Christopher Ahlberg is the co-founder and CEO of Recorded Future which is a technology company specializing in threat intelligence powered by machine learning. He raised $58 million from top tier investors such as Google Ventures, Insight Partners, and Balderton Capital. The company was recently acquired for $780 million by Insight Partners. Prior to Recorded Future, Christopher cofounded Spotfire which he sold to TIBCO for $190 million.

In this episode you will learn:

  • Using patents as weapons
  • Crossing the Atlantic with your startup
  • His business models and cash flow strategy
  • The book he wants to be buried with

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About Christopher Ahlberg:

Dr. Christopher Ahlberg is the CEO of Recorded Future, Inc. and Chairman of Hult International Business School.

He advises a series of start up companies.

Earlier Ahlberg was the president of the Spotfire Division of TIBCO, which he founded in 1996 and in 2007 sold to TIBCO (Nasdaq: TIBX) for $190 million.

Spotfire was founded based on his ground-breaking research on information visualization.

Dr. Ahlberg earned his doctorate from Chalmers University of Technology, worked as a visiting researcher at the University of Maryland, and has lectured and consulted extensively for industry, academia, military, and intelligence communities – as well as published & lectured in computer science, cybersecurity, psychology, linguistics, biology, and chemistry.

He has five granted software patents, and multiple pending.

Dr. Ahlberg was named among the World’s Top 100 Young Innovators by Technology Review, MIT’s Magazine of Innovation in 2002.

He is a member of the Royal Swedish Academy of Engineering Sciences.

 

Connect with Christopher Ahlberg:

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FULL TRANSCRIPTION OF THE INTERVIEW:

Alejandro: Alrighty. Hello everyone and welcome to the DealMakers show. Today, we have a guest that I think is going to teach us a lot about the full cycle of being an entrepreneur, about building, scaling, financing, and then also exiting a business. Then, also, about doing it again, and doing it in a space that is quite hot at the moment. There is a lot going on with all of the AI and cybersecurity and all of this stuff. I think this will be a good chance to discuss all of these aspects. So, without further ado, Christopher Ahlberg, welcome to the show today.

Christopher Ahlberg: Thank you very much for having me. I’m excited.

Alejandro: So, born and raised where Christopher?

Christopher Ahlberg: I grew up in Sweden, the west coast of Sweden, Gothenburg. I was born back 50 years ago and spent my first 26, 27 years there before moving to the U.S.

Alejandro: Really cool. So, how did you develop the love for computers?

Christopher Ahlberg: Like a lot of others, I got my hands on a Sinclair Spectrum back in the—it must have been in the ’80s, wasn’t it? I remember a friend and I wrote software for that. We built some drawing program, sort of a CAD program back in the early ’80s. We sold that in newspaper ads. I can’t say that we made a lot of money, but that was the first piece of software that we sold and got into software and studied computer science at University. Did my Ph.D. in computer science, and never looked back.

Alejandro: And you certainly never did, and I think that your professor helped you in the process. How did you meet your professor, Stefan, and what was that process of starting to discuss what this potential venture would look like because you literally went right into it? You didn’t do much of what people do here of Corporate America or maybe like taking a stab at a startup. You went right into it. Is that right?

Christopher Ahlberg: That’s completely right. For better; for worse. I was very lucky. As you said, I’ve never had a boss more or less in my life. I did my Master’s in computer science. In Sweden, you do your Master’s right away. As part of doing that or just in the lead up to that, I took an AI class in Sweden. There was this guy, Stefan Travar who was the professor of that class. We started talking. I needed to do a project. He ended up being my examiner for that project, and we started doing some work together. Over time, first research, and then by 1996 what became Spotfire, the first company that we started. We worked all together since then. It’s a long time from 1991 until now. Yeah. It’s a long time in the making.

Alejandro: I hear you, and you guys were at it with that business for over 11 years before the acquisition actually happened. Can you tell us about how that brainstorming process was with Stefan? How did you convince him because you were his student? How did you convince him to really go at it together?

Christopher Ahlberg: It’s somewhat complicated. Stefan and I hit it off. I went off to the University of Maryland for the summer of 1991. I did a project there with another great professor, Ben Schneiderman. We worked on how to visualize large databases at that time was research. It became a paper that we published. That paper still gets referenced. Sort of crazy, from a long time ago – 30 years ago. It was good work on how to visual large databases. These days, everybody talks about visualizing data and information visualization and all of that sort of stuff. Back then, that was very weird. But that became a thing. I came back to Sweden, and we tried various ways to keep this going. I ended up being a Ph.D. student, and basically, spent the next three and a half to four years on turning this research into A) a Ph.D. thesis because that’s what you do when you’re a Ph.D. student. B) At the same time, towards the end, turning that into a product that we had the good luck of being able to take the code from that research and turn it into a company. We found a local venture guy in Gothenburg who invested in the company. In 1996, I overlapped for maybe close to six months during both finishing off my Ph.D. and starting a company. Strong recommendation against doing that. Sort of like literally, not just no sleep; probably negative sleep. Crazy time. But then I was lucky to come out of it having gotten the Ph.D. done. Then equally important, having started a company.

Alejandro: That seems quite challenging too. How is that transformation from the dogmatic approach because you were doing this from the Ph.D. type of lens, to really shifting it to the pragmatic approach of building a meaningful business around that? How did you go about that?

Christopher Ahlberg: That’s a great question. The biggest change, I think, is that when you do a Ph.D. and you do research, the goal is to A) reproduce full results. We could talk about that for a long time. But you always want to think as big as you ever can with this and try to make your results apply to as many things as you ever can. But when you do software and start a business, you’ve got to find a market segment that you can be focused on. That sort of focus from a business point of view versus trying to create the most generalized research are literally a conflict. We ended up having a lot of discussions, a lot of debates, a lot of different approaches to this. But in the middle of all of this – again, this is probably late ’96 coming into ’97, I moved from Gothenburg to Boston. Landed here. Got off the plane and realized, “Here we have not 8 million people like in Sweden at the time, but we have a market of 320 million people. It’s enormous, and we can only take this on by focusing on something, and more or less, luckily stumbled on pharmaceutical research as a place to go after, and we then focused our company on that and just had a tremendous two, three, four-year run at going after that segment and nailed it. Then we were able to build from that into a much more significant business.

Alejandro: Let’s talk about that. Once you finally pulled the trigger on this, and you already have in mind, “We’re going to build a business around this.” What were some of the early employees that you were able to really bring together to be part of this thing because here you are, someone that is very much now with a Ph.D. with all this dogmatic approach? How do you convince people to jump in it on one thing that is like your very first business; you’re not very knowledgeable of the world of business yet. How did you convince people, and who did you convince?

Christopher Ahlberg: That’s the weird part because you always look back at that time and you say, “I wouldn’t listen to that guy. Who’s that crazy guy?” But, you know, it’s weird. We built something cool. Obviously, I’m not very objective, but the software that we built, it’s funny because I still use it. That’s going to sound very geeky. I actually used it this weekend to do something that relates to the current business. It had some magic to it that allowed you to basically take any set of data, be it an Excel spreadsheet or a big Oracle database or what have you, and turn that into a visualization that you could work with. That magic was there. People looked at that, and I think they saw the passion in my eyes where “We’re going to make something big out of this,” along having this piece of software. Then, pretty early on, we were able to apply that in a very dramatic way. It’s hard do convey here on the podcast, but we were able to map that or apply it to pharmaceutical research in a way that got people in pharmaceutical companies to just say, “Wow.” We really went after a very high-value problem. This allowed us to go raise money. This allowed us to get a whole bunch of customers and be able to go recruit a pretty stellar team of salespeople, and marketing people, and all the stuff that you need to have it take off. It’s probably that, again, A) the humble way of saying it is just like I wouldn’t buy for myself back then, but at the same time when you have that between somebody with a lot of passion and a couple of proof points to it – and maybe that tenacity that “Look, it’s not just what you see now, but there is enough energy behind it that you know that even if it’s going to be a rough road in front of you, we’re going to go find the solution.” When you see that, then you can make it happen.

Alejandro: Talking about making it happen and also making money, what ended up being the business model of this?

Christopher Ahlberg: That’s a great question. Back then, this was on-premise software. We sold it with a perpetual software with the classic 18% maintenance. Over time, we turned it into more of a SaaS-like business model. I would say that it was sort of hybrid because, to be honest, it was on-premise software that we charged a subscription for. So, we were forward-leaning on the business model, but the software was primarily back then on-premise. Over time, it migrated into cloud. But sort of forward-leaning on the business model over time, but old-school on the software, we were able to sell [11:46] that went with our business in a good way, so that allowed us to make people think subscription. It became a very solid business model. By the time we sold the company, we were getting closer towards 100 million dollars of bookings and becoming a really nice business that we could go sell, and it became something good.

Alejandro: Really cool. I mean, we’re talking about ’96 when you started the business, and you were alluding to this earlier. Now, everyone is all over data. Data here; data there. But in ’96, data was not as popular. What were some of the challenges that you guys were facing during the early days of building the business?

Christopher Ahlberg: I was going to say, there was an immense [12:29], but first of all, I would say to your point that people talked back then about business intelligence and so on. But it was thought about like reporting with a little bit of glamour thrown at it. Now, to your point, it’s like everybody’s data science, data whatever. So, going out, raising money for this, recruiting to this, back then people wanted to do e-commerce and telecommunications, and all kinds of interesting things. The hot sectors were certainly not the sector we were in, but we found this subsegment in going after pharmaceutical research, but we were able to carve out a niche. Then by the pure business momentum, I think we proved that we were onto something. Then we grew into something. We went after other segments. We went after financial services, oil and gas exploration, intelligence. We’ll come back and talk more about intelligence I think here.

Alejandro: Yeah.

Christopher Ahlberg: As we were doing that, we were building something that over time became a data visualization and data analysis business that today, you’d probably call a data science business. It became a very solid business. If you want to delineate this set of challenges, we had all the challenges. All of them is probably the way to think about it.

Alejandro: One thing that is really interesting that you reminded me of is that founders always make the mistake of really going out with a model, and then they understand that the building blocks of the model, they don’t sustain the structure well enough, and everything comes crumbling down. I always tell founders that you need to start with the store and then you build into the model. So, one of the things that I heard you speaking here about was that you started tackling certain industries, and then you would jump into other industries. What was that process of, for example, dealing with one industry, understanding that it worked, and then how did you jump into other industries? What was that process?

Christopher Ahlberg: That’s a great question. We were pretty much following the book, and the book was – maybe you’ve read it – Crossing the Chasm by Geoffrey Moore. I like to call it the only marketing book ever worth reading. Maybe I’m annoying a whole bunch of other people here who have written all kinds of other marketing books, but it’s a great book. I think it’s completely 100% timeless. I think it has come back, resurfaced a little bit recently here because of more and more people are looking to B2B. As an interesting segment that maybe now B2C is a little bit less interesting than it was a couple of years ago. It’s still basically a fine, narrow segment where you can be the biggest guy, the biggest fish in the pond, and then figure out who are the key partners in that segment, who are the lead customers, who are the early adopters? That’s the key thing. Then repeat that from segment to segment. Over time, you’ll see that these segments come together into something more technological. For us, it went from these different segments into something that we thought about more, which eventually became data visualization, a version, sort of 2.0 business intelligence. It was a process, and we followed that book to the letter. I still pick up that book. I think I reread it last year yet again. I give people copies of it. I just sprinkle it around, and that’s the model that we follow. I’ll probably bring one of those copies into the grave.

Alejandro: Very cool. Well, next time we have a drink together, I would expect you to come with one of those copies.

Christopher Ahlberg: I certainly will, Sir.

[Laughter]

Alejandro: Christopher, when you guys were experiencing really growing the business, how did you guys capitalize the business? What was that strategy and the process like?

Christopher Ahlberg: Good question again. So, we started off. We got first investment from a local VC in Sweden, in Huns capital. They knew that we’d have to go global with this. We were lucky at the time. Atlas Venture, they’re now called Accomplice here in Boston. Atlas Venture, at the time, was very focused on helping companies like ours doing the cross-Atlantic jump. Back then, that was a big deal. Now, it’s not such a big deal anymore. It’s still hard, but it’s not as unusual. Back then that was a big deal, so I was very lucky to run into via these guys that in Huns capital – this guy called Billy Claude. He had been the first investor in BusinessObjects, which was one of the biggest successes ever coming out of Europe. They were sold eventually to SAP, I think, for 7 billion dollars or something like that. He had been on the board and worked on taking them from France to the U.S. So, Phillipe joined our board back in 1997 and just became instrumental in providing fantastic guidance of how to go after things. Then, from there on, we added a set of investors. I think we raised in total 40 million dollars which by today’s standards is like nothing. I still look back and think, “Hum. Could I not raise the last 20?” But we raised 40, and then sold the company for 200 or 195. So, we had a good return for people. Pretty much, everybody made good money. Some made more; some made – but I think pretty much everybody made money, and some of them a whole lot. It was a good journey.

Alejandro: That’s amazing. I love the fact that you talked about crossing the Atlantic because I’m from Spain, from Europe, and I completely understand what you mean with that because people have so much trouble coming from overseas to here, to the U.S. because it’s just a different dynamic. Why do you think so many of those founders fail in the attempt of crossing the Atlantic?

Christopher Ahlberg: I think, first of all, you show up in the U.S. I think there are two sides to it. One is what you’re leaving behind in Europe at some level, and then what you’re landing at in the U.S. You can argue all day, but especially for B2B technologies, the U.S. is always the early adopter. Pretty much, always. That was true 30 years ago, and I bet you it’s going to be true 30 years from now. Again, I’m sure there are some people that are angry at me for saying that. I think as a Swede background, I can say that. But I’ve seen it many times at least, and I think it’s still the pattern. So, you walk into the U.S. You’re dealing with the early adopters, and they’re demanding. They want to have access to the best technology. They want to have the best people. They know how to buy that technology. There are standard approaches to it. And the channels, the salespeople, the whole machinery around it, the system integrators. They’re all there. When you show up there, it doesn’t really matter if it’s Spain, Sweden, or Switzerland, “Dude, who are you?” That’s the one side of all of it. Non-trivial.

Alejandro: Got it.

Christopher Ahlberg: I think when we come – and again, it doesn’t matter if it’s Switzerland, Sweden, or Spain, and so on. Arguably, it’s probably easier at some level, the smaller the place you come from. You know, when you come from a particular market – I think Germany might be at some level the hardest because you’re dealing then with a fairly big local market. Now, maybe not as early an adopter, but it has a lot of intrinsic to it. Then when you show up in the U.S., you have to leave all that behind. The good news: Europe, the problem – I don’t want to make this about U.S. versus Europe. Look. It’s all great. We’re all great markets, but the European market is, obviously, not very homogenous at all. Every market there is different. Every segment is different. What goes in Sweden is not going to go in Spain, and vice versa. Whereas in the U.S., there are some differences between selling in New York, Houston, and San Francisco, but it’s more or less the same. Being able to adapt to that based on where you’re coming from and where your going from is nontrivial. You’ve just got to be very humble and very open-minded. I’ll tell you about all kinds of failures that I did personally going from having been in a perpetual business model, and now doing SaaS. Making your head do something that it’s not used to, it doesn’t matter if you’re experienced. At some level, it’s probably better to be inexperienced, so at least you’re not biased. It’s not easy, this stuff.

Alejandro: I hear you. It makes sense. Before we shift gears to your latest venture, Recorded Future, I want to wrap up with the acquisition, with the M&A story. How did the acquisition happen?

Christopher Ahlberg: You know, sort of classic. [Jibco 21:58], great company on the West Coast. They were looking to expand into – they are the kings of real-time data flow in businesses, and real-time how data moved – we’ll call it movement in data, data in transfer instead of – what they invented there. We were the masters of dealing with doing data analysis when data was at rest. So, they wanted to add that to their portfolio. They were interested in the industry segments we were in. They were interested in some of our technology. So, they saw our business. I don’t even remember how we first met up. Then pretty quickly thought this would be a great add. We went through the classic negotiation where first everything’s great. Things are awesome. We have a certain price on the table. Everything blows up, big drama, and we walk out and leave. Then come back together. Eventually, we figured it out. It became a great deal, I think, in the end game both for buyers and sellers. It’s been great to see that the team, many of the core engineering team are still there 12 years later. It’s sort of wild, actually. I think it turned out to be something really good for the buyer. I’ve been very proud to see that happen in a solid way.

Alejandro: Really cool because you were pointing to that it was a 200-million-dollar deal. Is that right?

Christopher Ahlberg: Yeah. 195. So, yeah. It’s funny these days. Here are 200 million. “Yeah. That’s a big number.” To me, it’s like an enormous number. Then you hear some other guy’s selling his company for 19 billion or something. You’re like, “Ah.” Whatever.

Alejandro: Everything is relative in life. I think that an exit is always an exit. So, that’s really fantastic. You did your vesting and all of that stuff, so I don’t think we would get in trouble if we have you answer this. Going back now before you were to do the deal, what would you do different?

Christopher Ahlberg: That’s a good question. There are some deal mechanics of how we played it. Sort of tricky stuff, but when you’re in the midst of doing a deal, you want to make sure that you have a series of contenders. We did not create enough of a set of potential buyers. We had some, but we should have had more if we would have played it perfectly. Now, remember. This was in June of ’07. We built up the precursor to being able to go public. Also, remember, that August of ’07, the world started to melt.

Alejandro: Yeah.

Christopher Ahlberg: Then it went completely downhill not far after that. So, the timing in hindsight – we certainly didn’t know this at the time, but in hindsight, the timing looked impeccable. But I think we should have had more contenders so that we could create more of an auction. There were a couple of deal plays that we should have done better, but more or less, I’m pretty happy about how we did it.

Alejandro: Got it. Then you were with [Tipico 25:24] for about two years. Was it as bad as they painted normally investing?

Christopher Ahlberg: No, no, no, no. It was good. I still have a lot of friends there. I remember coming home to my wife at some point, and I said, “Look.” Because I had started working on that idea in ’91. This was then sort of ’09. So, I was like, “Look. I worked on this idea for 18 years.” That’s going to sound terrible to a lot of people here. I’m an old man here. I worked that idea more or less for 18 years. A bunch of it, and I could email, but still, I’d better have one other job before I die. Then, I ended up getting this new idea for what became Recorded Future. My co-founders of Spotfire had left earlier. So, I called them up and pulled them back into the fray. After I had first written up the patent, application, and filed that, and so on. I just had to do one more job before I die. That was the idea.

Alejandro: I hear you. Ideas are like busses. There’s always one that’s going to stop by.

Christopher Ahlberg: That’s the danger. I hate these ideas. They’re killing me.

Alejandro: That’s it. Ideas are like busses. How did the door open for this buss of Recorded Future for you?

Christopher Ahlberg: Literally, I was on the treadmill, and it struck me that we had done a lot of work with Spotfire visualizing and analyzing what I would call structure data: data that would live in Excel spreadsheets and data that would be in Oracle databases; highly-structured data. We had done some work, and I had personally done some work with – we’ll call it intelligence against these where you were dealing with more unstructured information. That information in that world, typically, would sort of originate out of a stack of wet papers found in a cave in Afghanistan or something like that, that you turn into data. It’s much more unstructured. Through various means, you turn that into structured data that you can help analyze. It sounds crazy, but I was on the treadmill running, and it struck me that “I wonder if we could apply this same approach to turn unstructured information into structured data by applying that to the web. If you think about the web, all the way back in – a long time ago, just certainly in ’07 and probably ten years before that too, but in ’07, the amount of data flowing to the web is, obviously, incredible. It’s the biggest information concentration that has ever happened in the history of mankind. So, what if you could actually get your hands on that and turn that into structured data? Not just structured data, but try to really turn into data that you can analyze, and make it analyzable and use that data for intelligence? So, that idea hit me. I ran up from the treadmill to the kitchen, wrote down the idea, called up my patent guy, and said, “Here’s this idea. Please do a provisional patent application around it.” We got that done. That sat for a little bit. Again, then we turned that into a prototype, and a company, and we were off to the races yet again.

Alejandro: Just out of curiosity, why did you do a patent because on patents, you just tweak something, and it’s good to go. It’s just very costly, and it takes forever. So, why did you do it?

Christopher Ahlberg: Yeah. It’s a good question. We would never use our patent in offensive fashion – you know, never say never. I guess I shouldn’t say that. That’s probably a bad strategy. The strategy is to have it for defense if somebody would come after us. That’s number one. Number two, I do think that it’s a good way to encapsulate the core value of what you’ve done if it is technological. There are certain businesses that are more business process focused or where the patent doesn’t make sense, but at the core of our engine, our set of elements that are patentable, and in fact, you can find that patent if you go to the USB [29:51]. It’s issued. It’s a system for collecting data at mass scale and extracting data and helping to predict analysis. So, we have the patent on that. It’s very helpful in the early days when you have very little intellectual property to bring to the table. You know you go to somebody to raise money, when you talk to your early customers, when you talk to your early people. It’s good to say, “Look. At the core, there’s a patent.” It’s a tangible in a world that’s highly intangible. I would recommend it to people who A) know how to do patents, to people who work in domains where it makes sense. I wouldn’t do it if you don’t know how to deal with patents, and I wouldn’t do it if you don’t know how to work with using it as a weapon. But it can be used as a weapon in the right circumstances, and it can be very helpful. We’ve done that in both companies, and it’s been a helpful strategy, absolutely, including defensive strategy one time in the prior company. It’s not your core strategy, but it’s a good tool to have in your toolbelt.

Alejandro: I guess for the founding team, you convinced Stefan again?

Christopher Ahlberg: I did. Stefan and Eric [31:04]. It was both early guys at Spotfire. So, they came back on, and we went at it. We were off to the races yet again.

Alejandro: You actually recruited really incredible, really interesting. So, people from the CIA, from NSA, from FBI. How did you get these people onboard?

Christopher Ahlberg: There are a couple of steps here. First of all, we did a unique set of funding early one. We had these two alternatives that we could either try to sell fund or bootstrap the business. That was one idea, but we knew that there was a decently-sized build to do here. We had to go build something. So, we were like, “We should have a financial partner with us.” We knew the In-Q-Tel guys from before. They have a long history of working in the Intelligence community. I’ve done a lot with them through the years. So, we were able to get them onboard. Google was a newer friend in all of this, but Google came aboard at the same time as In-Q-Tel and ended up being a great partner in all of this. So, we did that. Then as we started building the company, our first market segment was the U.S. Government, working with intelligence agencies. We probably won’t go into more detail than that. That’s where we started before we figured out this cybersecurity use case was the natural extension of that. As we did this, it turns out that we lived in a world over the last 15 years; had lots of mystery. As you know, there have been a lot of wars and a lot of conflict around the world. There are a lot of people who got an education and training in Intelligence of various sorts. That’s true, certainly, in the U.S., but I think it’s true in most of Western Europe. There’s this talent pool to draw upon of people who – they’re not necessarily math geniuses, but they’re analytical geniuses; people who know how to deal with unsure, insecurity, uncertain is probably the word I was looking for. Uncertainty and uncertain information. So, we were able to go recruit that sort of people to get them onboard here into the company and put them together with data scientists and programmers, and other sets of people to be able to build that perfect mix of people to build an intelligence platform. That worked out pretty well. I like to compare our business to being the Bloomberg of Cybersecurity. If you think about Bloomberg, he pulled together the financial geniuses with programmers to build the Bloomberg screen of finance. We want to be the Bloomberg screen of cybersecurity. We have to bring together the same mix of people with this analytical experience of the intelligence agencies together with the best data scientists and programmers, and in that, we can find that magic.

Alejandro: You guys are obviously using machine learning to predict all these kinds of cyber attacks. What does that look like when you’re able to really predict cyber attack catastrophes?

Christopher Ahlberg: There are many different levels of that. Here, you have to be very humble about the different levels you can do this. There is everything from the lowest level where you want to be able to say here is an IP address. Here is a domain; collection of IP addresses; collection of domains that either have been used historically for doing bad stuff or you may never have ever observed them before, and the system believes now that they will be used in a malicious manner. So, our software will be through a combination of AI and machine learning techniques, good old data analysis techniques. I tend to be one of those who likes to say it’s not just about fancy machine-learning-type stuff. There’s a more basic analytical method and a combination of other methods being able to say that these four elements of malicious infrastructures might be coming alive all the way over to being able to pull together and say this actor (is the word that we like to use). That could be a criminal or it could be an intelligence agency, a cybercriminal or an intelligence agency, and being able to say that they’re about to embark on a particular mission, be it stealing money or stealing information as typically what criminals and intelligence agencies are about: money and information, sometimes, wrecking more havoc than that. But when you’re dealing with that, when you really want to say something at that higher level, now it’s going to be a combination of humans and machines. So, it depends on what level you’re at, but we’ve been able to build the system that can operate at all these different levels, and then bring together the software machinery that we built, and data machinery that we built with the best analyst and be able to service it to our customers.

Alejandro: So, to get more visibility and a better understanding, let’s talk about the largest catastrophe that perhaps we can discuss here that you think you guys would have been able to predict?

Christopher Ahlberg: So, predict. We try to be a little bit careful about predict. There are good examples. After some of these NSA tools got legs or started moving around – I might be speaking of very domain-specific, but these toolsets are called eternal glue. There’s this whole set of, let’s call them cyber tools or offensive tools both eternal glue and so on that got stolen from the NSA and ended up in the wild. Those tool sets, we were able to observe them early on in sudden Russian forums and the like. It was able to put out warnings. We put out the warning in such a way that we went completely public with it. Some other times, we will hold it back and only get it to our clients, obviously, who pay for this information. I think we did that early and were able to be one of the contributors to be able to hold back on the potential problems that could come out of that. That’s a good example. We’ve certainly seen work that we’ve done that has either led to direct work that we’ve done that led to arrests of cybercriminals or our customers being able to work to be law enforcement themselves or commercial clients working with law enforcement to get cybercriminals arrested. One of the things that makes me particularly proud myself because I had the chance to be involved in this myself was with the Chinese Intelligence Agency called MSS, Ministry of State Security. They ran a big scheme that was somewhat complicated but basically holding back on informing the Chinese and their local region about software vulnerabilities. We found their scheme on how to do that. We published about that scheme. They try to cover up the scheme. We published a report on their coverup, and then made them stop this malicious behavior altogether. That’s probably our biggest intelligence we’ve done altogether. To your question, it’s less about that one catastrophe to stop because we try to not think about this in the ticking bomb scenario, but it’s more about dismantling malicious infrastructure, dismantling bad behavior so that you can help make a better internet altogether over a long period of time.

Alejandro: Yeah. That makes sense. There are a lot of people now that are thinking about the Third World War not being like the type of war where you have all the tanks, and the bombings, and stuff like that, but more like being cybersecurity-related stuff. So, how do you think about that? How do you see it?

Christopher Ahlberg: There are two ways of thinking about it. A) This constant information war that is going on that has always happened, and it is sort of the war of spies, the spy wars, whatever you want to call it. That’s always happened. It’s happened for hundreds of years, for thousands of years. Now, the internet provides means to do this from a distance. That means that if Spain wants to get their hands on some information from somebody in South America, they don’t necessarily need to send an intelligence officer to South America, but they can find a way to get to it from a distance. So, it makes it more convenient if you want. Likewise, this information might not just be about stealing information, but it might be about influencing an election, discrediting somebody, the sort of stuff we saw around the U.S. election, and we’ve certainly seen around other European elections. Again, that sort of propaganda type of stuff has been going on for hundreds if not thousands of years, but it’s just at a different scale. So, I think we’re in the midst of that. That’s going down as we see. We’ve seen the sort of things where the city of Atlanta got locked down, the City Hall, and their systems around it based on ransomware. But we haven’t really seen just them. We’ve seen some specific things like stocks net where presumably the West went at Iranian nuclear centrifuge equipment. You know that sort of very pointed things. We haven’t seen somebody do this at large scale just yet. I think we will. So, I think we’re in the early innings. This will happen, and we have a lot of work to do to clean up our systems to make sure that we’re not going to be on the receiving end of this. There’s a lot of work in front of us.

Alejandro: Absolutely. So, how do you guys make money at Recorded Future, Christopher?

Christopher Ahlberg: That’s a good question. Again, the way that we think about our business model – you asked about that before – is that we think about this as a Bloomberg screen of cybersecurity. We charge for both our screen, our UI. We think of it as our portal, and that has all the tools, all the insights, all the data that the cybersecurity professional needs to be the best cybersecurity professional. Just a like a Bloomberg screen helps a trader be the best trader. We then also provide basically the same information but provide it as data in a way that people can use that to be able to feed it into all kinds of systems and inform machines. I’d say that our business is more or less 50/50 providing data to users and the other half providing to machines. It just ends up being a very attractive business model with high retention rates, high degrees of growth, high degrees of margin if you want. It’s a good business model.

Alejandro: Nice. How much capital have you guys raised? You were talking about investors. How much capital have you raised?

Christopher Ahlberg: Yeah, 56 million. So, a little bit more this time. We actually have more than half of that still in the bank as we try to be very capital efficient. We built a solid business model here, and we were cash neutral last year, and that’s while growing 80%. So, it’s good. It’s a good model, a nice, annually paid in advance business model that turns out to be pretty efficient.

Alejandro: Why did you go this route of being cashflow positive breakeven versus like the other hypergrowth companies are doing burning cash like crazy?

Christopher Ahlberg: We’re happy with our growth in this sort of 70%, 80% range. I think we could try to make it for 100, 120%. That’s, I think what a lot of people try to do. They try to fund, build a business plan that supports that. I think the risk they take is that they frankly just sort of fund something that has a very high degree of risk around failure. So, by picking this perfect – aiming for perfection growth rate where we can both get aggressive growth and be cashflow neutral more or less, ends up being a pretty good sweet spot. We’ve been very disciplined around our business model to make that happen.

Alejandro: Yeah, it makes complete sense. I believe you guys didn’t even touch the money from your last round.

Christopher Ahlberg: Yeah. We haven’t touched it. We have it in a pile sitting on a table. We just sit here and look at it all day and think about how we’re not going to spend it.

Alejandro: That’s amazing. Well, that’s good to know. Now I know who’s inviting for dinner next time, Christopher.

Christopher Ahlberg: Absolutely.

Alejandro: And I see that on your list of investors. Incredible people: Google Ventures, Insight Partners, Balderton Capital. Did you feel being this the second time around and also being a fully exited that has gone through the full cycle as a founder type of thing like easier for you to raise money?

Christopher Ahlberg: I think that’s a great question because the way I think about it is it’s easier to raise money. It doesn’t matter. Any type of acid management, people will throw money after somebody who’s made money before. That’s absolutely the case. So, the world is skewed towards you, which makes sense. It doesn’t matter if it’s a hedge fund manager, private equity manager, or an entrepreneur. Anybody who’s going to look for money, it’s going to be skewed towards that. That’s one. On the other hand – so, that’s all good news, but who cares? What actually matters is that you still as an entrepreneur need to go learn all the lessons yet again for the business you’re trying to do. There are obviously some core things about how to manage a sales force, how to manage an engineering group, how to build a management team. A bunch of those lessons are pretty timeless, but at the same time, we are now in a completely new market here. So, I had to personally just learn security, which in many ways has a lot of specifics to it. It’s a very particular market. We’re now selling SaaS. It’s all multi-tenants. It’s all cloud. It’s so many things that are different, and there are a lot of things to unlearn and start over.

Alejandro: I hear you. You’ve been at it – this is the second rodeo, raised a ton of money from investors, and also done the exit, but anyone that would look at this would be like, “Oh, my gosh. Christopher is so successful, and everything looks so glamorous, but Christopher, you and I know that the life of an entrepreneur is very far away from anything glamorous. I want to ask you here, what has been a very dark moment for you as an entrepreneur that really has made you be the founder that you are today?

Christopher Ahlberg: That’s a good question. I think in both cases, both with Spotfire and Recorded Future, the days before we found product/market fit, those are tough days because, without that, you’re sort of nobody. You may have cute technology, but it’s hard. That, for sure, those days are tough. The thing is they’re not moments. Like, if somebody shows this on a movie, film, or TV episode, it looks like it’s a moment in time, but in reality, these days, what they are like – people say that there are good days and bad days. No, it’s among the 30 days, and 29 days kind of royally s***ks. But then there’s that one day when a customer says that he loves what you’re doing, or an employee is thrilled, or where the high of that one day makes up for those other 29 days. I think maybe what happens is when you go from those early days is that you move from when it’s 29 days of misery and one day good into a world where maybe the mix ends up being a little bit more manageable for the long-term, but it’s never going to be sort of where it’s all glamorous and good by any means. This stuff is tough. You’re dealing with a lot of c**p and s**t. The problem as a CEO is obviously that you basically have to put on a strong face, a brave face, and maybe even a happy face all the time. You just have to keep doing it.

Alejandro: It’s also lonely being at the top. That’s for sure. I hear you, Christopher. How big is Recorded Future today?

Christopher Ahlberg: We’re 380 people. We’re 60 million, a little bit more than we did in ARR, we did last year. This year, we’re growing pretty nicely. If all things go well here, we should pass 100 million. Things are getting to a good place.

Alejandro: Wow! Congratulations, Christopher. That’s very impressive. So, I want to ask you one question that I typically ask the guests that we have on the show, and that is knowing what you know now, Christopher, if you had to the opportunity to talk with your younger self, that younger self that was coming out of doing the Ph.D. If you had that opportunity to tell your younger self one piece of business advice, what would that be and why?

Christopher Ahlberg: Good question. My first advice would be to do exactly what we did yet again. That would be number one. I can’t imagine a job that is better than this. I like to say to people, “Look. I’ll do this for free.” And that’s not because I have a lot of money or anything. “I’ll do it for free.” I love this. It’s just a profound love for doing this. So, that’s number one. Number two, in terms of advice, I think the biggest advice in all of this – I say this after having sat here now talking for 45 minutes, but it’s listen. Just listen. You have two ears and one mouth. Just try to listen. There’s so much to learn. Find those smart people who you can learn from, and just never forget that. It’s easy. When you’re 25, it sort of comes naturally that you’re like, “I don’t know s**t. I’d better learn fast.” Now, when you become 50, it becomes a different thing because then you’re like, “Ah, I already know those answers,” but no you don’t, and in fact, there’s going to be a bunch of smart 25-year-olds you need to learn from. That’s probably the most fundamental one that I would put out there.

Alejandro: I love it. For the folks that are listening, Christopher, what is the best way for them to reach out and say hi?

Christopher Ahlberg: Twitter, probably. @cahlberg – That might be the easiest way to find me. I’m on LinkedIn as well. You can find me there too. I can’t say that I’m great with LinkedIn messages.

Alejandro: Got it. Cool. Well, Christopher, thank you so much for being on the DealMakers show today.

Christopher Ahlberg: Thank you very much for having me. This was fun. You ask good questions. This was awesome. Thank you.If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic, and if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com.

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