SaaS Interviews with CEOs, Startups, Founders
How This Security Company Raised $26m Seed Round With No Revenue
20 Jan 2022
Chapter 1: What is the background of the guest and their experience in cybersecurity?
So for 12 design partners, does that mean they're paying customers or are you guys pre-revenue today? Today, the company is pre-commercialization. The easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com. Hey folks, my guest today is Ofer Ben-Nun.
He's a seasoned entrepreneur with vast cybersecurity experience and was the founder and CEO of Argus, a global leader in automotive cybersecurity, which was acquired by Continental in 2017. Following that acquisition, he served as a member of the senior management at the company and as CEO of Argus, leading it to protect over 60 million vehicles globally.
He served as captain in the IDF Cyber Intelligence Unit 8200 and was a team member of two Israeli Defense Prize winning projects. Ofer, are you ready to take us to the top? Ready. All right.
Chapter 2: How does the new corporate browser enhance security for distributed workforces?
Something special is happening over there in Israel. You know, I have these founders on and they're all for exit IDF. You know, we've got Ari at CoreLogix, Tomor at Yadpo. What's happening over there? Well, I think it's two things, right? One is the fact that a lot of Israelis now are looking, what can they do better for the world? How they can contribute a little bit more.
And I think it's kind of the feeling of the ecosystem that, you know, there are opportunities that we can bring value. And the other point is obviously the background, right? So the fact that everything is always quite hectic, the background coming from 8200 is also very much helpful where we are solving significant problems on a daily basis. So yeah, the atmosphere here is quite good now.
So you're tackling security in the enterprise now with this new corporate browser that you've built specifically for distributed workforces. How on earth can you get people or teams to convince their teams to switch from Safari, Chrome, or the browser they use onto your secure browser?
I think when teams already understanding that working from everywhere, they would need to have additional security on the endpoints, especially the less managed endpoints, potentially personal devices, or if it's contracted and then in many cases they have devices from other companies.
I think it's clear for people and it's well understood that they will need to have some type of protection on this unmanaged endpoint.
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Chapter 3: What challenges do companies face when switching to a new secure browser?
And if you think about the alternatives, right? To install now a fully managed network filtering or is it to install a fully managed ADR on this device? then one of the alternatives that are having the least amount of privacy invasion is actually a browser. Because then, in a sense, your employee knows that you're only monitoring things which are corporate-related, but anything else is not.
And so walk me through pricing. Obviously, every SaaS company is different, but how do you price this thing? Very, very similar to ADR. So the pricing model is pretty much identical. Sorry, what are you pricing as? Number of browser installation, number of seats, feature-based upselling? So it's number of browser installations. So it's in a sense, per device per month. Okay, per device per month.
And so obviously, if you're signing up an SMB with two customers, that's different than an enterprise with 500 customers or licenses signing up. What's your sweet spot? What's the average customer paying you per month or per year to use this technology? So our target customer would be organizations which are between 5,000 employees to about 50.
So this would be kind of our suites for organizations which are big enough, that have enough people working from all over the world, enough contractors, enough challenging use cases, because one of the biggest advantages that we can bring is kind of a consolidation of the different devices, different use cases. So offer five to 50,000 employees as your target audience. But where are you at today?
What's the average team size on your platform using you guys today? We have an organization still pretty much all ranges, some with hundreds of thousands of employees, some with tens of employees.
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Chapter 4: How is the pricing model structured for the new security solution?
So in terms of the size of the customers. But if you take all the devices on your platform divided by all the brands using you, you can back into an average. What's that sweet spot? Like it's a thousand, maybe a thousand employees, a fair sweet spot? Something like that. Yeah. Okay. Okay. And walk me through how you're keeping your top of funnel wide.
You mentioned people can get started with as little as just 10 devices or 10 employees. What are they getting? Is it free or not? So initially, it's kind of, we believe kind of in the model of try to pay. So start, feel the value of the product, see that it brings you value.
In a sense, I think that the best thing that any SaaS company gives its customer is the conviction of bringing value rather than immediately charge up front. So usually we start with a process of a few weeks of demonstration or called proof of value, in which we can demonstrate the value to the customer. And only then, when the volume starts to increase, then we'll convert into a paying customer.
And Alfred, before we go and get your backstory from Argus into Talon, help me understand, well, I mean, if someone's listening right now and wants to start on you guys, what should they expect to pay per device on average per month? So usually it would be a single digit dollars per device per month. Okay. So something like five to 10 bucks per month per month.
Now, if an employee has a cell phone, a laptop and an iPad, is that 10, 20, 30 bucks a month for that one employee? Cause there's three devices. In use case, in use cases like that, then usually it would be per device. So meaning yes, three, what usually happens is that on big organizations, then Obviously, they have bundles for this type of lease. Okay.
But it's generally fair to say, just so my audience understands, you're charging sort of $5 to $10 per device, not per employee, because an employee could have three devices. Okay. Okay, very cool.
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Chapter 5: What is the target customer profile for the security company's services?
Let's get the backstory here. So what did you... I mean, did you get the idea for this at Argus? Did you see something there or at Continental? So if we go back kind of to the history of Argus, in a sense, we wanted to bring... to the world, something that brings a lot of value to solve a significant problem.
If you look at the world of connected cars, somewhere there in 2013, there were not many companies. General Motors, I think, was one of the only ones of the first ones that were really focused on bringing connectivity. And then all of the other manufacturers kind of marched forward.
So we had to understand there is a huge tectonic changes having employees or having customers interested to connect their vehicles to the outside world in order to gain a lot of insights and also abilities to have more safety. And we understood that when you are bringing such capabilities into a market that wasn't dominated with security issues before that, then there would be a big vacuum
a big issue that will come into the world. And then at the point, after three years after the acquisition, I've started working with Ohad Bobrov, my co-founder here at Talon. Ohad used to be the founder of Lacoon Mobile Security. Have you read about Lacoon, Nathan? I have not, but you two got together in what year was that? When did you write the first line of code for Talon?
So that was middle of 2020. And did you guys play nice? Did you just say, Ohad, you know, you're an equal partner. I love your brother. Let's split it 50-50. Or did you negotiate like hell? Ohad and I know each other from the 8200 Intelligence unit days. So that was, I think, already 15 years ago. It was clear to us that we are equal partners, that we're going into this journey.
His brothers play super well.
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Chapter 6: What are the lessons learned from the company's pre-revenue phase?
It wasn't even something that I think we have discussed more than 20 seconds. So that was one of the first things that were completely clear. What credit card should I use? You guys have heard this. If you're scaling with 10, 20 employees, you know that your lead developer needed your credit card data to sign up for Jira or Trello.
Your head of marketing needed the credit card to sign up for Facebook ads. Or your head of HR needed a credit card or your credit card data to sign up for that Delta trip you need to take to that next conference. Nobody understands or understood how to track this stuff officially and effectively until Ramp came along.
Create virtual or physical cards for everybody on your team as you grow and build your SaaS company. Quickly log into Ramp and see where there are discounts you might be able to get that you didn't know about. For example, maybe you save $100 a month on Trello or $20 a month on your email marketing provider.
Ramp has all these listed in their platform, and you can assign a credit card, both virtual and physical, to every employee and set limits. That way, you can quickly see if your dev tool spend is going up. Are you spending more on Trello? Or are Facebook ads increasing too fast? Or are you spending too much on travel? It's incredible the amount of insight you can see inside the ramp dashboard.
I got a look the other day and I was blown away. I said, I've got a partner with these guys. Check it out today at nathanlaca.com forward slash ramp. That's nathanlaca.com forward slash ramp. I'm not going to tell you about the special bonus you'll see, but once you go to the landing page, you'll see there's a big with two zeros bonus on this page, nathanlaca.com forward slash ramp.
Check it out today because time is money and I want you to save both. So tell me if you can name them, that would be amazing. Who was your first customer and how did you land them? At the time that we started with Argus, I think that our first customers were some of the biggest car manufacturers in the world. I think actually at the time it was one of the biggest tier one manufacturers.
And the logic and the reason why they came into the table at the time... Car manufacturers, you're talking Ford, these kinds of brands. Yes, yes, yes, yes, yes.
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Chapter 7: How did the company secure funding for its operations?
And the logic is that all of them were coming into a relatively new world, coming to a new environment, and cybersecurity at the time wasn't a big thing for that area, right? Because cars weren't connected. Now you had a stellar modem, and it was kind of the early stages.
But one of the things that for us at Arbus was very clear is that the opportunity here to bring something to the world was unique. And by the way, that's also what Ohad and I were looking at mid-2020. So Ohad was the founder of Flakul Mobile Security. It was the first cybersecurity for smartphone. And one of the things that both of us experienced this tectonic chain.
So when I had started in 2011 with Lacoon, smartphones weren't connected to organizations at all, and all organizations wanted to allow this access. And then when we started working together June 2020, first point is that we knew that we wanted to work together. So that was this brotherhood that you have mentioned. And second thing was, can we bring something dramatic to the world?
And I can tell you that. So just to move this, just to move this forward, because again, we've got about four or five minutes left here.
Chapter 8: What are the future plans for the company after raising $26 million?
So your first customers come from the space you came from, which is car manufacturers, you know, not Ford, but people maybe like Ford or maybe Ford too, but you can't comment, but those kinds of brands, that was your first group of customers. Where are you at today? Obviously you're only a year, year and a half in, but how many customers today?
Today we have about a dozen design partners, uh, getting, uh, probably by the end of this quarter to about 20, where the goal would be to bring as much as value as possible. So for 12 design partners, does that mean they're paying customers or are you guys pre-revenue today? Today, the company is pre-commercialization. Okay, so pre-revenue. Help me understand how you're learning right now.
This is a beautiful place to be in as a founder, right? You're doing the design things. You're saying what will work, what won't, when should we launch pricing? How are you thinking about those challenges? I think one of the most important thing is to understand which problems are we tackling for the customers and exactly what are the biggest pain points that we are solving?
Because each customer by definition has different issues, different challenges. And what is kind of the common denominator that most of them are having? that we're able to bring that value as soon as possible. So I think that's the most important thing. The second most important thing would be to understand and to identify exactly how is the fastest way to present this value.
Because I think that one of the main challenges with a lot of security companies is how to present the value that you are bringing to the customer. And how many of the, I guess, how many devices are you managing across the 12 design partners right now? Like what's your actual install rate or install base usage rate base? Now it's a hundreds and going to thousands. Okay.
And so when I asked you earlier about pricing per device and you said sort of five to 10, it sounds like that you're still experimenting. You're not quite sure where pricing is going to end up, but you're testing right now on these 12 design partners. These are usually the feedbacks that we're getting, but not only from the design partners.
So in a sense, in many sessions, you are touching and feeling what are the expectations. I see. Talk to me a little bit more about the funding history. And this is unique because I believe, again, you exited to Continental back in 2017. And I think it was a fairly large deal, right? What did you exit for? So the exit there was for a fund of $30 million. Okay.
And you were one of the founders there at that company, correct? Correct. So there's a meaning, I imagine that was a very meaningful exit for you personally, correct? Yeah. So, so why go raise cap? You've chosen to raise cap on this new company. Why raise capital? Why not be a little greedy and you and Ohad keep a hundred percent, do your thing, use your own money to fund it.
I think the most important thing when you're starting a new company is to choose the partners that you want to work with along the way. And at least my view is that every new investor. is actually a new partner for the journey. So understanding that with this partnership, you are getting more and more friends, advisors, supporters, networks. So choosing right, I think, is critical.
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