Neil Patel

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Reuven Aronashvili’s startup has already raised $140M in capital and they’re growing fast as they work to equip organizations to fend off growing cybersecurity threats. His venture, CYE has acquired funding from top-tier investors like EQT, 83 North, and V Ventures.

In this episode, you will learn:

  • Cybersecurity
  • Partnership and team building
  • What CYE is doing for organizations like yours

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    About Reuven Aronashvili:

    The founding team of the Israeli army Red-Team, Section 21 Founding team of the Israeli army Incident Response Team B.Sc, and M.Sc in Computer Science and Math from Tel-Aviv University US Department Of Homeland Security certification as world-class ICS and SCADA cyber security expert Head of Hyver global cyber security experts community Trusted advisor of multiple Fortune 500 C-Level executives.

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    Connect with Reuven Aronashvili:

    Read the Full Transcription of the Interview:

    Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. I’m very excited to have our guest today. We’re going to be learning a lot about cybersecurity and crazy stuff that is happening nowadays: building, scaling, being profitable before even getting your first investment, and you name it. So without further ado, let’s welcome our guest today. Reuven Aronashvili, welcome to the show.

    Reuven Aronashvili: Thank you very much. Thank you for having me.

    Alejandro: Originally, you were born in Akwa in Israel. Tell us about your upbringing. How was life growing up there?

    Reuven Aronashvili: Yeah, that’s a very interesting place to, let’s say, go in. My neighborhood was not the easiest one. You can imagine a situation of a lot of crime in the neighborhood, people that are not really looking to be educated. It’s not like the [2:17] and so on. So it was not an easy place to go in. However, when I was there, you see it as the best place in the world. That’s a very interesting way to look at things as this is home. The friends that you have there are your family, and only when you look at it, what locked in me, and trying to see what you had there, only then do you understand how difficult it was. But when you leave that, it’s not really difficult. But I liked every second. I really enjoy going there and different lifestyles, much easier, simpler. But, yeah, I enjoyed every minute. When I moved to Tel Aviv for the first time, things were completely different. I met different people, and it was a different atmosphere. It was definitely different, but Akwa is always going to be my home.

    Alejandro: I can imagine. Then, math and computer science; when did you start to develop that love for numbers, and computers, and so forth?

    Reuven Aronashvili: That started very early. When I only was in elementary school, I was always better than others, let’s say, in these kinds of science classes, whether it’s in math, biology, physics, and any other kind of scientific class. That really was my passion. I really enjoy that, and when I decided to go to a career path that included an academic portion of it, I decided that computer science and math are a combination: computer science for the practicality and math for the soul. This combination actually provided a very nice toolset that I am still using today.

    Alejandro: Let’s talk about your SATs because I know that was quite an experience, so tell us about the SATs. What happened?

    Reuven Aronashvili: I was part of an academic excellence program that in order to get into this part, you need to work six or seven months before in order to get into the program. Now, I was presenting my final project in Tel Aviv. My project won the contest in Israel, and I presented it to some very important people in Tel Aviv University when I was 16 or 17 years old, just before the army service. I met someone from [4:50]. They told me, “If you want to get into [4:53], you need to do your SATs tomorrow.” That’s something that usually, you get prepared for quite a long time. So I got to this specific exam clueless, without even understanding what the structure was of the exam, what the specific tools were that you needed to have, and even the pencil; you have to have a special pencil to use for the SATs. I didn’t have anything. It was quite embarrassing. But, luckily for me, I managed to get a very high score, and it was everything that I needed in order to apply and be accepted to the university and specifically to what my first choice was in Tel Aviv.

    Alejandro: Nice. Let’s talk about being confused and being viewed as the maintenance guy when you showed up at the university. What is that?

    Reuven Aronashvili: Yeah. My first course at Tel Aviv University was Linear Algebra. I came late, as always. I came late since I was coming from Akwa to Tel Aviv. It was a two-hour ride. I got into the class 15 minutes late, and the professor stops everything. He starts to shout at me and says, “Where have you been? We’ve been waiting for you for too long. See the people here. We’re in Israel. It’s so hot here. How can we manage to have a class in this kind of temperature? It’s not okay that you allow yourself to not come three weeks before,” and so on and so forth. He’s continuing to shout and so on. I’m going and sitting and opening my specific small table, getting out of my bag my notebook. “I’m one of the students.” He’s like, “That’s okay. You can continue.” He was so embarrassed. That was very funny, but now we are very good friends, this professor and I.

    Alejandro: Hopefully, he gave you a good grade. So, good stuff. In your case, obviously, this was a good segue into your going into the army, and the army was a pivotal part of your career, and you were there for seven years. But here is where you actually started to get deeply involved in cybersecurity. Tell us about this.

    Reuven Aronashvili: Before joining the army, I was, again, at the university. I learned a lot about computer science, engineering, and so on. The training that I got and that the defensive people built is for attacking organizations, etc. That’s training that I got in the army in a very specific unit called Section 21. When I joined the army, that was the time of the foundation of this unit. So my team and I built everything from scratch from the computer processes to standard operating procedures to specific [7:55] software courses that we needed to take. What the training is going to look like, what we are going to talk about as infrastructure application. A lot of decisions that we made at the time were crucial to the success of this specific unit. So it was more or less an experimental experience in the beginning because we didn’t get them mainly for show. We got a 1 or 2 demonstration whether we’re able to take this all. At the end of the year, we got the mandate late after we demonstrated what we were able to build, and that was a huge success from our point of view. At this point, we started to get more and more responsibilities around getting full access to the army networks, in general, whether it was navy, air force, and so on. Later, we got the responsibility, also, for the protection of secret services in Israel. Then the [8:50] infrastructures over the state of Israel in a way and in a combination with some of the secret services in Israel, and that was the best time that we had in the army. At this point, we were demonstrating capabilities that were new to the Israeli community, let’s say, and that was something that was developed since then to be a huge success.

    Alejandro: Obviously, a lot of classified information there, so we can’t go into detail. What would you say that you’ve learned or that it gave you this experience of being seven years, in terms of discipline, too? I meet a lot of entrepreneurs that are coming from Israel, the startup nation, and it is amazing—that way of thinking and the mentality, training that you received from being in the army and then it becomes very helpful once you’re looking at tackling your professional career, and more importantly, building a business because ultimately, building a business is like going to war. You’re in the battlefield every day putting out fires and stuff like that. So tell us about how or what kind of approach or visibility, or perspective you have from being in the army for so long.

    Reuven Aronashvili: You quickly find yourself in a situation that you need to provide a solution to an organization that is one of the most attacked organizations worldwide. We’re talking about tens of thousands of attacks every week that are targeted to the [10:20] coming from different ranges or different capabilities of attack from [10:25] all the way to nations around us. We have very good neighbors around us. The whole objective is to train our service units, so they’re doing quite a lot in order to make sure that our teams will always be prepared. You find yourself in a situation that you have to innovate because you have limited resources and a lot to deal with, and you start to find yourself in a situation that you need to be able to prioritize to optimize resources, to make sure that you’re able to distinguish between important to non-important things. All of those skills are highly important for business: where you put your emphasis, where you invest, how to prioritize, how to say what is important and what’s not important, delegating, etc., a lot of capabilities, I have to say that those are things that you learn in the army. I joined that army when I was 21 years old. You get responsibility that is definitely more than you can take on yourself. But you’re young and stupid, and you don’t care. You say, “This is a great opportunity. Let me. I’ll take everything that you give me.” Only later, when you’re older, do you understand the huge responsibility that you took on yourself. And it’s all history. I think that’s the amazing part of the Israeli army. People are not getting out to the technology units are dealing with problems with complexity that is something that is very hard to find outside this kind of organization, which, I think, is the basis to what you see in the Israeli market. That’s why innovation coming in this magnitude when you compare the number of successful startups to people in Israel. That’s a very nice issue.

    Alejandro: It really is. In your case, let’s talk about breaking out of the army and starting and building your first business. Tell us about how that process was?

    Reuven Aronashvili: After six years of service, I had the opportunity to find it was my duty. I extended for an additional year. I wanted to make sure that our unit had everything that was needed in order to continue in this impressive track record that we had at the time, so I extended for one additional year. Then I decided to continue toward a more civilian career path. I went to one and only interview in another company in my life, which made me clearly understand that with the situation that I saw in the Israeli market with the level of sophistication, that was not very impressive to me, at least, at the time. I decided that I wanted to go to a more, let’s say, my own journey and decided to develop my own business and put emphasis on quality and not on quantity. At the beginning, I wanted to find several key customers and work with them and provide them with the highest level of capabilities that they could have. Very quickly, I had the opportunity to get the initial opportunity in Europe, in the Netherlands, with a company called Phillips, a very nice organization. I really enjoyed and am still enjoying working with them in creating an amazing organization. Since then, the rest is history. After successful work was done there, I got good references and very good introductions from the people there. Based on that, I started to get more and more traction. I found myself very quickly being a trusted advisor to civil executives in different organizations. They fell through the European market. And later, I was based in a U.S. organization to start with; and the expansion to the U.S. is something that happened quite intensively but in a later stage. Europe was my main target.

    Alejandro: What ended up being the business model of CYE? Talk to us about what you do and how do you make money?

    Reuven Aronashvili: When I started, I was doing pure professional services. That means taking a very holistic approach for offensive security and no estimations and no assumptions—nothing acting as a military unit trying to attack an organization and come back with the report saying where the gaps are and how to solve those gaps in the most effective way possible. Later, when we grew up, and we became a company, which happened, starting in 2016 when the company really grew up at a pace of more than 100% a year. We also started to develop technology that is both helping us with scalability to be able to automate some of the capabilities and maintain the same level of quality. More than that, we developed algorithms that today are considered unique in the market to optimize investigation and service investment in organizations. That is something that is quite impressive, really helping me based on a multiple approach. And computer science, the academic experience that I had, really became handy in this case. We used that quite intensively in order to provide organizations [16:07] capability to invest cybersecurity funds and be able to distinguish between important and non-important cases of litigation plans.

    Alejandro: In your case, we’re talking about a business that was profitable since day one. In fact, before you guys even took your first trench of money, you were already $6 million-plus in revenue. So, let me ask you this: how much capital have you guys raised to date, Reuven?

    Reuven Aronashvili: The total fundraising until now is around $140 million. I have to say that we had two rounds in our history. First, with 83North and some angel investors, which, at this time, we wanted to have 83North as our advisors on how to transform the business from, let’s say, one of oriented-kind of business to a more SaaS subscription-based business. That was our transition in 2018, and it was great to have Yoran Snir as a member of the board, who comes from 83North, and a very good friend, and a true professional in the market helping us there. At the beginning of this year, we added EQT, which was our customer from 2016. In 2021, we decided that their capabilities, their network reach-out, and so on can be highly beneficial for our go-to-market expansion worldwide. We decided that we want them as a partner as well. This was the tool, and the investment part was to connect the dots between them and us. The financial aspect was less important. It was always important but less important; more important was the partnership and the capabilities of a company like EQT brings to the table, which from our point of view is changing quite a lot.

    Alejandro: It’s interesting that you mentioned this because, typically, founders think about fundraising because they want access to the money. In this case, you had the money; you were getting good revenues from customers, but you realized that it made sense to raise money so that you could access the networks of whoever was giving you the money, whether that was to distribution, for subsequent rounds, or whatever that was. As they say, “You don’t know what you don’t know.” So at what point do you realize that it makes sense to make money from people, even though you don’t need the money?

    Reuven Aronashvili: We never raised money before we knew our partners very well. 83North was our customer before we started working with them as an investor. And EQT, as I said, we knew them five years before we had them as partners. So, not only did we know what their influence was and what their power and strength were, we actually worked with them already as some kind of partners before we’ve done the transaction. We’ve done the try-before-you-buy process quite intensively, and I think that it was very successful. The next time, if we go to fundraising, will be when we have a specific requirement or need that we’ll find a partner with a skillset capability network of any kind of specific security that will be appealing to us, and that will be the next time that we will go fundraising. The financial situation of size is very solid, and the moment is not really the point, but you know? Every now and then, you get a commission, also by the market with a nice valuation and high valuation. That’s also good, so they don’t take you for granted. That’s also important. However, that’s not the most important.

    Alejandro: In your case, you’re raising this $140 million that you guys have raised is pretty impressive being out of the U.S. and being in Israel. What was that approach? Because when you’re outside of the U.S., it’s a little bit tougher to raise this kind of money. What kind of approach did you guys take in order to make this happen?

    Reuven Aronashvili: Since we raised money at the beginning of the year, I think that fundraising in Israel actually changes dramatically. There are a lot of players in Israel that are willing to write larger checks, so we’ve seen $100 million, $200 million, and $500 million of investments from different organizations. I’m very happy for the Israeli market, and I think that’s a huge majority phase and maturity phase that we’re going for in the Israeli market from $100 million to $200 million to $300 million of exits that are, of course, very impressive and very nice to see to developing more mature organizations that are going to IPOs and to the Stock Exchange in the end. So from my point of view, getting the market more and more mature and getting the recognition from investors that are worldwide investors. Most of the investors are not Israeli investors that are deploying the large amounts. That’s a huge sign for the quality of the Israeli market and a lot of great solutions in the market. That’s what I can tell you. When we started our journey, we knew that we were not going to add any partner that will be the majority in our organization. So we wanted to go to a minority investment because we wanted a partner, and we didn’t want someone that would get ownership for our organization. Based on a very well-defined formula, we got into the sum itself. It could have been easily less than that, but we wanted to have enough interest for our partner to be in our organization on the one hand. We balanced that with the least dilution kind of forces that we could have catered to our organization. The balance there was enough interest for our partners while minimizing the dilution to the existing shareholders of the organization that was really the thought behind that. That led us to the number that we got. In the rest, it was $100 million, and then the pure investors actually joined to preserve their equity level. It ended up more than $120 million.

    Alejandro: I heard you say a couple of times the word partner. I think that a partnership is really what this is all about when you’re looking at bringing on people for the long run to share the journey with you. As you’re looking at this, and you have been, and thank God, fortunately, in a position of luck given the financial circumstances of the business, but at what point do you realize, or what is that approach to the understanding of whether there is an alignment or not to have someone being labeled as your partner for the long run?

    Reuven Aronashvili: I think that I’m a very personal and resourceful guy. You can enjoy the ride, and so on, but in the end, if we don’t believe in it as a team, something doesn’t work. That’s very simple from my point of view. So we set up very clear KPIs and targets, very aggressive in most cases. We like to challenge everyone in the organization; that’s something that you’ll hear when you go inside in the office and hear everyone saying very clearly that they are challenged with the targets and the feeling, and so on, and that’s the portrait of this organization. Our partners are there to enable and to support those specific conditions and targets that we have, and it’s very clear if we don’t deliver in the end, then it’s very clear that something didn’t work, whether it was on our side, or the partner’s side, and so on and is something that we can investigate. Luckily for us, I can tell you that we had those two rounds of investments, and we are very happy with both. So we didn’t have a lot, so two out of two is quite nice. I don’t know how the future will look because every time you increase the complexity level, the requirement that you have from your partners is also higher, and you expect something that is more than you have at the moment. But I can tell you, for sure, that I am very happy and quite pleased with the partners that we have at the moment, and I’m happy to call them partners because this is really the feeling. Now when you sit in a board meeting, and everyone is there trying to help, and there are no arguments—you know, you can always argue on the business side, and good discussions are always important, so that’s part of challenging the assumptions, and so on, and that’s something that we do on a continuous basis. But when you summarize the meeting, and everyone is there to support, and everyone is taking on themselves more and more responsibilities: “I’ll introduce you to this guy.” “I’ll take this specific mission.” “I’ll do that,” and so on. That’s the spirit that I’m looking for, and I think that where we are today is something that is expressed and translated into numbers, in the end, and that work is leading us to exceed our expectations already after year two. We managed to achieve our expectations for 2021 already in Q2, and that’s very nice to see. Now we’re working on expanding more and more, but that’s, from my point of view, a pure bonus, obviously.

    Alejandro: Nice. Congratulations on that, Reuven. For the folks that are listening to get an idea of the size and the scope of CYE today, is there anything that you can share in terms of the number of employees or anything else?

    Reuven Aronashvili: We have 120 employees today. We grew 100% from the employee perspective and 300% from a revenue perspective this year, so it’s a very successful year. All in all, I would say that we are exceeding expectations at the moment. Of course, there are still a lot of things to do. Don’t get me wrong. I think that at every point, we always see what can be important, and we’re trying to report those specific processes, procedures, and tool capabilities. But, overall, I can tell you that 2021 is the best successful year for CYE. The future is really bright, as I see it. At the moment, we are investing a lot of time. Also, we’re looking at potential acquisitions on our side, so that’s part of the inorganic growth that we are trying to develop in our organization.

    Alejandro: Nice. So, as part of thinking about the future and what that holds, imagine if you were to go to sleep tonight, and you wake up in a world where the mission and vision of CYE are fully realized. What does that world look like?

    Reuven Aronashvili: That’s an interesting question. I think that if we’re able to create a standard, taking what we do and make it a standard that every organization is following this specific standard, I think the world would be a safer place for a show from a cybersecurity kind of tech point of view. I’m not saying resilient because there’s no such thing, but I can tell you that the cost to attack is actually being able to beat [28:24] access into the organizations would definitely be dramatically higher, and the similar items may be generated only by true professionals and not like every kid in the market can do like you see today. More than that, I would say at least every organization would be able to very clearly state the maturity level of the organization and in numbers—quantify that in a very accurate way of what is the journey of the organization? What is the budget that needs to be invested in cybersecurity, and above all, what is the organizational risk in terms of dollar value? I think most organizations today are not able to answer those questions in a clear way, and I think that our capabilities will definitely help to solve that and to provide those capabilities as a natural language in every organization. That’s exactly what I’m trying to do.

    Alejandro: Beautiful. Reuven, imagine I put you into a time machine, and I bring you back in time to that point where you were coming out of the army and wondering about a world where you’ll be bringing a company to life. You have the opportunity of having your younger Reuven actually listen because we’re talking about 2012, and maybe that younger self sometimes doesn’t listen that much.

    Reuven Aronashvili: Yeah. [Laughter]

    Alejandro: Let’s say that younger self is listening, and you have the ear of your younger Reuven, and you’re able to give him one piece of advice before launching a company. What would that be and why, given what you know now, Reuven?

    Reuven Aronashvili: The number one piece of advice from my point of view, other than all of the things I already knew—I knew that quality is important. I knew a lot of things, but one thing that I think is the most important advice that I can give myself or any other founder of a company or someone that is going through a personal journey would be to invest in a team. I started as a one-man show. I thought, “Yeah, I can do that alone.” I spent two or three years doing that alone. It was nice. I mean, I enjoyed the journey, but CYE became a true brand, and capability, and a power in the market only when the team was realized. That means that when I had partners, and again, I’m using the word partners because my employees and those people that joined the organization after me, from my point of view, are true partners. That was the one thing that I think changed completely the way that we work, people that are dedicated, obligated to the success of the organization have personal interests for that to be successful. That completely changed the way that CYE looked, the quality of the delivery, and everything around it—the succession of customers, the quality of revenue, the specific margins that we have on projects, and so on. Everyone was dedicated, and everyone wanted it to succeed. I think that the team is the #1 key item. In every company that I’ve been in, in the future of numbers, one thing that I do is first build an excellent team around me and take it from there.

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

    Reuven Aronashvili: LinkedIn, email, phone, Facebook, whatever. I’m everywhere, and I can give you the email so we can do it that way. I’m very available on LinkedIn as well, and they can reach out to you because now we are friends as well.

    Alejandro: There you go. Reuven, I want to thank you so much for being on the DealMakers show. It’s been a pleasure to have you.

    Reuven Aronashvili: Thank you very much. It was a pleasure.

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    Neil Patel

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