Dimitri Sirota is the co-founder and CEO of BigID which develops a software that helps companies have a secure customer data and satisfy privacy regulations. The company has raised so far $96 million from investors such as Bessemer Venture Partners, Salesforce Ventures, Comcast Ventures, Scale Venture Partners, Western Technology Investment, Boldstart Ventures, and Deepfork Capital to name a few.
In this episode you will learn:
- Why it’s advantageous to raise money sooner rather than later
- The real benefits of fundraising
- Dimitri’s top piece of advice for new founders
- Why he prefers US startups over Canadian ones
ACCESS THE PITCH DECK TEMPLATE
About Dimitri Sirota:
Dimitri Sirota is the CEO and co-founder of one of the first enterprise privacy management platforms, BigID, and a privacy and identity expert.
Dimitri Sirota is an established serial entrepreneur, investor, mentor and strategist, and previously founded two enterprise software companies focused on security (eTunnels) and API management (Layer 7 Technologies), which was sold to CA Technologies in 2013.
Connect with Dimitri Sirota:
* * *
FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone and welcome to the DealMakers show. I’m excited about the guest that we have today. He is a foreigner, just like myself coming to this wonderful country to the U.S. He’s built, he’s sold a couple of companies. He is now on his next hypergrowth journey, and he also knows a thing or two about pattern recognition when he comes to Angel Investing. Without further ado, I’d like to welcome our guest today, Dimitri Sirota. Welcome to the show.
Dimitri Sirota: Thank you very much for having me.
Alejandro: Originally from the Ukraine, and then you jumped a little bit from country to country. Tell us about your experience being raised and growing up.
Dimitri Sirota: I was an infant when I left the Ukraine, so not much to share about that, although I may take my father back there to revisit. My first memory is in Israel, where I grew up until the age of about five. Then I ended up in Canada, Winnipeg, Manitoba, for those in your audience who are familiar with the flattest place in Canada. I grew up there through high school before attending the University of Montreal, and then later grad school in Vancouver.
Alejandro: What got you into physics, Dimitri?
Dimitri Sirota: What got me into physics? I was fascinated by space. I love science fiction. I love the possibilities of the universe and science. So, physics seemed like a good place to be.
Alejandro: I see here that after you did all of these different stints and getting your studies, you had your first gig at Telus, and you were doing business development. It’s interesting that someone that comes from the engineering background and the science type of perspective, you’re here selling. How was that transition for you?
Dimitri Sirota: You know, it was surprisingly easy. Even in my high school yearbook, I intended to do graduate work in physics and then become an entrepreneur. I think that was always my roadmap as they say in product management. So, I didn’t really deviate that much from it. I studied physics. I didn’t really see myself being a career physicist in academia. While interesting and fascinating, it’s probably not fast-paced enough for my tastes, so I wanted to find a path to warrant starting a company. I didn’t really have any particular ideas as to what I would do. When I left academics around 1995 to 1996, the internet was just happening. I think the Mozilla browser was just launched in ’97, ’98. Telus, which was a regional carrier, was trying to build out an internet strategy. So, I was one of a few people that they tapped and said, “Look, help us figure this internet thing out.” As it happens, the year to year-and-a-half I was there (so, not too long) was a springboard to starting my first company because everybody I started my company with was actually the same age as me and was also at Telus with me.
Alejandro: Out of curiosity, how old were you when you started eTunnels?
Dimitri Sirota: I started eTunnels at 28. I was chomping at the bit to do something. It felt like everybody was starting a company back in ’98. The internet was hot. You already had a few companies like eBay and others going public. It seemed anything was possible. So, I got together with a couple of other folks that I was working with. As much as I like Telus, which was a great opportunity for somebody young, it just seemed exciting to go out and build something from nothing.
Alejandro: How was that day where you finally said, “I’m going to go after eTunnels?” How did you recruit these team members?
Dimitri Sirota:: At Telus, my job was really about helping to facilitate other service providers to buy things that carriers have whether it’s fiber optics, whether it’s the fact that it was dialup modems and things of that sort. Just as we were embarking on this idea, we realized that there was going to be a new generation of service providers. Back then, they called them CLEC, Competitive Local Exchange Carriers. These groups were going to need services, security services, VPN services, things to sell to small businesses and to consumers. We were doing something similar, but for ISPs in British Columbia and Alberta, we thought there was an opportunity to do something over the internet to appeal to these new groups. So, myself and my two co-founders were both at Telus in various capacities. I was more in a business development strategy role. My co-founders were in a technology service provider role, so it just seemed like a good fit. We thought through what this would look like, built out a plan, went to fundraise with some local funds, and we were fortunate enough to get interest almost right away. We raised a little bit of money, enough to get going. Then started building a company in Vancouver, and soon after that in Seattle.
Alejandro: What was the business model of eTunnels?
Dimitri Sirota:: As the name probably suggests, we focused on helping organizations build point-to-point and multi-point branch office VPNs. At that time, VPN services were still pretty pricey and still pretty novel. A lot of the local exchange carriers wanted to have some of those flexibles that could accommodate people dialing in from home, which believe it or not at that time was still relatively new as well as people coming in from branch offices all over as folks started traveling and working from home. So, we came up with a new architecture to allow people to essentially dial in with a secure channel from home, from travel, from a branch office without a lot of capital expense without big infrastructure that you needed to build out in your point of presence. That was the proposition. We threw in a couple of other things in there like storage, a la box thinking that people may want to have a shared drive like SMB or for a [7:53] for those in your audience. That was it. We basically got started. We started engineering in Vancouver, raised some Seed capital, then very quickly realized we needed to have a presence in the U.S. Myself, and a couple of other folks branched out. We opened an office in Seattle. Over a course of two-and-a-half years grew that to maybe 75 people. That was eTunnels, basically secure networks over the internet.
Alejandro: You know, one thing that I was present to, Dimitri, is we’re both in New York City, but in the late ’90s, I can’t even imagine because, in New York City, the startup ecosystem was almost non-existent. I’ve seen it develop like crazy in the past ten years, but in the late ’90s, I can’t even imagine people like putting money as they’re putting it now in startups. In Vancouver, was it that challenging to get that first money in?
Dimitri Sirota: You know what? It was, and it wasn’t. Vancouver’s never been known for having a large capital base. Even today, I think there are very few professional investors. Having said that, Vancouver has always had a history of speculative money. It’s no more for kind of mining money. It’s known for – nowadays, I think there’s Blockchain and things like that sort. There’s always been a group of folks in Vancouver that were willing to take a chance and a risk. So, we were able to attract some of those, enough of those for us to start building a business. Eventually, we did raise venture capital in 2000. Unfortunately, we raised it right before the markets turned, and the markets started falling apart. But it was an exciting time, and we were young. We were in our late 20s. Everything seemed possible. Everything seemed like it was going to go up until, of course, it didn’t. They talk about black swan events, and in the early internet, that market crashed. That kind of started bubbling the summer of 2000 and carried over into the Teleco crash, and early part of 2001 was really that black swan event. But, prior to that, it seemed like an exciting time. We were young. We were hiring. We were growing. We had a lot of interest. It was a lot of fun.
Alejandro: I know that Dimitri, the first experience is always the most challenging one because not only do you have the challenge of building and scaling something from nothing, but also the fact that you’re learning it and how to do it for the very first time in your life. I know that for you, specifically this initiative or this first journey was challenging. Tell us a little bit about some of those dark moments, and what were some of those big learnings that you got out of it?
Dimitri Sirota: Some of them are very typical startups. While we were able to raise money, we never raised a large chunk of money. So, we always raised enough to make payroll or to make three payrolls. We were always living hand to mouth. That was always a challenge. You had three young friends who never had built a company; had only worked together for a short amount of time. So, dealing with some of that politics and basically having a company comprised of three friends in their 20s and a bunch of their friends, also in their 20s, to me today being in my 40s and looking at my older son who’s almost 20 and thinking, “I would not trust him with a lot of money.” So, you had a lot of that kind of dynamics. There are a lot of interesting stories. Again, there was no blueprint. The internet was still relatively new. You had a few companies in Silicon Valley that were racing ahead, and everyone was trying to follow in their footsteps. But it was exciting, so as hard as it was, at the end of the day I didn’t have a mortgage. I didn’t have children yet, although I did by the end of the company. We had some funny anecdotes we actually believed or not. I remember we had an employee named Elizabeth Tunnel. Her email was email@example.com. So, in hindsight, looking back now, it was fun. But there were hard moments. One of the biggest regrets, believe it or not, less than a year into the company, we actually were offered an acquisition by a publicly-traded NASDAQ security company. We were not interested. Thinking back, we would have all been millionaires many times over, in our 20s, and yet, we believed that we were going to be huge, we were going to bigger. So, we held out. Of course, when the market turned, there was nothing but regret. But those were the times. They were all kind of go-go, and we went-went.
Alejandro: Got it. I see that later in 2002 because your next company you started in 2003. So, in 2002, in January, you decided to leave eTunnels. Why?
Dimitri Sirota: The decision was made for me. After the market turned, we tried to recast the company. Our strategy had always been to raise enough to sell to service providers. Overnight, a lot of the service providers that we were selling to like AtWork, Koved, Northpoint, names that you pretty much need history books to recall disappeared. A lot of the people left. There was this cratering in the service provider space almost overnight. This is the era when a lot of those equipment vendors started disappearing. So, we had to reposition. We had to go direct. We had to find a new business plan and new proposition. We had to raise new money to be able to go direct and acquire customers directly. So, we did all that, and we actually attracted money from Telus, as it turned out. Then we ended up having challenges with our investors who didn’t really want to take the money at the terms. Then we spent the protracted amount of time debating and discussing. Or investors at that time wanted to take a very different course from what I wanted to take. The decision was made to – this was not going to be a fit for me. They kept going, but I decided to do something, what I thought was going to be more exciting. Where my company on the eTunnels side was focused on Layer 3, VPN, network security, network transmission, a lot of the folks I was talking to at that time were saying, “All the action is going to be a Layer 7 at the programmatic layer of the OSI stack.” I got more and more interested. I think when it seemed like we were not getting agreement between me and my investors from eTunnels, I saw an opportunity to do something new. So, I left eTunnels, and within three months, I joined forces with another person that I knew and put together an outline of a business that was focused on Layer 7 of the OSI stack and essentially allowing companies to connect and stitch together applications over the internet to build composite applications, leveraging APIs, and web services, and all of these emerging standards. That came Layer 7 Technologies, which was my second company.
Alejandro: So, Layer 7 Technologies is born. But before we go into it, what was the one biggest single lesson that you learned from eTunnels?
Dimitri Sirota: I think there were a lot of lessons in terms of working with investors, especially when you don’t see eye-to-eye. There are a lot of lessons when working with partners and co-founders. There are a lot of lessons with working with employees. It was really the first time that I had staff. It was the first time that we had a lot of money, and we had to deal with our own inner politics. We were all young. So, I think there are certainly regrets. I think that as youth, there are youthful indiscretions in terms of how you relate and behave around others. Lessons that you take to heart and fortunately, they were manifest in Layer 7 and certainly in BigID. But look. I think that’s the reality of when you’re young. You’re sometimes impetuous. You sometimes want everything immediately. You’re sometimes less willing to compromise, and I think those lessons were taken to heart, and I think they became, again, real in my later experiences in both Layer 7 and BigID.
Alejandro: Got it. So, let’s talk about Layer 7. Obviously, you meet this individual. You guys start brainstorming and then finally this idea comes to fruition, and you guys decide to go at it. What ended up being the business model here?
Dimitri Sirota: The business idea was really about selling almost what you’re familiar with at Layer 3: firewalls, VPNs, but at Layer 7. The Layer 7, for those who still remember the OSI stack is about the application layer. Right before we started, there was a lot of talk that at some point, you’re going to create these small, discreet applications, and you’re going to be able to build broader application systems by just stitching them together. Think of moving away from mainframes into web services or as today, that has evolved into microservices. That was the idea, but you needed infrastructure. You needed plumbing to make that possible. Things that were analogous to a firewall and a VPN, but operating at Layer 7. So, things that essentially allowed you to connect your API to another API to share data and share information, and make those two systems talk to one another. We described it as networking for the application network. We thought this was going to be the future. As it turned out, it was. However, the future was further out than we had planned. We felt it was going to be imminent, and candidly, it took a lot longer for that reality to actually become reality many more years. I’d certainly be happy to talk about that journey of wandering in the desert until we finally found manna nourishment and a market for what we were doing.
Alejandro: Yeah, let’s definitely talk about what was that experience, or how challenging were those days until you finally hit it on product/market fit because for some people it takes months; for others, it takes years, and for others, they are never able to achieve product/market fit. So, what do you think was that breakthrough moment for you guys that really led you to finally hit it on the nerve?
Dimitri Sirota: To some degree, it was stubbornness. It was the refusal to believe that we were wrong or at least in my case. It just seemed like the market was going to appear, but just the timing was not there. So, when we started, part of the proposition was that you were going to have to build these composite applications, these systems that aligned and connect data, and systems together over APIs or web services as they were called at that time. The challenge we found is that buyers were just reluctant to do that. They didn’t see the impetus. They didn’t see the driver. They only really saw the light when something happened in the market that forced this reality. There were actually two somethings. First is one that the audience will know very well, which is Amazon Web Services. It’s got web services, which is really talking about APIs right in the name, and that started getting going around 2006, and then soon after the smartphone what we describe as iPhone Version I when you started having this nominal notion of applications on devices. Of course, if you’re familiar from an architecture standpoint, those applications are like little apps that are on your phone, that are calling other apps over APIs over the internet. So, all the sudden, there was this two-cycle event where the Cloud came into being, and the way you connect to the Cloud is over APIs. Then smartphones came into being with their app ecosystem that also required APIs. All the sudden, APIs became relevant. Prior to that, I think a lot of companies didn’t really understand why you would use these APIs. They were reluctant to spend the money. There was no compelling event. Then with Cloud and smartphones or mobility, the compelling event emerged. Funnily enough, we were steadfast to some degree, really introducing product maybe in early 2004. There was a period of two, three years where we struggled to get interest from buyers. But almost magically around 2007, 2008, business started picking up. People got it. People that were introducing initiatives around mobility, people that were looking to start connecting to Amazon initially, later Salesforce through APIs got it. All the sudden, after wandering in the desert for three or four years trying to find an audience, it clicked, and we were able to build a business. I think when we sold, we were close to 40 million in revenue. We just year after year were able to build this business organically.
Alejandro: Wow. Three to four years in the desert is quite a bit of time until you find the water. What was one day that you remember that was probably the hardest day for you during this time?
Dimitri Sirota: I could recall years. It does speak to perseverance. I think as an entrepreneur, one of the most important qualities is that kind of sticktoitiveness. I think at the end of the day investors want somebody that has a confidence and a commitment. They don’t want you just putting your finger up in the air and saying, “I think I’ll go right today. I think I’ll go left tomorrow.” Obviously, they want vision, but they want some ability to have confidence that clearly everyone knows terms like pivot and so forth, and there are situations and times where it makes sense to do that. The challenge with us is that we felt that everything was still on the horizon. The thinking that formed the basis for Layer 7 and the fact pattern hadn’t really changed. It’s just that there was no catalyzing event. What I learned from that whole experience is you need that catalyzing event. That became some of my thinking process for BigID later in thinking through: how do you create that purchase? How do you create a catalyzing, crystalizing event that accelerates the purchasing because it’s always hard in technology to time the market? Very few companies get it right. We’ve all heard stories about Airbnb being too early, and interesting increasingly went public. It takes time, sometimes, for people to get what you mean or why they need it. I think wherever possible it helps to be able to stick to it, or pivot slightly, or alternatively be able to find a business that has that kind of catalyzing event that creates a forcing function for buyers.
Alejandro: Right. In you guys’ case, how much money did you raise for Layer 7?
Dimitri Sirota: You know what? Because I was still in Vancouver, not much. I think in the history of the company over the entire nine years we raised maybe 18 million. Vancouver at that time, I think it’s changed a little bit since I’ve left. But there just wasn’t a lot of venture capital base. The amounts raised were smaller. The amount you had to sell for that smaller amount was larger. There just wasn’t a lot, so we were forced to be a lot more judicious about how we spent the money. I think we were actually profitable for the final four or five years of the company because we just didn’t have the luxury of being able to go to Sand Hill Road and raise a big pool of capital and grow inorganically if you will.
Alejandro: What was that day when you came back home, and you finally said, “We’re going to make it?”
Dimitri Sirota: I think it was after we crossed 2010. We exited in 2013. By 2009, despite the economy being in recession, you may recall this was after the 2008 crisis.
Dimitri Sirota: People were already starting to invest in mobility and Cloud. That was something people talked about. Both ideas require you to be able to leverage API to build connectors. Obviously, some companies in that space did phenomenally well. MuleSoft is a great example. Apigee is another. Some did poorly. We were kind of in the middle. But things started taking shape. Customers started getting it. Analysts started getting it. You started getting Magic Quadrants which is always helpful because that’s a signal to buyers that there’s a category. There are conferences dedicated to it. So, everything started converging around 2010. Truthfully, the year 2010, 2011, 2012, were pretty good years. Business was growing. The company was growing from a stat standpoint, from a revenue standpoint. Things started trending our way.
Alejandro: Obviously, you were eluding to it. CA Technologies ended up acquiring the business, but I would assume that at one point, there was perhaps a discussion at a board level. You, obviously, had raised the 18 million that you were referring to earlier, but you probably had to take it to the board to really reach a decision on whether or not you guys were going to go through the M&A route and so forth. So, why did you guys decided that M&A was the way to go, and what did that process look like for you?
Dimitri Sirota: Yeah. We had a couple of options. We could have continued. We had options for raising, but this was before the big inversion. Today, I think you see private fundings that are valued more richly than acquisitions. At that time, the fundings were still a little bit lower. The exit would have actually offered us a sizable premium over what we were seeing in the market in terms of companies at our stage and so forth. That was a consideration. The fact that at that time we were eight years in was a consideration. I think investors, these were return capital to their investors and LPs, especially the number of considerations. I also wanted to move to the States. I particularly wanted to move to New York. We had other interesting parties out of the Bay Area, but I personally wanted to move to the East Coast. I was 40 years old and felt that I wasn’t going to have too many more opportunities to do that. So, I think it was a confluence of factors that contributed to us deciding that maybe this is the right time. It would have resulted in a great return. In fact, I think we were the Venture Capital Company of the Year. In Canada, we were the BC Technology Company of the Year. While the numbers by the standard of American companies today seem relatively small, it was a great outcome for investors. It was a great outcome for founders, and I just felt that it would afford us the changes that we want, including for me the ability to move to New York to work for a couple of years in a company that acquired us, but ultimately to start a new venture, which is something I always intended to do.
Alejandro: We’ll get into that in a minute. I want to ask you. When we’re thinking about the M&A process, did you guys decide, “We’re going to do an M&A process, and we’re going to reach out to people and gather some interest and perhaps some competitive bidding? Or, did you guys get the inbound interest first, and then that triggered the M&A process? How was this for you?
Dimitri Sirota: It was inbound first. We got interest, and then we had a couple of folks inbound, but it was inbound interest.
Alejandro: So, how long did it take from the moment that you got that inbound to the moment where the acquisition was complete?
Dimitri Sirota: It was months. It wasn’t immediate because we did have the option of raising money, which we did discuss, and we were kind of in the throes of trying to see if it made more sense to just keep going, opening an office in the U.S., and so forth. Less than, I think, seven or eight months, but it wasn’t immediate. We had some optionality. We didn’t have immediate consensus as to which path we wanted. So, we slow-rolled it, but it wasn’t an overnight exit. We got inbound interest. We did go out and talk to other folks about their interest. There are a few parties that we pursued. We pursued a dual path by potentially raising additional funding as well as exiting.
Alejandro: Got it. What ended up being the terms of the transaction with CA Technologies that you can disclose?
Dimitri Sirota: Obviously, like most transactions, they’re under NDA. I think some of it is public and disclosed in the press release by CA, which is now part of Broadcom. But ultimately, I think there was a base price that was great for the investors and the founders. There was an earnout that was great for the staff that continued on, which I think was 100% of the staff stayed on. Most folks had a three-year vest. I stayed on for two-years. The CA was nothing but very courteous in the transaction. They kept the company intact. They made it some division. They relocated me with a Green Card to New York where they had their headquarters in Manhattan. They gave me a role that I wanted, which was to basically focus on identifying companies for acquisitions, so I got a better sense of the business casing and the process for the reverse. So, it was terrific, and it was a great outcome for Layer 7 without going into the details that are kind of under NDA. The company grew over three times from a revenue standpoint. The staffing grew, almost three times. I think the people that came over with the acquisition, which I think was all the staff, the majority of them stayed on right through the Broadcom acquisition. So, I think it was a good outcome for the investors, the VCs. As I mentioned, it was the VC Company of the Year. It was a good outcome for the founders. It was a good outcome for the employees. And it left a lasting legacy, which continues today. It’s still one of the top brands in the API management, API security space along with MuleSoft and Apigee. There is still some remnant of it out there in the marketplace.
Alejandro: Very cool. I believe the reported price was close to 200 million, so very, very nice. So, Dimitri, now that we’ve touched on your first journey with eTunnels and now with Layer 7, your first real exit, if you had to do things over again, and we’re thinking about an M&A transaction, perhaps given what you had learned with the acquisition of Layer 7, what would you do differently?
Dimitri Sirota: One thing I would do differently is I would build a company in the U.S. as opposed to Canada, which obviously was one of the factors for me to move to the U.S. I think there’s just more velocity; there’s more volume; there’s more maturity in terms of infrastructure in the U.S. That was a factor and consideration for me wanting to leave Canada. I love Canada, and I remain a Canadian citizen. My family is there. That was one thing. I think another thing that I became readily aware of is while we were right about the ultimate use case and the need, we were wrong about the timing. I think the lasting lesson for me was really about finding a business where there would be some kind of catalyzing event, where there would be some forcing function that would encourage spend, so you didn’t have to wait four or five years for the market to form. Both those lessons were obviously considerations in building BigID.
Alejandro: Obviously, BigID is the next venture, but before talking about BigID, you’ve been very active as an investor in early stage companies. I’ve seen that you’ve been involved in Angel groups as well. What I want to ask you here is, after investing in all these companies – and just out of curiosity, how many companies would you say you have invested in? A rough estimate.
Dimitri Sirota: Probably eight. I haven’t actually invested since I started BigID. I think there was a period for two years that I was more active after selling and before starting BigID. So, roughly about eight or nine companies.
Alejandro: Let’s talk about Pattern Recognition really quickly. What are the three ingredients that give you the sense that a founder has what it takes to make something meaningful?
Dimitri Sirota: One thing is ambition. I think not all my investments have done great, but the ones that have, have a founder that wants to go big. They’re ambitious, aggressive, and assertive. There is no replacement for that quality. Secondly, I think as much as possible they surround themselves with other folks that want to be successful whether it’s advisors, maybe additional early investors that share that common vision and ambition. I would say those are probably the two biggest qualities. Now, I’ve invested in different stages. Some companies were a little more than slides, and others had product and revenue. Truly, the further along that pathway towards product revenue, some type of confirmation, the more successful those outcomes have been. But I would say the #1 thing is really just having that – I’m going to go back to the ’80s here, that eye of the tiger. It’s that notion that you really want to succeed and you’re willing to push the envelope and not settle. I think that desire. It’s something that in me kind of remained true at Layer 7 through those four years of wandering in the desert. I think it’s an important quality when you’re investing in somebody else.
Alejandro: BigID, your next and most recent rodeo. How did you come up with the concept? How as that incubated?
Dimitri Sirota: I’ve always leaned towards – maybe because of my physics background – kind of more techie things. I always felt they were a little bit more defensible. I think the harder, the less likely you’re going to get into a race around who can raise the most money. One thing that struck me so, when I was at CA, I was basically running a security strategy for the security business, which is largely an identity business meaning that they have a variety of products in the identity access space. Part of my role was, I had a small team, and we identified companies to both partners, potentially acquired, things of that sort. But one thing that struck me is while I was seeing a lot of companies focused on the problem of authentication, authorization, single sign, and all the traditional IAM capabilities, I really wasn’t seeing anything focused on the problem I was reading about on my commute to work. I live in West Chester, which is a bedroom community just north of the city. What I’d read about in the headlines and the Wall Street Journal and New York Times on my train into the city was about all this data that was being stolen, being lost, being misused. That always made the masthead in all of these papers. Yet, when I was looking at when it came to companies were really things that were more about operational deficiencies, things that were answering a problem like Sarbanes-Oxley from 2006. I didn’t really see anything focused on the problem of identity security. It got me wondering: why am I seeing so much around identity management, but not a lot around identity security? But identity security seems to be the thing that journalist and consumers are most fearful of. So, as I started thinking about starting my new venture, originally, I thought I’d give three years at CA, but I actually went through four acquisitions while I was there in terms of companies we bought. Frankly, I was always jealous of the people we were acquiring. I kind of wanted to be back on the other side. So, about a year-and-a-half in, I started thinking about what I wanted to do next and started networking in New York to get to know folks. As part of that, I started thinking about the problem space and realizing that there seems to be a gap, a white space, between the protection of personal information and the technologies around the market. There just wasn’t anything purpose-filled for the protection of information. There’s one other ingredient that was an important catalyst for me, and it was an important catalyst because I felt it would be a catalyst for purchasing. Over the horizon in Europe, across the Atlantic, I knew about this new regulation that was taking shape called GDPR. I don’t think the final name was defined. They were still working through what the finds would be. What was important about it is there was already this kind of drumbeat that among the 28 member states in Europe, in the European Union, there needed to be a better way to protect personal information. Here I was realizing there’s a gap because I’m reading about this lost, misused, abused data on my train ride in, and here at the same time, I’m only looking at companies only focused on a 2006 Sarbanes-Oxley problem and realizing that over the horizon, there’s going to be this new law. This new law was going to come with fines for not doing something for protecting personal information. So, it was that triangle of activities. You saw this catalyzing event, this forcing function, this regulation that was just over the horizon. There was this need that was plain and evident on my train ride in, and one that I experienced, my spouse experiences. Secondly, there seem to be just a lack of solutions. So, I think it was those three factors that started getting me thinking about this problem. Once I left CA on my second-year anniversary, I reached out to somebody I worked with there who ran identity products. I started talking to him about this and getting his impression and thoughts around this idea because he had a lot of experience. He came from the identity world. Then we workshopped it just the same way you would workshop a play or a movie over a course of a few months. But we knew there was something there because, again, it had three important qualities. We knew there was a dearth of technologies or products that actually addressed this. We knew there was a need as evidenced by the articles, which is pretty plain to most people. And we knew there were going to be regulations maybe starting in Europe and probably extending elsewhere really focused on that protection of personal information. So, that was the genesis. It took a few months to take shape and manifest as a slide deck that we could take to investors, but it was really those three factors. Within six months, we had raised money, and we got to work on building BigID.
Alejandro: You know one thing that is interesting here is that you guys really started the business in 2016, but it was much later when we would start to see this new regulation being implemented, and the likes of Google or Facebook having to pay billions and billions of dollars in fines. So basically, at that point, perhaps I think it was earlier this year or last year when it was all over the press, and you’re able to ride the wave. But I guess you guys were able to do this earlier. So, how would you say that when you’re dealing with customers hiring or perhaps investors, how did it change for you like before all this press around Facebook and Google and the fines, how you were operating and educating people versus how things are now?
Dimitri Sirota: When we started, I think we were telling them about this thing in Europe, and you could tell a lot of people in the U.S. about things in Europe, and their eyes glaze. They don’t really know what regulations are going there. As far as they’re concerned, Europe is where you go to see some nice churches for two weeks in the summer every couple of years. Nobody followed the regulations, and frankly, the further west you went, like Silicon Valley, the more they stared back at you glassy-eyed. So, when we were first talking about this need to better protect personal information and the privacy of data, and that there was this thing over the horizon that was going to make people do stuff, people didn’t really buy it. They didn’t know what we were talking about. Very few Americans seemingly read European newspapers like The Guardian or The Times. Certainly, as you go further west, I would say that percentage even decreases. So, we found a couple of early stage enterprise investors that believed in me and my co-founder as much as anything else. I think they may have had the exact same reservations about the business problem, but felt that at the end of the day, if you find somebody passionate and somebody thoughtful about something, and somebody interested in building a big business, as I mentioned earlier in terms of Angel investing, those are the qualities you want. I think we found some investors that were willing to make a bet, and they made a bet. So, we closed our seed funding just off some slides in February 2016. Then we hired our first developer in March 2016. Then our second in April, and we started getting to work. The one thing I will say for us, we had the benefit of a regulation, this thing that became known as GDPR was pretty prescriptive in terms of “You need to do this.” So, for us, it wasn’t just like – we knew there were going to be certain use cases that no technology existed to address. So, if you buy into the fact that privacy was going to become a big problem, frankly, I bought into it. Maybe Europe was kind of like the clarion call or the canary in a coal mine, but at the end of the day, a lot of people are worried about their data. So, we thought that this was going to expand not just to the U.S., but globally. Again, the tooling that you need to be able to give those individuals, those consumers, and the employees the assurance around their data privacy and protection just didn’t really exist. We, obviously, believed in it. We felt that it had echoes of the technology innovation around Sarbanes-Oxley in 2006, which is largely the entire identity and access universe of products. We got started, but it was hard. For the first year-and-a-half, I think, again, people didn’t really know what we were talking about. They didn’t think it was a big problem. It only started changing in maybe late 2017 or early 2018 as privacy became something that was in front of you. Everyone started talking about it. Then our business took off. Our financing took off. Everything started taking off just last year, so not long ago. It was a year instead of four years of wandering in the desert. There was a year and a bit proselytizing. Then we started seeing some of the fruits of that investment.
Alejandro: How much capital did you guys raise this time?
Dimitri Sirota: When we started, we raised 2, and the 2 was really just about building a prototype. So, that was in early 2016. Then once we started closing business in the second half of 2017, we started getting investor interest. We ended up closing our Series A in January 2018. But by that point, people were already talking about this. People didn’t necessarily know what product or what, but people started talking about this. Then we started not only closing more business, but we started getting recognition. So, from being a backwater that nobody talked about and a company in New York, which is still a little bit unusual for a security networking company, we started getting recognition from CB Insights. We won the RSA Division Sandbox, Gartner named us a cool vendor. Low and behold, we got interest in a B Round. So, five months after closing our A Round, we closed a 30 million B Round. All the sudden, a company that only had a little bit of money, a couple of developers in Israel, a very minimal prototype with some early customers, raised a bunch of money. We started hiring. We started growing. Again, not a long time ago. We’re still in 2018. I think we closed our B Round in June a year ago. But in that year, we’ve expanded. We’ve gone from – I think we were eight people at the beginning of 2018. We’re over 108 now. So, we’ve expanded. We’ve gone global. We had a couple of engineers in Israel, myself by my lonesome in New York. Today, we have a couple dozen people here in New York. We have staff across the U.S. We have staff in Brazil. We have staff in Singapore. We have a large engineering team in Israel. We have staff across Europe. So, we’ve grown pretty rapidly through both investing, but also customers. We’ve closed a lot of notable customers because the thing that we bet on, now three years ago, that this would become a problem. It really has. I think it’s jumped over the Atlantic into the U.S., and jumped over from the U.S. to Singapore, Japan, and Thailand. Privacy has become a global concern as evidenced by anybody that’s watched the FA Conference from Facebook or Google’s Conference. It’s become a huge issue. The tooling and technology necessary to account for the data you collect and process on individuals has not been very mature. The problem didn’t exist. So, we were in the right time, right place, but I do want to stress that it wasn’t an accident. There was some forethought put into it.
Alejandro: Rewinding a little bit here, it only took five months to go from the A Round to the B Round. Typically, when people raise money, it takes them from 18 to 24 months. Why did you guys raise the B Round so immediately after the A Round?
Dimitri Sirota: A) It was available. B) The terms were great. C) The evaluation was terrific. The other thing is, it gives you – we felt and wanted to build a business. I’ve already had an exit under my belt, so I was more inclined to keep going. It would give us have to invest earlier. It would give customers confidence, so we tend to sell to larger entities. So, it just seemed like money was available under the terms and with a good evaluation, and it would give us that pop. It would give us that notability. It’s something that people recognize. Today, whether we like it or not, how much you raise, how frequently your raise is a consideration. People read TechCrunch, and Forbes, and other publications. They talk about this kind of thing. So, yeah, it seemed opportune, and it was relatively easy with the same data room like nothing had really changed. So, we did it. To be honest, it was the right decision. We got a forward-looking valuation. We got a lot of capital to be able to invest earlier. That investment earlier allowed us to accelerate from a revenue standpoint faster and go bigger. Today, I would argue we have a reasonable brand, not just in the U.S. but also internationally.
Alejandro: So then for the people that are listening, especially for the founders that are at it, Dimitri, what would you recommend? Raise all the money that you can, or raise the money that you need?
Dimitri Sirota: Look. This is why I’m in the States versus Canada. I went through the need model. It’s very much at the health care system in Canada. I did that already. I think part of the American psyche is you want to go big. I do think that it may sound fanciful and a little bit sarcastic, but it has values. Companies at the end of the day are betting on you as an organization. They want the confidence and assurance that you’re going to be around, that you’re going to have the wherewithal to engineer what they need even if you don’t have it immediately if you’re missing that or this feature. So, there’s a tremendous amount of benefits. Obviously, you have to consider evaluation, so I don’t think you should raise at the same evaluation you just closed on two or three months later, but if someone is willing to give you a forward-looking valuation, and you have uses for that capital whether it’s growing sales, growing engineering, introducing new products, I would always lean on the side of taking that money. You do close out some possibilities. Maybe you’re not going to get it fired right away. You close off certain doors, but again, if you do want to build a big business, I think it’s always advantageous to take sooner than later.
Alejandro: Got it. Then, I want to ask you here, the data and privacy environment in the market, where do you think it’s heading? It makes me very uncomfortable that people know of everyone. They know the temperature in your house. They know the websites that you’re visiting. They know the emails that you’re sending. It’s like there’s no privacy anymore. So, where do you think data and privacy as a whole is heading?
Dimitri Sirota: We believe that it’s foundational. I think it is personal. It’s about personal data, but you are your data. That data is the representation of you inside of a company. I think what we’ve learned from Amazon over the last decade is that every company is becoming a data company. Where they keep their physical servers doesn’t matter as much. Where they rent office space doesn’t matter as much. What differentiates them is the data. Having said that, for the last five years, most of these companies will be focused on accumulating as much data as they can. This is that whole kind of big data trend that gave rise to companies like Cloudera and Hortonworks and so forth. Now, I think there’s that realization that with that accumulation of data comes new responsibilities. So, what BigID provides is a way for companies to better account for the data they collect and process on individuals, being able to account for that data so they can be more accountable to their customers, their employees, their clients. Believe it or not, that type of accounting doesn’t exist for data. If you think about there’s an analogy that I like to sometimes use, which is think back to 1910 and before 1920, there were no systems of standardized accounting for financial transactions. So, fraud was rampant. Things like GAP were introduced almost 100 years ago to provide standards for how organizations account for their revenue, for their income, for their expenditures. In a similar way, data is the new currency for most businesses. Sometimes, people talk about “Data is the new oil,” but the reality is that data is a little bit different from oil. Data belongs to a person. It has attribution. So, you need to be able to understand the value, but at the same time, preserve the security and privacy of that information. You can’t do any of that without having a framework for accounting for what data you collect, for what data you process, for what data you share, for what data you dispose, and that’s really what BigID is providing. That’s our big idea is that we provide organizations this holistic approach to know their data because their data is potentially the most toxic thing, or it can be their most valuable thing. But how do you do it in a way that balances insecurity or security with value?
Alejandro: Got it. So, one thing I typically ask the guests that we have on the show is – obviously, you have a wealth of knowledge here, Dimitri, on building and scaling companies. I want to ask you if you had the opportunity to go back in time and have a conversation with your younger self, where you would have the chance to give yourself one piece of business advice, what would that piece of advice be and why before launching a business?
Dimitri Sirota: Not to be – well, when I think somebody offered us to buy the company, eight months into the company before we had product, I probably should have taken it. The other piece of advice is really just in terms of your behavior towards others. I’ve always been driven, but I think it’s important to be able to manage, balance that with a degree of respect and thoughtfulness in terms of how you relate to both your co-founders, employees, investors, clients. One of our standard statements, probably the top line, we have a set of value statements at BigID, and the first one is really about caring. That reflects the way we think about taking care of our customers, but also taking care of one another. I do think that is something that the old me, the 27-something didn’t value as much as the 40-something person does.
Alejandro: Got it. For the people that are listening, Dimitri, what is the best way for them to reach out and say hi?
Dimitri Sirota: They could email me at firstname.lastname@example.org. They could also reach out to us on Twitter @bigidsecure or over LinkedIn. We’re available on all the media channels. They can even find us on Instagram.
Alejandro: Amazing. Well, Dimitri, thank you so, so much for being on the Dealmakers show.
Dimitri Sirota: Thank you very much for having me.
* * *
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 email@example.com.