companies. Launched it in 2014.
Today, he's working with over 450 customers. doing north of $2 million per month in revenue, hoping to break that $25 million AR mark later this year, doubling year over year, so healthy growth. Net negative revenue churn, which is obviously a healthy metric to be at. $80,000 on CAC is a less than 12-month payback period.
Lifetime value to CAC, obviously super healthy with his team of 130 people based in New York. Alexander, thank you for taking us to the top.
Thanks, Nathan.
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