Neil Patel

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Dean Sysman is the co-founder and CEO of Axonius which is a cybersecurity asset management platform that helps secure and manage connected devices in use by businesses. The company has raised $95M from top investors such as Lightspeed Venture Partners, OpenView, Bessemer Venture Partners, and YL Ventures to name a few. Prior to this, he cofounded Cymmetria (acquired by Stage Fund).

In this episode you will learn:

  • How to pursue your dreams early on
  • How VCs really work
  • What to look for in investors
  • The best ways to get funded
  • Dean’s future plans for this company

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About Dean Sysman:

Dean Sysman, a world renowned expert in cybersecurity, is the CEO and co-founder of Axonius, a cybersecurity asset management platform. Dean Sysman began his career as a software developer for the Integrity Project where he conducted research on advanced machine-independent compilation. Dean Sysman remained in this role for a year until serving an elite unit in the Israeli Intelligence Corps, where he served for 5 years as a team leader and officer.

During his service, Dean Sysman received commendations and awards for his service.

Before founding Axonius, Dean Sysman co-founded Cymmetria, a YC-backed cyber deception company focused on changing the asymmetry of cybersecurity.

In 2005, Dean Sysman was part of the gold medal winning team in the international Robotic Olympics in South Korea.

Dean Sysman has spoken at major conferences including Blackhat, Defcon, CCC and more.

In 2017, Dean Sysman was honored with being in the Forbes 30 Under 30 Israel list. Dean Sysman is a graduate of the special “Etgar” program at the University of Haifa, where he earned his B.Sc in computer science at the age of 19.

Connect with Dean Sysman:

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FULL TRANSCRIPTION OF THE INTERVIEW:

Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a very interesting founder from the Startup Nation. He’s done it multiple times, been to Y Combinator, raised money, has seen his companies doing an exit; you name it. So without further ado, let’s welcome our guest today, Dean Sysman. Welcome to the show.

Dean Sysman: Thank you for having me, Alejandro. It’s great to be here.

Alejandro: So originally born in Israel. How was life growing up there?

Dean Sysman: Very interesting. I grew up not to the best social, economic standings, but I was always surrounded by really great people and great schools. From a very early age, I knew that my passion is computers. I was playing video games ever since I can remember myself. At some point, I wanted to create my own video games, so I went to the library and got a book on the C programming language. When I was 12, I learned how to program by myself. Then, I realized that while video games have rules, when you’re programming, you make your own system of rules. Even video games took a back seat to me to how interesting programming was.

Alejandro: Obviously, when you were 12, there was a moment when you go into the library, and you start learning programming, so how did that happen. What was that process like?

Dean Sysman: Yes. I looked up on the internet, “How do you make your own video games?” I think somebody wrote in the forum, “You should learn C programming language.” So I went to the library. I found a book on it, and then that’s what happened. Pretty much, that was it.

Alejandro: Very cool. And Olympics, you haven’t been in the traditional Olympics as we know them. Very special Olympics. What kind of Olympics were those?

Dean Sysman: Yes. When I was 15, through my school, I had a really interesting opportunity. I was part of the Israeli team that participated in the International Robotic Olympics in South Korea, a really big contest of those into robotics. It was so important that the Minister of Education of Korea is the one who hands out the gold medals. We won that year. It was the first year that Israel won the gold medal. It was impressive because I remember that for years, I thought that my passion for technology is something that’s personal, but after we got back, we were on talk shows and in newspapers and magazines. It opened my eyes that technology can impact other people too. It was really an eye-opening situation.

Alejandro: Very nice. And obviously, part of being born in Israel entails going into the army. We can’t go into too much detail because there are a lot of classified information there, but what were you doing in the army?

Dean Sysman: Before the army, another special thing I got to do was, I was part of the special program to do a Bachelor’s Degree in Computer Science for gifted students while still in high school. I finished it when I was 19. Then I got drafted into the Intelligence Corp in Israel. You can do the one plus one and what my experience is and my army service, but I can’t really talk about it, but it was an interesting time for me because I learned many things. First of all, how to work under pressure. It was my first time being able to manage people at a very early age. When I was 21, I had already gotten a team to manage. So I learned how to be a manager and a commander and a leader very quickly, which also was part of going into officer’s training in the army. The two people I served the most amount of time with, my commanding officer for almost all my service and my protegee, who ended up replacing me in my role, they ended up becoming my co-founders in Axonius, so it was a pivotal time in my life.

Alejandro: Very interesting. So, from this army experience, what would you say taught you the most and perhaps from a perspective of being able to apply that into being an entrepreneur?

Dean Sysman: You know, Israel is a small country with many enemies and many people who are interested in causing harm to the country. In the Intelligence Forces, if you’re assigned a project or an area of responsibility, most of the time, you are the only person in the entire country who is responsible for that task. You literally, when you’re 18, 19, 20, there’s obviously a small part, but it is a significant part of the country’s security that you are in charge of. If you don’t do your job, like if you’re sick or if you’re lazy, and you don’t do it well, then nobody else is going to do that. That’s a very unique characteristic of being in the Israel Intelligence Forces. The kind of culture that fosters is that you do whatever it takes to be successful. There’s nothing that you let yourself believe. There are no excuses that you let yourself believe that could stop you from achieving any goal because if you don’t, nobody else will. That is one of the core aspects of what makes people out of that unit and others so entrepreneurial because you know that if you want to achieve something, there is a way to do it no matter how difficult it seems.

Alejandro: I love that. For me, that was a breakthrough, too, during my years of building and scaling stuff is that nobody’s going to come and save you. If you don’t do it for yourself, nobody else is going to do it for you.

Dean Sysman: Right.

Alejandro: So, I really love that, so thank you for sharing that, Dean. I guess in your case, rather than going after the experience in the army, rather than going into a corporate or starting to do some stuff, you literally went at it as an entrepreneur. You took the leap of faith, and you started with your first company. Tell us about this experience.

Dean Sysman: When I was about to leave the army, I thought about what to do next. Like you said, many people join like a Facebook or a Google, or they go into another startup. This also ties into something else, which is, I’m fairly young for my position and my career. I’m 29, and a lot of my friends who are my age are thinking about starting a company, and they ask me for my advice. They always ask me, “Should I start a company? Can I be a founder?” I always give them the exact same answer, which is, “No. Don’t do it. It’s a mistake. Don’t start a company.” Then they ask me, “Why did you do it?” My answer is always the same, which is, “I don’t have a choice.” To explain that, my childhood, my upbringing, my history, my life has made me — and you can use any kind of verb, but I think most of them are negative. You could say scarred, or damaged, or broken, or whatever. It’s made me unable to enjoy a normal job. Like, I cannot do a 9:00 to 5:00 job to save my life, literally. I don’t think I could survive doing a regular 9 to 5 job. I need that — I’d like to call it a crusade. It’s not even a mission; it’s a crusade because when you go on a mission, it sounds very honorable, but a crusade just sounds crazy. It sounds so disconnected from reality that why would you do it? And I need those in my life. I need that challenge, and I need that ultimate goal that feels almost unachievable to find meaning in my own life. And I feel that’s one of the only reasons why you should start a company or be a founder because it is so difficult to do. It really takes everything out of any aspect of your life to be able to pull it off, and I want to make sure that people do it for the right reasons, which for me, are just a lack of choice. This is the only thing I can do and be happy. I realized this when I was about to leave the army. I tried to ask people, “What should I do?” I knew I had a very strong technical knowledge in cybersecurity, but I didn’t know anything about the industry. I didn’t know anything about what it’s like to run a company. A good mentor of mine connected me to this guy who was a very experienced cybersecurity industry veteran who was starting a company. His idea struck a chord with me from my own experience in cybersecurity. We ended up joining forces and started Cymmetria.

Alejandro: One of the things that I wanted to ask you, and before we jump into Cymmetria is, you were talking about the journey of an entrepreneur and your advice of not doing it. From your experience now of having been at for a couple of times, what would you say is the hardest about being an entrepreneur?

Dean Sysman: It’s sort of cliché to say, but it’s the emotional rollercoaster. The reason it’s an emotional rollercoaster is something that most people don’t understand about what it is to be a founder. When you’re a founder, the alignment between you personally and your company are completely overlapping. There is no difference between you and the company. The company is successful; you’re successful. If the company is unsuccessful, you’re unsuccessful. That’s very special to being a founder. If you go to work for Cisco, it doesn’t matter how Cisco’s quarterly earnings go. You could always say, “Yeah, I did my job really well. Everybody would believe you, probably, and still think you’re a great person, and you’re successful. Even if you go to a startup that fails as an employee, you can always, “Yeah, I did these interesting things. You are not labeled as a failure. But if you are a founder, and your company fails, you are the failure. You cannot blame anybody else. So it becomes so personal, anything that happens in a company when you’re a founder. It takes your ability to handle those emotions because they are so powerful. Something funny that nobody understands is when public companies have bad quarters. Everybody knows about it. The company goes and does the quarterly earnings, and the CEO takes some flack. Maybe the CEO gets fired, but even that CEO, most of the time, is a person who has a job. He goes to work. He has a job, and even if he gets fired, he’s like, “Okay. That didn’t work out. I’ll find a new job. But when you’re a private startup, the only thing you can talk about is the positive stuff. You don’t go ahead and publish on LinkedIn that you lost the customer because that makes no sense. So you have to very privately manage all the negative things that are happening, and it’s really nice to get the feedback on the positive things, but nobody really understands. It’s very lonely. Nobody knows about the hardships that you’re going through.

Alejandro: Yeah. Absolutely. Let’s fast-forward here to Cymmetria. You were mentioning that you connected with a co-founder. Tell us about the experience here and the journey. What was it like?

Dean Sysman: It was very interesting because we went through Y Combinator, which is arguably the best accelerator in the world. It has very, very successful companies that have come out of it. It was a great school. I didn’t know anything about business, let alone what it’s like to fundraise or start a company or scale a company, or do sales. I learned a lot about what it’s like to be in an industry, what it’s like to actually have product/market fit, what it’s like to fundraise, what it’s like to do sales. All those things were new to me. As a CTO and co-founder, you get to touch whatever the company does at any point in time. In the beginning, the product that we developed, the product that got sold for the first time — we had a financial tech company in California buy it for a five-figure amount. That was all code that I wrote. I wrote the entire thing in my apartment, some of it in my underwear. But if you fast-forward about six months after, it’s fundraising and hiring. Then, six months after that, it’s sales and product. And a year after, it’s totally like upper-level management. It was a very interesting school. But while I was there, I constantly kept understanding many things about fiber security and the power of products and problems. I think what most people don’t understand is that startups have so many things going against them, you really have to understand how to get the core trends of that escape velocity — like, getting to the point where your company is taking off and is successful. It’s incredibly difficult. It’s much harder than what most people think and the understanding of what that takes, I think I got through Cymmetria.

Alejandro: What was the business model of Cymmetria?

Dean Sysman: We started the company in 2015, and at that point, many large organizations like Target, I think it was also other very famous companies like J.P. Morgan, got hacked by advanced threats. Somebody got into their network, passed through hundreds of millions of dollars’ worth of defenses, and was still able to get everything that they wanted. In Cymmetria, what we wanted to say was, “Instead of trying to defeat an attacker, who has all the technological advantages — they can attack whenever they want. They don’t have to do any sort of compliance. They’re as agile as they want. They only need to win once rather than the defender needing to win all the time.” We thought that instead of trying to beat them in an unfair way, let’s try and make them lose by utilizing the only advantage the defender has, which is the homecourt advantage. The attacker doesn’t know your network when it’s penetrated and trying to find what they’re looking for. What we did was something called cyber deception, basically taking the concept of honeypots, but making it into a big enterprise and more than just the script-type solution to make decoys and traps that attackers will trip over when they’re in a network that they’ve infiltrated.

Alejandro: Got it. Obviously, this is a company where you did the full cycle as a founder. You guys created it, you scaled it, and then the company ended up getting acquired. What was your biggest takeaway from your experience with Cymmetria?

Dean Sysman: During Cymmetria was where I ended up getting the idea for what ended up becoming Axonius afterward. The story goes is that I was working with a very, very large corporation in the U.S. I can’t mention the name, but about as big as you can imagine. We were trying to find attackers in their own network. Then, at some point, we get an indication — and this if very clear-cut — of a threat being in their network and infecting machines. This threat is called APT28, and it’s attributed by the companies that researched it, which I think is Mandiant and CrowdStrike but correct me if I’m wrong. It’s attributed to the Chinese Government. So, basically, they were in their network. We were seeing evidence of this. We were very excited when we found this because we thought, “This is great. Now, this company is going to buy our product because we found this.” When I showed them the results, they were not particularly excited. First, because they had some hints of the fact that the threat actor had already reached their network. They weren’t excited. They were like, “Okay, great. Now you have some evidence of it, but we can’t do anything about it.” Maybe I was naïve back then, but I was surprised. I was like, “Well, we know which machine did this infection. There’s a machine in your network that has an IP address and has a hostname. We know it’s infected. We know the actor is operating from it. Can we research it? Let’s figure out what it’s doing. Let’s figure out where it is in the network.” They told me flat-out, “We’re not going to find it.” I said, “What do you mean? It’s a machine in your network. It’s your machine.” They said, “Well, yeah, but it’s one of the subnets with a dynamic IP, and we’ll never figure out what it is.” I couldn’t understand what they were trying to tell me. I told them, “Let’s go through all the systems that you have. You have agent systems, network systems that should have some data about this thing.” Whatever system we would go into, either it would have 17,000 results for that five minutes where we saw that infection take place, or it would have nothing, which was impossible to understand what this thing is. We actually finished that day by them emailing other people asking, “Do you know what this machine is, or why it’s there, or who owns it?” I finished that day, and I was blown away. I could not comprehend how it’s easier to find one of the most advanced threats in the world infecting a network, but that exact same team cannot know what a machine in their network is. So I continued to ask them more questions. I even got to the point of asking them, “Do you even know how many machines you have?” I remember them telling me, “Between 1.5 million to 3 million.” If you go to a parent and ask them, “How many kids do you have?” And they say, “Between two and four,” that’s a pretty alarming answer. It doesn’t make much sense. Or if you go to a CFO, and you ask them, “How much money is in the balance sheet.” They’ll say, “We have between 15 and 30 million dollars.” That’s also like a really bad CFO. So I asked them, “How does this happen?” They told me, “If you go far enough into the past, it wasn’t like that. Like with PCs, with Windows, you had one type of device, one operating system, one network, one management solution. It was really easy. But now, you have dozens out of each one of those variables I mentioned. Everything is incredibly fragmented, so they don’t know. Then every other CIO or CSO I met, I would ask, “Do you know how many devices you have?” They would tell me either, “I don’t know,” or they would give me a wide enough range that means, “I don’t know.” It wasn’t a proficiency issue. It was something that everybody was suffering from. That’s what catalyzed the idea around Axonius that the fundamentals of what organizations are doing around cybersecurity are still lacking deeply. This is a problem that we like to call — we like to call ourselves The Toyota Camry of cybersecurity. The reason we do that is, we got one of the biggest awards for a startup in cybersecurity. It’s called the RS Sonification Sandbox. When Nate, our CMO, was giving the presentation because my flight got canceled because of a storm. He asked the audience, “How many of you have had a poster of a car in your bedroom, and that car was a Toyota Camry.” Obviously, nobody raised their hands, and everybody was laughing. If you did have a poster of a car in your bedroom when you were a teenager, it was probably a Lamborghini or Ferrari, some exotic car. I think in technology, people suffer from the same element. You were constantly drawn to the most cutting-edge type of technology, which in cybersecurity could be deception like we were doing, or orchestration, Rai, or all these things. But, actually, the thing that most people need and sells the most and is the most valuable is a Toyota Camry, not a Ferrari.

Alejandro: Let’s talk about the Toyota Camry and this idea of Axonius, which is your next baby. You finally were exposed and present to this. Then you leave Cymmetria, and you started the business. How did you get the team together? How did the band come together, and then how did you guys go about bringing this to life?

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Dean Sysman: It’s a series of mistakes that ends up being wins, which I think is the story of every founding team. One of the reasons of the timing that I left Cymmetria was because I knew that Ofri and Avidor, my two co-founders were about to leave their current position. Ofri was still with the government. Avidor was finishing his army service. I knew that it was my dream to start a company with the two of them because we had worked together for five years in the army. I basically got to them. I talked to Avidor first, and then Ofri, and I told them, “Look. I decided to leave Cymmetria. I want to start this company. It’s going to be really difficult,” because, at that point, I had enough experience with fundraising that I knew it would be difficult to fundraise for this idea because it’s so boring, it’s so old-fashioned, it wasn’t writing any sort of hot trend. So, I told them, “It’s going to be difficult, but I think this problem space has huge potential. Whoever solves this is going to become a huge company.” I told them, “Let’s start it, and I don’t think we’ll be able to fundraise early, but let’s bootstrap it. Let’s get to some sort of product offering. Let’s do it together. Let’s go on this journey.” For whatever reason, they decided to believe me, which today turns out to have been the right thing, but definitely was not something to comprehend back then. The first mistake I did was that we didn’t really need to worry that much about fundraising because very quickly after I left and we started the company, some VCs from Israeli Ecosystem heard that I left, and they asked me what am I going to do? I told them, “I’m not fundraising,” which is the best way to get funding. But what surprised me was that many of them realized that they don’t understand anything about this problem space. As a VC, there’s no way to validate if this is an interesting company or not. Until one VC that ended up leading our seed rounds got us in front of a few CSOs and asked them, “Listen to Dean about this problem space. Do you agree that this is a problem, and is this a pain? Should this be solved?” All of them said that this is the biggest gap that nobody is pursuing in cybersecurity. I think even one of them, who is a CSO of a Fortune 500 tech company, said, “If you solve this, this would be the holy grail in cybersecurity.” That is what got us our initial funding way quicker than we thought. We didn’t even have anything. We didn’t have a deck. We had barely picked the name and incorporated the company a few days before.

Alejandro: How do you guys go about making money with Axonius?

Dean Sysman: The way our product works is actually to say, instead of trying to install yet more infrastructure, yet creating more data, the problem is not that organizations have a lack of data around what they have, it’s an abundance. It’s spread out into dozens of different places. What we do is, we have this concept called adapters, where if you give us the ability to read an API or the management console of any of your existing infrastructure controls — it could be your network. It could be your agents. It could be your cloud. It could be your identity provider. We have over 200 adapters for different products that we know how to pull all the data and collect it all into one place. What’s surprising is almost nobody believes us when we tell them that we can show them everything they have, and it will work in a few minutes. It’s almost a cliché at this point. We’ll show a demo. They’ll be like, “There’s no way this is how it works.” Then they’ll deploy it, and they’ll be blown away and become very, very happy customers because they’ve been having this pain for, sometimes, decades and nothing solved it until now. This is a very unique case of entrepreneurship. Most of the time, when you look at problems, they are new problems. They get created because of something. For example, cloud security. It’s very good to do a cloud security company when cloud is becoming popular. Like right now, for example, there are Kubernetes security companies because people are starting to move into Kubernetes. But it’s very rare to find a problem that is very deep and has been there for a long time but finding a solution that nobody else has. The way we charge is, like any enterprise software, we have an annual subscription that’s based on the size of the organization.

Alejandro: For this, how much capital have you guys raised?

Dean Sysman: Again, this is very unique to Axonius for many reasons, but we’ve raised a lot of funding. We did four rounds: seed, A, B, and C, which the C we announced only a couple of weeks ago. We’ve raised a total of 95 million dollars in less than three years.

Alejandro: Very cool, and obviously, you guys were quite at the right time in history. You literally closed your Series C last month. How did you do that prior to the coronavirus? Talk about timing! That’s amazing!

Dean Sysman: Yeah. Your next question should be, what are the tricks to understand how to fundraise effectively, and I’ll go into that in detail.

Alejandro: Before actually going into that question, I want to ask you how did you time this so incredibly?

Dean Sysman: Like what most people who look smart end up doing is getting lucky. In all of our funding rounds in Axonius, they have been preemptive, which means that we never went out and said, “We want to fundraise.” We’ve always had some investors tell us, “Hey, guys. I know you’re not fundraising, but here’s an offer to take money.” And how to handle that preemptive offer, there’s a whole school of thinking of how to leverage that well, which means you don’t always have to do that funding, but in many cases, you can take that preemptive offer and turn it into the kind of funding that you would want to do anyway. That’s what happened in this last round. I could have been luckier, though, because we did sign a term sheet for it before corona became really impactful. We did do the process when corona started in China, and actually one of my investors called me up while I was on vacation and said, “Dean, if you want to do this right, you have to close out as quickly as possible because this thing is going to bring down the entire world’s markets.” I thought he was crazy because it was only in China, and none of us forecasted what would happen. He was actually right; it just took a lot longer than he thought would happen. So we did sign the term sheet for it, but we had to close it at the worst time possible. I’m based in New York. This is where the headquarters of the company is. I’m pretty much in quarantine in my apartment. That’s what we did when we had to close the funding round in-between San Francisco, New York, and Tel Aviv time zones.

Alejandro: That’s really unbelievable. Unbelievable, Dean. For two different companies, you’ve raised quite a bit of money. In the fundraising journey, you’ve seen the good, the bad, and the ugly when it comes to engaging with investors. I know you’ve had a couple of instances there, either one where an investor is grabbing whatever you’ve given them during the process, and they give it to a competitor, or even an investor getting their equity, but not transferring the money. How is that possible?

Dean Sysman: Yes, through my own experiences and those of other founders, really, there is no limit to what can happen with a VC. For example, getting equity and not transferring funding, getting all your data, and giving it to a competitor. A VC that actually asks you to do due diligence on a company. You end up telling them they are a competitor, and they decide to invest anyway and then leave your board. Anything you can think of that is unimaginable, I’ve seen or experienced VCs doing.

Alejandro: Wow.

Dean Sysman: But also, VCs do amazing things, too. They can help you, and they can make or break your company. 

Alejandro: Of course.

Dean Sysman: What’s important is to put yourself — and this is what I’ve mostly learned from mistakes that I’ve done or have seen is, you have to put yourself in their shoes and understand their incentives and how they work. Let’s imagine. Let’s say that we’re a VC network, and now we’re going to open Alejandro and Dean Venture Partners. We’re going to need funding. We’re going to need what people call LPs, limited partners, where the people give money to the VCs to invest. Now, those LPs are usually very big, institutional organization. It’s like endowments of universities, pension funds for public workers. These organizations are very fiscally conservative. They do not like anything that is out of the norm. A lot of the ways a fundraises its own funding, when Dean and Alejandro Venture Partners, we’re going to get our funding, is very standard. It’s mostly you create a fund that has a lifespan that is specifically almost always ten years because that’s the norm. Nobody likes to do anything outside the norm because they’re conservative. The expectation is that as a VC, venture capital, you’ll return three times what you raised. So let’s day Alejandro and Dean Venture Partners raised 100 million dollars. The expectation of our LPs is for a good fund, and we want to get more funding is to be able to return 300 million dollars on that 100 million dollars that we got. How we make money, you and I, running this fund is through a very well-known formula. Again, this is the standard. Almost nobody deviates from it, which is called 2 and 20. Two percent out of the fund goes to us directly. So if we raise 100 million dollars, we get 2 million dollars. And we get 20% of the carry or the winnings. For example, if we return 300 million dollars, we’ll get 60 million dollars of that — just you and me. Like Dean and Alejandro will get 62 million dollars from that fund out of the 2 and 20. Now, once you realize this, you realize two things. First of all, every VC in the world wants their fund to be bigger because they get more money. They have the opportunity to get more money. But second, you also realize they have to deploy that capital very quickly. If I need to return 3x in ten years, but the average lifespan of a company from founding to exit, let’s say it is five years. I’ve got to finish investing all that money in the first five years. It’s really intense. Today, we’re in a market where there’s too much capital. There are too many venture capitalists with funds who have gotten very, very big because they wanted more. They wanted their own percentage, and it’s in their incentive to get a bigger fund.

Alejandro: Yeah.

Dean Sysman: But it also means that there aren’t that many companies that they can invest in because there’s a lot of competition. There aren’t that many good startups who can justify returning that amount of money. Let’s take an example. Let’s say Alejandro and Dean Venture Partners raised a significant amount of money. We’re really good VCs. We have a billion dollars to manage. That means we need to return 3 billion dollars. That’s a huge amount of money. 

Alejandro: Yeah.

Dean Sysman: That also means that it’s just you and I. We’ll make a lot of money between the two of us, but how many companies can we invest in. We need to go see them. We need to sit on their boards. We need to support them. There are negotiations. So we can’t effectively be involved in more than 15, 20 companies. But that means that in order to make 3 billion dollars out of the 30, 40 companies that will be together, assuming that most of them will fail, means that we have to make bets on companies that can become 10x or 100x return on our investment. I’ve had VC who tell me when they invested in me in the beginning in the early rounds, they told me, “Look, Dean. If you’re going to sell this for 300 million dollars and we’ll make our x-amount of money out of that, that’s going to be a mistake for us because it was a waste of time. We could have invested in a company that actually was potential for that 100x. It would have been a mistake, which any normal person would say, “How can you say that just making a few million dollars very quickly is a mistake, but it is under the incentive structure of VCs.

Alejandro: Yeah.

Dean Sysman: That means if you agreed with all those assumptions that I made and the way I built up the logic, the only way to get a lot of funding and the best kind of funding is if you have the potential and you’re building yourself to be a multi-billion-dollar company. Now, that is also a very dangerous concept because, for example, Axonius raised 95 million dollars. There aren’t that many companies in the world who can acquire us for a price that our VCs would want. We basically closed the door on many different kinds of acquisitions. But that’s okay for us because we’re committed to going the long-term, and we want to be a big independent company that ends up IPOing in a multi-billion-dollar valuation. But most products, and actually, most problems, do not have enough meat in them, do not have enough thickness in them in order to sustain a multi-billion-dollar company. That’s something that most startup entrepreneurs don’t get. It’s very much an all-or-nothing. It’s incredibly hard to be able to fundraise effectively if you’re goal is to sell, which is a legitimate goal. Some people want to do them. That’s fair, and that’s most of the startups in the world that are successful. 

Alejandro: It’s the size of the market. It’s funny because when you ask investors, “Hey, what are you the most excited about?” They are “Team, team, team, team, and team.” I think that’s not accurate because I think that market is everything. You can have the best team in the world, but if the market is super small, then I think that doesn’t align with the incentives that I think you very well outlined. So I completely see that, Dean. I wanted to ask you one thing that I typically ask the guests that come on the show, and that is now that you’ve been at it with two companies, and you’ve been through the full cycle too. If you had the opportunity to go back in time and have a chat with that younger Dean, let’s say that younger Dean that is coming out of the army and is taking a look at potentially launching a business, knowing what you know now, if you were able to go back in time, what would be that one piece of business advice that you would give to yourself before launching a company and why knowing what you know now?

Dean Sysman: So, first of all, don’t do it. Just do something else. But, seriously, if you’re deciding to go on this path, it should not be because you think startups are fun or they’re a good career choice, or they’re a way to make a lot of money. All those are true, but under the assumption that you are willing to do everything it takes to be successful — because another important aspect that nobody thinks about is that there are going to be a lot of people who are going to be betting on your leadership. At Axonius, we have 80-something employees. We have almost 100 customers. We have investors. All those people are depending on my co-founders and me, and our executive team to lead this company into being successful. They bet on us. When you join a startup, you’re betting that part of your career on the leadership of that team. So understanding the responsibility of that is very important. The reason why I chose to do it is because making other people successful, whether it’s my customers or my employees, in a way that they wouldn’t be able to get if it wasn’t for my actions, to me, is the most meaningful thing in life, really. Doing difficult things to solve people’s problems and make their lives better even in a very narrow scope is something that I see as the best way of living life. So my mistake, I would say, is not internalizing that quickly enough. I definitely got into startups with other ideas, like other assumptions, and they’re very wrong. The reason why I’m so serious about it is because if you make mistakes, you’re going to end up letting a lot of people down. It’s okay to make mistakes, but it’s important to internalize that that’s what’s going to happen if you’re going to run a company even successful.

Alejandro: Of course. Dean, for the folks that are listening, what is the best way for them to reach out and say hi?

Dean Sysman: So happy to talk to anybody. My email is [email protected] or feel free to go on our website and reach out to us. I’m very happy to talk about anything from entrepreneurship, cybersecurity, or Axonius.

Alejandro: Amazing. Well, Dean, thank you so much for being on the DealMakers show today.

Dean Sysman: Of course. Thanks for having me, Alejandro.

 

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Neil Patel

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