Rishi Bhargava On Selling His First Startup For $560 Million And Now Raising $53 Million To Make Login Likable On The Internet

Rishi Bhargava exited his first company for $560M. Then raised a seed round for his latest venture, which is more than 20x the average size for a brand-new startup. The startup, Demisto, has attracted funding from top-tier investors like Accel, ClearSky Security, Palo Alto Networks, and Greylock.

In this episode, you will learn:

• Category creation
• Getting your company acquired
• Rishi Bhargava’s top advice before launching a business

SUBSCRIBE ON:

For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).

Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.

About Rishi Bhargava:

Rishi Bhargava is Co-founder and VP of Marketing for Demisto, a cyber security startup with the mission to make security operations “faster, leaner and smarter.”

Prior to founding Demisto, Rishi was Vice President and General Manager of the Software Defined Datacenter Group at Intel Security. A visionary and technology enthusiast, he was responsible for delivering Intel-integrated Security Solutions for data centers.

Before Intel, Rishi was Vice President of Product Management for Datacenter and Server security products at McAfee. As an entrepreneur at McAfee, he launched multiple products to establish McAfee’s leadership in risk & compliance, virtualization, and cloud security.

Rishi joined McAfee by way of acquisition in 2009 (Solidcore, Enterprise Security Startup). At Solidcore, he was responsible for Product Management and Strategy.

As one of the early employees and members of the leadership team, he was instrumental in defining the company’s product strategy and growing the business.

Rishi has over a dozen patents in the area of Computer Security. He holds a B. S. in Computer Science from the Indian Institute of Technology, New Delhi, and a Masters in Computer Science from the University of Southern California, Los Angeles.

Rishi is passionate about new technologies and industry trends and serves as an active advisor to multiple startups in Silicon Valley and India.

Connect with Rishi Bhargava:

• Crunchbase
• LinkedIn
• RocketReach
• Twitter

Read the Full Transcription of the Interview:

Alejandro Cremades: Alrighty hello everyone and welcome to the dealmaker show I am thrilled with the founder that we have today joining us because it’s a founder that not only you know he has done it but he has done it successfully from building it to scaling it to financing it to xing in it. So. And how part of theredo let’s welcome our guests today rehi bargava welcome to the show hi.

Rishi Bhargava: Thank you so much Alejandro excited to share my experiences with the community here.

Alejandro Cremades: So you were originally born and raised in India so give us a little of a walkthrough memory lane. How was life growing up.

Rishi Bhargava:
Well um, lots of fun I would say amazing memories with the with the single focus on how do you continue to improve your life. How do you continue to learn at each stage of life and that’s that’s what I kind of ah. Ah, remember my childhood as which is starting from kindergarten how do you figure out ah to differentiate yourself move to the next step be the best in class. Ah and so on as forth and yeah, growing up in India and Education System India is always about being the best.

Alejandro Cremades: Yeah, no kidding I mean the culture you know the way that you either become an engineer or a doctor. It’s unbelievable, but that’s it that’s it now now in your case you know talking about being the best in classes you were saying you graduated there from Delhi you did your computer science degree and then eventually.

Rishi Bhargava: Um, us.

Alejandro Cremades: You see that it’s time to come to the us why why coming to the Us.

Rishi Bhargava: Yeah, so I think um, the the journey to us was an interesting 1 right? I mean graduated from 1 of the premium colleges in India in engineering and the first step was if I look at education system in India it’s. Amazing at the bachelor’s level but from a masters and ph d level. There is a lot to be fulfilled. There is a lot more that is offered by universities in United States so the goal was to come here. Ah. Do a ph d in computer science. That’s what my goal was and especially in a particular field of networking and systems. So I came here to do a ph d and learn more ah but ended up dropping out before doing a Phd so finished my masters and says well Psd is not my thing.

Alejandro Cremades: First and what happened after the masters.

Rishi Bhargava: So dropped out after masters. So after the masters I think um took up a job I as as part of the masters journey what I realized was I really enjoy solving customer problem. So. That’s best done in a startup so when I joined my first job after masters it was in a public company but relatively small public company in iystems and I was as a fresh grad coming out the promise was that I’m going to given an independent project being able to build my own thing. That’s what attracted me to that company. Ah, but again it was tough times I graduated in 2001 after masters and it was tough in the sense that you know what 2001 was all.com bust started with that company the stock continued to slide down down down down.

Alejandro Cremades: Oh yeah, oh yeah.

Rishi Bhargava: Um, projects got terminated so started on as a telling somebody this morning. It ah started on experiencing the toughest time we have all seen but then saw it again in 2008 and probably now so that’s that’s how my beginning of the career was.

Alejandro Cremades: And obviously your career I mean very successful. You’ve worked for really big companies. You work for companies like Mcafee you work for others like Intel so it took a little bit of time for you to really go at it as an entrepreneur I think that you know the question here that comes to mind is. What do you think you know needed to happen for you to really feel that you had you know the docks in a row to really make that leap of faith.

Rishi Bhargava: Yeah that’s actually a good question and and honestly looking back because like hindsight is always twenty Twenty I feel that ah coming out of engineering in India and then masters it was not that I was dreaming to be an entrepreneur right? It was like hey just continue to learn continue to grow. But. Right? after the oi systems and Cnn job I joined a startup called solid core systems. That was my first experience as a true startup and what I realized very quickly was there is a thrill in starting from a blank slate right? I mean I really enjoy saying hey. What is the problem we are solving and I was like engineer number 2 in solid core then became their first product manager and that was my thinking which is like as ah as a product manager in the early startup I really got to see the customer problem. How can I solve it how can I solve it better

Rishi Bhargava: And then continued with that journey so in some senses even though I was not a founder at solid core system I experienced building a product and a failure I mean solid core systems was not a very successful outcome. It was acquired by Mcafee for as much as it had raised but then also. Macafee was an amazing experience right? I mean I learned how to build big products scale products which has millions of users and those kind of learnings always helps me as an entrepreneur to make sure what I’m building will scale eventually. So lots. Lots of good learnings and then I found an amazing team I I always say for me, it’s team First idea later as an entrepreneur big believer in the right team big believer in my cofounders high am is high amount of trust and that’s that’s when I took the leap of faith.

Alejandro Cremades: So then let’s talk about taking the leap of faith. You know how was that like because obviously the misto you know, ended up being a smashing success. You know, incredible outcome. You know first company first incredible outcome I mean that’s that’s incredible hrishi so why. I mean you had already been you know for a while now in the corporate world. Ah you know, obviously your parents everyone in India was probably super proud. You know you had like the 9 to 5 you know the paycheck coming. You know you know that everyone was taken care of. So so why going you know after the uncertain.

Rishi Bhargava: Yeah, that’s actually an excellent question I handle the the parent and the family part coming from India is a very interesting one because back then now the now the indian outlook has changed but back then.

Alejandro Cremades: Path.

Rishi Bhargava: The company brand mattered a lot leaving a company like macafee Intel was like oh my god who leaves a well good paying job for an outcome taking one third or one fourth almost of the salary that you’re making at that company. What is that like so. It was a shocker when I told my parents and my my father and mother both worked in a single job their entire career so it was like wow. What are you doing this did you get fired what is going on and I think the the answer is why take that uncertain path is ah this itch to go. Create something new to solve customer problem I believe big companies are excellent at scaling but it is very hard to innovate at a large company. Very very hard and I think it’s not a function of which company it is is just when you’re serving. Ah, very large customer base changing or innovating something new is not easy and I I went through this thought process introspection and says I’ve always now having experienced solid core. Want to do something ground up. Want to solve a customer problem. There is thrill of building something new building something of your own. So let’s do it. It was a big debate right? I mean right around that time. Um, right before we started demisto I had ah I had one kid at home and we were going through this whole.

Rishi Bhargava: Discussions like as a family am I doing the right thing. What is the risk and we said no, it’s okay I think let’s take the chances I’m a believer that there’s always a second chance if this doesn’t work out corporate job take another corporate job but wanted to give it a chance and the second start by the way. as as I said I’m I’m ah I’m really lucky to have cofounders. Ah solo entrepreneurs are very It’s very hard for solar entrepreneurs and for me there was support sat down discussed with 3 other cofounders went through it had clarity on the idea we were all in this together.

Rishi Bhargava: So there was there was support together to go through this and I think that that had to not.

Alejandro Cremades: So Why I mean you were talking about the um perhaps they they the lack of innovation in larger corporations. You know they focus more on scaling versus you know the the you know innovation with the misto. Why did you guys think. But this problem was big enough or was meaningful enough for you to really take the risk.

Rishi Bhargava: Yeah, so I think even with de misto and now with disco I think this is one area where we have always taken a very I call it open mindded approach to go survey the market at deistto. Um. Before we started. We interviewed roughly 50 customers over a period of two months and we started our theory was working on 1 idea which is doing a better endpoint security with a different angle. We started to pitch that idea. Every customer said no, that’s not the problem I’m worried about I have many other products solving it and after first set of ten fifteen interviews we switched our questions to these customers. We says okay, tell me your number 1 problem that you’re facing and how can we solve it. So I think why did we think it’s a big space to go after the answer is because the potential customers told us to I mean it was literally I tell it’s like we didn’t think of something new. We just asked the people. What is the problem that is worth solving. What can we help you with and then go from there and that’s what happened so we said okay this is the problem that people are facing and then we had all the writing clings around us that another company phantom cyber was.

Rishi Bhargava: Winning the rsi competition in innovatortas which means they are doing something amazing some other company resilient systems was acquired by Ibm which is doing something amazing. So we said this problem of security operations is a problem worth solving. How do we build a complete solution and then we’ve started there and validated that.

Alejandro Cremades: So for the people that are listening to really understand it. What ended up being the business model. How did you guys make money. Okay.

Rishi Bhargava: Yeah, So I think this one this is where by the way our learnings of working in a big company. All the founders ah comes in handy right? I mean it’s It’s not about building that amazing product. That everybody wants. It’s also about building that amazing product and figuring out the right go to market write business model and ah from my experience. What? what? we really ended up doing was the business model needs to reflect. Who’s your buyer. What’s the product. How does the product work and sell all of these combined so we innovated a lot right? So the business model we said hey it’s an enterprise sale Large organizations need us. It’s not that a startup for buyer product which means you need to have sales people which means you need to have sales engineering. But at the same time. The user of our product is that security engineer and if that is security engineer can we create a free tool for the security engineer can we go out reach out to them by other means So Lots of different innovations on building a community. We build this large community of Security engineers. Who then started to love our product but the buyer was their manager or their director. But when we walked into the enterprise they already knew about us. So It’s it was a 2 wo-pronged approach to the business model.

Alejandro Cremades: And they also how much capital did you guys raise prior to the acquisition.

Rishi Bhargava: So we we had a total of 3 rounds first was 6 then was a 20 um and then the last one was 42 something like that. So.

Rishi Bhargava: Close to 70 or little over seventy. That’s that’s how much we raised over three rounds. In fact I think the story of acusation is interesting one we were onto our executing very well. Um, raised our sea round with an amazing venture capitalized gray lock team was amazing working with that team. We were heads down executing and then for all 2 networks came around and made an offer that we couldn’t refuse as a entire team.

Alejandro Cremades: Well well we we can’t leave it just there. We got to double click here for the people that are listening rii because the outcome was smashing smashing outcome I mean 560,000,000 I mean unbelievable. That’s that’s literally you know they are the 10 x that people were hoping for you know on the investment side. So. So definitely you know, tell us make us make us like an insider of that process. How how did that process you know got started. How did that unfold and and what was it like all the way up until the closing. So.

Rishi Bhargava: I think it’s more it’s more 20 x than 10 x in most cases from an investment. Yeah, ah but I think so the the the way I think I say all of these things happened in.

Alejandro Cremades: Even better. So.

Rishi Bhargava: Ah, because of the amazing customer growth in the product adaptability. So the way like I would take even a step back right? I mean ah, the first version of our product. We released in middle of ah 2016 so company started. 2015 September october middle of 2016 first version of the product and the first seven months in sales we got roughly a million dollars in sales so that was like hey the product is needed by the market. We really need to go? Um, ah scale. It. Ah the first full year of selling we quadruple that number the next year we could we we did 5 times the previous year. So from a scale perspective. We are seeing amazing business growth and. Right around that the market also realized that this is a category I mean when we started there was no category for security operations automation and research reporting by the way. The sore word came around multiple acronyms changed and gartner changed it many times. And the point is between us and the other players in the market are competed as we created a proper category. We created a proper market and that’s what triggered really the conversations with the likes of pauldo networks which is like okay this is a category that is emerging. It’s going to be an important.

Rishi Bhargava: Place where for auto networks need to play in and the first conversation was ah ah like okay how can we build this partner acquire all of the opens. Things on the table but this is an important place. This is an important category that they wanted to play in and then things started from there and eventually came to the number 5 60 But I think it was all a function of the customer growth we were experiencing and now if you look at that product that is an extensive like. Leader in its category doing very well kotex xo is the product that’s called very proud of the team continuing to deliver on that inside of Monoter networks.

Alejandro Cremades: And how did you guys when when you were discussing this at a board level you know and you had now the the interest of Palo Alto and networks and and you guys like you were saying you were quadrupling. You know the the size of the business you know year over year selling to them versus keep building. What was that conversation like why did you decide it was time to sell.

Rishi Bhargava: Yeah, so I think that one is I so it’s very. It’s a very tough conversation right? because as a company we are doing well and everybody is bullish optimistic business going very good. Our competitive in rates are in high eighty s so on all fronts. There are signs that this company can continue to grow and do well as an independent company but at the same time I think there is an opportunity where from a financial outcome. It’s an amazing outcome for everybody every investor every employee every founder so that’s a good path Could you continue to grow yes and I think there was a lot of opinion on the table I mean I think it was not where it started. No everybody said yes is like no no, no, we have a huge opportunity you can grow independently continue to grow and then there was this like hey we have come a long way and. Ah, Polo Alto Networks is an amazing partner like all of my memories at Polo was amazing memories right? I mean they did right thing to invest in the product when we engaged with the poo al netflix team. It was like guys. This is not a product. We are acquiring to slim down the investment. We’re going to invest in it double down grow the product. Eventually we believed. It’s an exciting opportunity where even after going in we can go and increase the adoption of the product grow the customer base aligns with the mission. So eventually I think everybody aligned on it. It was not that.

Rishi Bhargava: Ah, there were a positions I Just like this whole debate which is long term growth short term growth but everybody aligned eventually.

Alejandro Cremades: So everyone aligned 560000000 I mean I’m sure that felt good hrishi you know what? what was tell us is there anything that you wanted to buy that you were finally able to buy.

Rishi Bhargava: It’s very interesting. Um I don’t know a hundreds this a very interesting question is like financial outcome. Yes, very happy, Very comfortable outcome wise. Ah excellent outcome for the family for the founders. Every employee was happy but I Think. Looking back I wouldn’t say I was able to buy something um that I wanted to buy it was more of I really feel that like if if you really ask me my biggest accomplishment. What I really from the bottom of hard is every employee that worked for demisto. Wants to work with this again. We really had thrill working together and that’s that’s ah, that’s the biggest accomplishment but of course in transparently honestly, Yes, It’s good to be financially independent. It feels good as like there’s no I’m not going to say it’s not good. There.

Alejandro Cremades: The impact.

Alejandro Cremades: I mean financially the benefit that’s financial freedom 560000000 come on now now in your case, you did the um the the vesting and resting as they would call it. You know then you join Palo alto networks you know you did the whole integration thing and you stayed there for about 3 years and as they say once an entrepreneur always an entrepreneur. So here. You go again. So tell us about now what you’re doing with your latest baby. You know what point you know the idea of solving a problem that was meaningful enough you know came knocking and and how did you decide to go about it. So.

Rishi Bhargava: Say.

Rishi Bhargava: Yeah I think ah, first of all, there is no resting if you were to know nikesh Ceo of Paul Alter Networks there is no resting I think we worked very very hard in a different way. Um, but amazing journey there right? I mean product growth. Adoption integration. Ah new modules. So overall I think all all amazing experiences there growth wise. But again as as you said yes entrepreneur always an entrepreneur I think goes back to the same thing. Amazing team. We said guys I think we have given. Are all for this product to grow put a very strong succession team in place and we said okay, let’s go to our next challenge and I I truly believe is like if you want to be a successful entrepreneurship. Ah entrepreneur again, you need to go back to 0 so we all said okay. Back to the basics. So again, very very um I call it first principles start to think of the idea of building this time we have taken on a very big challenge I think the challenge is how do I enable authentication in applications like if I look at. Every application that is being built around us right? Any application they need to build a user login experience and that needs to be secure and that needs to be easy like how easy can it be a b two c login experience just an otp that’s what Whatsapp did.

Rishi Bhargava: Ah, we live in a world where most of the B Two C applications of B Two P applications have horrible login experiences right? User name Password you forget the password you reset the password. So I think the mission here is can I Enable simple login experience for every app out there.

Rishi Bhargava: With 10 lines of codes right? 10 lines of code passwordless login in your app and that’s what we are enabling. Ah, big challenge I mean in fact, if being being ah completely transparent and honest here. It is not an easy challenge I mean enabling these passwordless experiences with the simplicity needs a lot of innovation on the product side needs a lot of innovation on the go-tomarket side making it aware every application can build it. But that’s we have taken on. Ah very excited where we are in the stages. We raised our first round of money. Um, launched the product amazing feedback so far in the last we we launched it on feb fifteenth ah about a little over a month ago and amazing customer adoption already in traction that we’re seeing.

Alejandro Cremades: And for the people that are listening to get it. What ended up being the business model. How do you guys make money.

Rishi Bhargava: Yeah, so I think by the way this ah on the business model front there. We we are big believers that we will be able to do ah good as a business only if we focus on adoption at even smaller startup level. So. What we are doing is there is a free forever tier and that is available for startups that are early in carrier early in their journey so up to 7500 users. It’s free. They can adopt it. They can build it really quickly and don’t need to pay till this scale to a much later later stage. And once they start to scale we charge by monthly active users or number of their customers. Um, and the model linearly scales I think one of the things I hated as I built de misto and other start ah worked at other startups is anytime. There’s a step jump in money. The startups hated right? yours. Starting to pay nothing nothing nothing and now you are paying a big amount of money so we want a linear scaling model. Let the startup scale we are there so that’s one and then there’s an opportunity to go to larger organizations and actually enable password list login for those as well.

Alejandro Cremades: Now you’re you’re a very humble guy hrisi you know and I’m sure the people that are listening are probably you know, really getting that too. I mean when you say raised our first round we’re talking about a seat round of $53,000,000 hrisi you know the median the median seat is 2,000,000 I mean wow I mean how I mean we’re talking about people that invested in this seat round like ggv capital life speeded venture partners I mean a seat financing 53000000 from this rockstars. Why so much money and also from this people.

Rishi Bhargava: Yeah, so I think in a hand The the answer is um, the the problem is a big problem the money coming from investors is always I call it um to be to be honest, right. I look at myself as a founder in Aras as a founding team. This is this is ah this is not really a luxury or this is not what I’m saying hey I’m proud of raising 53 This is a debt to us right? I mean investors are putting this money in to build a scalable company. So Why this size because.

Alejandro Cremades: Oh yeah, oh.

Rishi Bhargava: We founders and investors believe that there is a huge problem to be solved here right? Applications are being built at a faster pace than ever before and all of them are struggling from a security and an onboarding perspective So big problem. Ah also to build a.

Rishi Bhargava: Scalable service. You really need to build this globally scalable globally distributed infrastructure wise a lot of technology innovation right? I mean we want to do it at a scale which can help. Every customer in the world. It’s not like hey let’s start with the us customers and go from there. We’re already talking global scale global customers and even a customer in the world will have users globally in today’s world right? I mean every app wants to become global so lot of um technology innovation being done. That’s another reason. We need funding and 3 I think to me um the way I think of this as this is a long cycle I’m investing in free forever tier. We’re going to spend money in that customer acquisition cost so we wanted something which lost us a good. 3 years timeframe so that we are able to build an amazing product for our customers launch it globally and scale it before we need to go worry about funding.

Alejandro Cremades: So Obviously there you know is a big big vision now that then that you guys are going after you know, big problem. Big vision Imagine you were to go to sleep tonightrisi and you wake up in a world where the vision of the scope is fully realized. What does that world look like.

Rishi Bhargava: I think the at a personal level and slavic our Ceo tells this story amazingly well, it says his family is not using password managers. My family is not using password managers I’m not dealing with password. So. That’s the first thing right? imagine I’m logging into a website. No password needed. I’m logging in zipping through so that’s first thing in this world where this vision is realized to I think again I have mentioned this many times I’m I’m all about the team and my proudest moments were that everybody in demisto wanted to work with us again. That’s my second which is I’m excited about which is hey there is a team. There is a buzzing team. Everybody is excited working and realizing this vision of no passwords and then happy customers is the third thing which is to me if there is some pride about telling my kids and saying hey you know that application uses my product and. Reason why you were able to zip through into this new app that you as a teenager is using is because they use us. We onboard it. It was easy. It’s what I dream of this.

Alejandro Cremades: I love that so we’re talking about the future here. Let’s talk about the past and let’s talk about the past with a lens of reflection Richie. So imagine I was to put you into a time machine and I take you back in time I take you back in time to that moment. Where you’re in corporate America you are experiencing the frustration for the lack of innovation. You’re wondering about maybe doing something on your own. You know, taking a problem that is meaningful enough for you and you’re able to have a chat with your younger self. You’re able to go back in time and have a sit down with that younger hrishi and give that youngerrishi one piece of advice before launching a business. What would that be and why given what you know now.

Rishi Bhargava: Tough, fun, interesting. 1 So first of all I think as I mentioned right? Even Macafee every I look back and I’m maybe I joke around is like I’m a very optimistic person. Be positive. It’s in my blood but I think the the. The fundamental thing I believe is every job in my past including the larger companies have taught me something one of the thing that I truly believed is you can learn a lot from scaling a product. So if I were to go back and give my younger self advices. I would say ah be a better networker build more bridges at the larger organization with your customers and I am starting to do more and more of that which is ah all of us. When we are very busy day-to-day, especially for entrepreneurs. You have so many different things that you can cover one of the things that gets deep prioritize is that connection with your customer is that connection with your peer and that’s what I look back right? Um, and growing. Um. Like the early stages in my career at Macafee I met a lot of customers I learned a lot but I never connected with them after I had that first meeting. So if I were to do something different I would become a better. Um.

Rishi Bhargava: Networker I would connect with our customers more engage with them more maintain that connection. So that’s one thing I would give tell every entrepreneur is like 1 of the one of the biggest asset is as you meet new customers meet new peers founders you learn from them. But maintain that connections continue to enhance those connections.

Alejandro Cremades: I love that so Richie for the people that are listening that would love to reach out and say hi. What is the best way for them to do that.

Rishi Bhargava: I think ah Linkedin is the best way I mean I truly believe Linkedin has ah kept us connected I’m a ah big believer in connecting with people learning more. So Linkedin is the best way to reach out connect and I usually i. Actually attend a lot of founder conferences founder ah places so you’re there would love to chat.

Alejandro Cremades: Amazing! Well hrishi thank you so much for being on the dealmaker show. It has been an honor to have you with us today.

Rishi Bhargava: Now it’s been very exciting for me as well I think ah I loved your questions of taking me back to the fast help me relive my fun memories.

* * *
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 al*******@pa**************.com

 

Podcast: Play in new window | Download

Subscribe: Apple Podcasts | Google Podcasts | Spotify | Stitcher | TuneIn | RSS | More