Sam Li On Raising $98 Million To Take The Grind Out Of Information Security Compliance

In a recent episode of the Dealmakers’ Podcast, Sam Li, Co-Founder & CEO of Thoropass, shared his remarkable entrepreneurial journey, including his progress from his early days in Shanghai, China, to studying computer science and economics at the University of Virginia and, eventually, founding Thoropass (originally called Laika).

Sam successfully raised funding for Thoropass from top-tier investors like Third Prime, Nyca Partners, Fin Capital, and Canapi Ventures.

In this episode, you will learn:

• The power of seizing opportunities. Collaborating with a like-minded co-founder, they tackled a pressing issue in the insurance industry.
• The winding down of the Zinc Platform taught Sam the importance of product-market fit, focused scaling, and execution. He emphasizes that failures are not true setbacks but rather lessons in disguise.
• Sam’s experience in fundraising underscores the dynamic nature of the process. It’s not about adhering to predefined metrics but rather convincing investors of the unique value proposition.
• Sam’s transition from product and engineering to business operations highlights the adaptability required to meet new challenges.
• Thoropass aims to remove compliance-related obstacles, allowing businesses to focus on innovation. Sam’s personal experience with compliance inefficiencies drove the creation of this impactful solution.
• Thoropass’s rebranding from Laika reflects the company’s commitment to clarity and relevance in the market. The new name encapsulates their mission: Delivering a thorough and seamless approach to compliance and audit.
• Encouraging aspiring entrepreneurs to take the leap. The experience of being a founder, with its unique challenges and rewards, is incomparable and worth pursuing.

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About Sam Li:

Sam is co-founder and CEO of Thoropass (f.k.a Laika), an information security compliance and audit technology startup backed by leading investors such as JP Morgan and Fin Capital.

Before Thoropass, Sam was an EIR at Bain Capital Ventures after running Zinc Platform, a YC-backed insurtech startup, as co-founder and CTO. He studied CS at the University of Virginia and holds an MBA from Harvard Business School. Sam is an avid traveler and takes cooking very seriously.

Connect with Sam Li:

• Linkedin
• Crunchbase
• RocketReach
• TechNYC

Read the Full Transcription of the Interview:

Alejandro Cremades: Alrighty hello everyone and welcome up to the deal maker show. So today. We have ah a really interesting founder. You know we’re going to be talking about you know going from technical to business from. You know a startup that he had to wind down to now startup that is making a killing you know, a really a really nice rocket ship. Going from early stage to grow stage. You know how you need to be as a founder to on what are gonna be some of the things that you’re gonna be encountering and obviously the good stuff that we like to hear like fundraising because he’s done every single type of round that you can imagine so without far ado let’s welcome our guests today. Sam Lee welcome to the show. So originally born in China so give us a walk through memory lane. How was life growing up.

Sam Li: Glad to be here. Thanks for having me.

Sam Li: Yeah, um, ah one I raised in Shanghai china both of my parents are professors so you know in that sense not not too much entrepreneurial blood in the family but you know we made our way to the states I came here after high school. Studied computer science and economics at University Of Virginia so you know Charlottesville was my first stop into the states then have been in the New York area since which is ah very different.

Alejandro Cremades: And what call you into computers. Why? what? What? What? what? what? develop that love for it.

Sam Li: Well I think this was ah you know 2007 is is already I got my first computer when I was ten twelve and you know fell in love with it. Not not the the craziest hacker kid on the block but you know have enough love for it and realize that you know everything is going to. Be related to internet and computer. Even even back in the day so decided to to study that and yeah now I think they should really make its way to middle school and high school education. Everybody needs to get little related on programming.

Alejandro Cremades: So after you know study in Virginia a university of Virginia I mean you did a a few things you know here and there you know I mean you from Goldman Sachs to Google. What what did you learn from like perhaps you know, being at such big corporations because I mean you’ve now had the opportunity of being in startups. You know, being a founder of startups but then also being in larger corporations. What did you learn or what did you see from being at such successful companies like Goldman Sachs and Google.

Sam Li: Yeah, so great question and you know I really appreciate my time at those 2 companies just learned. You know how proper business are run right? I mean and also obviously it was a. More kind of risk averse choice after college but I learned a lot at both places both in terms of like technical skills. The fundamentals of computer science and you know working at with cutting edge technologies at both places but also a sense of ah professionalism. Right? And like you know what is how do we have accountability on the team. How do we manage? How do we get message across and you know the tactical skills ability to write an email ability to you know, host a presentation get people’s attention I think you know I I now I’m a. Yeah entrepreneur and I can’t imagine going back to work at a large company. But for you know, younger folks that I advise like sometimes I think you people need to have work at large companies before they they jump into the startup world.

Alejandro Cremades: I mean without a doubt is a is a good training now for you you know eventually you decided that it was time to change or shift gears and and you went to get your Mba what trigger that.

Sam Li: Right train.

Sam Li: Yeah, ah, it’s great. Question. You know I always am interested in business and strategy. You know, decided to pick a technical major but you know I’m not the not the best programmer in my class or at the company right? and I know that you know I want to do something more strategic. Um, before going to I actually thought I would either you know, go back to Google to to do product or maybe join consulting so you know but I know that I need some formal business education to to gain the skills and network to make my next move was pretty pretty ah serendipitous to to you know, join the startup world. You know. Thought this will probably happen a bit later in my career but I’m really glad I made the choice to to get my Mba.

Alejandro Cremades: So you did the Mba and that was actually the immediate step towards say experiencing entrepreneurship the world of startups so you met your co-founder there and and what happened at what point were you guys like? okay, let’s let’s go.

Sam Li: Um, yeah.

Sam Li: Yeah I mean I couldn’t say enough thingss about my Mba experience I my my cofounder and my wife at h vs so you know that that was that and that was a great time I was a.

Alejandro Cremades: There you go.

Sam Li: First year I think second semester um, you know he became the co-founder of my last company Rafael he came from a banking background and you know had a thesis on ing short tech so was like Sam. Um, yeah you you come from a technical background Let’s do this together so we started Zinc platform you know in the innovation lab at Harvard when we were mpa students. So the idea is ah is an insurance api for products. So it’s kind of like with a firm. Ah, you can add. You can add financing. You can check out with a firm but with Zinc you can add insurance for your jewelries bicycles mulesway instruments and eventually cars and houses while you purchase them. You can add insurance to cart so that was the idea.

Sam Li: We applied and got into y combinator we raised around. In fact I drop out of Hbs for a year to work on this here in New York we had a you know pretty pretty ah nice office in Soho. But you know eventually we didn’t hit product market fit couldn’t erase ours heres a and wind it down the company.

Alejandro Cremades: So what? What do you think?? What do you think was that the case. What do you think you know you guys were not able to ah to achieve product Market fit because I mean we’re going to be talking about. You know the the successful company that you’ve started Now. Ah, most recently, but but I like to to see if if there’s any reflections there that you can share. You know with some of the audience because as they say you either succeed or you learn and I’m sure that what you got away, you know from this experience I’m sure it was extremely useful for what you’re doing now.

Sam Li: yeah yeah I mean there, there’s no failure There’s only lesson learned right? I think you know many of them. You know we had a very good thesis right? and there were in fact, right now other companies that are doing similar things and became more more successful. But I think we made a series of execution. Ah, mistakes right? We didn’t focus on really horny in on that product market fit like you know Witt which is the vertical that we want to get in. We started kind of spreading ourselves too thin into different verticals before we really were able to find you know more more direct product market fit and therefore revenue. On the the first demographic that we went in and we also you know, scaled ah prematurely right? We we have a product we start to get some tractions you know and then we kind of hit a hit a bottleneck and we couldn’t make more deals then the the right thing to do is to. Re-examine your assumptions and you look at the ideas tune the product what we did is we hired a sales team and that’s that’s a very important lesson if if the founders couldn’t do the sales couldn’t get to the initial attractions like you know, getting getting. A salesforce in is not going to help solve the problem because you are still in the product market fit stage which is frankly the only thing that matters for for early stage companies.

Alejandro Cremades: Now 1 thing that is very important is either ah driven by ego by ego or or I don’t know by by not wanting to give up. You know there’s just founders that just keep going and keep going at what point do you guys realize? hey it’s time that we pulled the blog and is. Obviously a cost opportunity type of thing and we need to move on. Okay.

Sam Li: Yeah that’s that’s also a great question and you know we um you know we we tried to raise a series a when we are maybe like you know eight months of runway you know three months later didn’t get very far. And then we’re like okay, we’re really risking on you know, people’s livelihood and kind of not having a good ending with our existing investors. At that point we decided to pivot but it was a little bit too late. We build the mep for the new product. But again, we’re going to run out of money before the new product really hit the market. So you know that’s the point we decided you know what you know I think I think we should give the money back to the investors and give all of our employees a good a good segue into their into their next thing. So and that it was ah you know we we get everybody into the room in the morning. It was a. Painful position and you know it’s something that I will not forget and I don’t want to make again, right? It’s like this is the first time obviously in a small scale. Everybody’s fine that you know we because of my mistake or you know my my oversight you know we. You know didn’t accomplish the mission we lose investors money but the good news is the the venture community is very very forgiving and you know so so the team you know people find their soft landings and you know I was able to give an opportunity to try again.

Alejandro Cremades: And the best way of doing it is be ah, an entrepreneur in residence program like the one that you did in Bain so out of all places. A. How do you come across Bain and and then also this program that I think is a fantastic you know, initially about any of those you know like toping. Firms you know to to to find that as ah as a secway into the next business.

Sam Li: Yeah I mean I feel very lucky and in the blast who had that opportunity similar to and Mba right? It’s kind of ah a way to have a soft landing ground or starting pad for for the next thing right? You get some time to. Ah, do some reflections and you know research some new ideas. So ah, bang got to know the partner Matt Harris here in New York in our failed series a process and he was like you know what? like I think you guys are a little bit too early for us to invest but I like you guys we have this entrepreneur in residence program. Ah, you know you guys can come in spend some time with the team and you know maybe think about your new ideas so we ended up taking that opportunity. You know I was like to joke that I went to their office I drink their coffee I eat their snacks and you know think about new ideas. So. It’s a pretty good. Ah. Pretty good gig for a jobless and Mba for sure. So.

Alejandro Cremades: And as we’re as we’re talking about ideas here. Um, you know while while I mean obviously the entrepreneur entrepreneur in Residence program is not only incubating you know new ideas and thinking through things but then also kind of I giving the um the the firm you know on the team. You know your thoughts do on some of the ideas that they’re coming across. So.

Sam Li: Right.

Alejandro Cremades: What were some of the patterns that you identified between the ideas that were good and worth pursuing and the ideas that were bad and that it was just better to just move on. So.

Sam Li: Yeah there’s ah, there’s a great question and you know I spent a year there has a spreadsheet of probably over a hundred of ideas that I you know look into to different extent and you know have ah have a little bit of ah you know towards the end kind of figure out some sort of framework to evaluate ideas. I think there are there are a couple of things that are important. You know one I think you know we we are probably as people coming from from business school like more interest more familiar with like a venture-backed setup. Ah, there are many ideas that are in that category but there are more ideas that are in a kind of more traditional business set setup small business ideas I think you know this was like 20192018 and there are a lot of like Dtc commerce you know, many of them did very well. But. That in some sense is not a technology business right? and it’s their supply demand. There’s like you know, real real-world constraints on how fast you can scale. So I think the first thing to look at is you know is this a venture backable business and I think a lot of people lose discipline when the market is hot and you know there are. Probably many businesses that shouldn’t be funded versus the ones that can truly scale. Usually it’s a little bit more technology-d drivenven or recurring revenue things like that I think the the second thing to look at is this concept of a founder or problem fit right? Why are you or this team in a unique.

Sam Li: Position to or is there someone on the team who were the users who could have been the user for this product or who have like you know, very specialized insights into a specific problem that other people wouldn’t have notice or access to new technology awareness of new regulations. What I call this founder. Problem fit and I think the third thing is market size. That’s you if if the market size is too small. It wouldn’t be really venture backable.

Alejandro Cremades: So Then while you were there. You know. Obviously you see the idea of thas came knocking So How did the idea come to you and and then you were like my God I got to go at it with this one. You know and and then and then how did you brought it to life. What was that journey like.

Sam Li: Yeah, yeah, um, so you know this compliance bit was a pain point that I experienced when I was running Zinc um, you know we were doing fi until we started selling to any large customers and they said. Okay, can I see your information security policy I’m sure you have gone through a soc 2 process right? Can I see the report and we’re like ah not sure what that is I’m going to you know quickly Google and you know figure out what I can do that was the first exposure I had to this information security compliance problem set. And then we eventually decided to do a so to audit I thought it would be a you know pretty straightforward six weeks max process six months later I still don’t have the report in hand I find myself spending a lot of my time and my engineering’s time you know trying to hack together an information security program. And the auditors that we work with they have excel trackers sharepoints basically very manual processes on doing this. So I wish there is a carda or a just work you know equivalent for information security compliance which didn’t exist at a time. Um, so I knew that this is a pain point because I am the persona that you know Thoroughpas which back then were known as like ah so too. So that’s ah I feel very lucky to be the persona that I’m selling to which kind of checks. The product market fit give me a lot of confidence on that in the early days

Alejandro Cremades: So for the people that are listening to to really you know, get it What ended up being the business model of thoroughpads. How are you guys making money.

Sam Li: We are a subscription business and you know our customers are technology companies fintech sas housetagg you know there are also some traditional businesses who are in the market to become stay and demonstrate compliance to. Ah, variety of information security frameworks sock to gdpr hipap you name it and we is a Saas model. Yeah, you pay for annual subscription. There are different pricing tiers and different selections of frameworks that you can add to your package. We also have a series of features that we charge.

Alejandro Cremades: And how was that journey of doing a rebrand because I mean as you were talking about it earlier. You guys say came out as Leka and then you know all of a sudden now you are a thoroughpa I’m sure that was not easy. So how did you come up with the you know one day hey.

Sam Li: On top of it.

Sam Li: Oh.

Alejandro Cremades: We got it. We got to change this name right.

Sam Li: Yeah, ah so it’s a good question I think we we like the original name it is the dog. The first dog in space. Ah yeah, we’re ah, kind of in the cybersecur space and it’s a cyber dog so we we like it. But you know frankly we didn’t put too much thought into it when we first picked it so which means there are practical and kind of more philosophical problems that starts to come out once we gone much bigger even the. There’s there’s not like a very deep connection in a name with what we do and ah, there’re also like ah seo collisions on ah from a search perspective. So you know we decided to to rebrand you know. And yeah, there are other things that we want to do. Rebrand and halfway through that process. We decided you know what it’s time to to pull the trigger to to find a better name. We came up with a thorough pass like thorough stand for thoroughly which indicates kind of the fashion that we do for compliance pass is the the shortest distance between 2 peaks of a mountain. The thoroughpads help you get from point a to point b on your compliance journey. We really like that in your name.

Alejandro Cremades: Now How much capital have you guys raised to date for thoroughpas.

Sam Li: We have raised ninety Eight million over four rounds of financing. Yeah ba has been supportive from day one and yeah, they they they have a great presence here and real love the folks there.

Alejandro Cremades: And no surprise that one of the investors is bane.

Alejandro Cremades: So You’ve done all types of rounds of Financings. You’ve done. You know early stage rounds. You’ve done you know more on the growth Stage. You know side of things. So What have you learned? Really I mean as as you’re able to reflect and and you’re able to share with many of the founders that are tuning in now. But have you learned in the journey of raising money and how those expectations have shifted as you matured from one financing cycle to the next.

Sam Li: Yeah, well I guess to summarize its art and size right? and you you need both for it to work. Um, you know I would say and in the early days right it’s really about product market fit. And yeah, the people the the. Find the investors that trust the team like the space and you know are confident about your ability to execute in that space I think there were you know when when we were first started right? There were. Some sort of like rule of thumb. You need a million ar to raise the series a or you need xyztraction to to do the seed right? and you know I’ve seen many people trying to look for those rule of thumb metrics to to justify. Um, you know their fundraising journey and you know i. Unfortunately, there is no such shortcut right? You kind of need to know that you there you could be hitting product market fit without getting even close to you know 1000000 ar or you could hit a million ar but still don’t have product market fit. So I think that the early stage rounds are really about. Getting people convinced that you know there is something here. There is this market deserves a new innovative solutions in there and you guys are the right people to execute on that strategy the later the more later it goes is more about the go-to-market fly will.

Sam Li: So to have the ability to you know, compete in the market is there enough room for you to grow into is there. You know potential Upmarket strategies that you can go into so it’s much more Number-d Drivenven unit economics growth rate. Margin retention like all of those Saas metrics starts to become much more important.

Alejandro Cremades: So then for you always he has. We’re talking about the different expectations and how you were going from one round to the next. Also how has it been for you as a founder because I mean the founder that you were. When you were like pushing you know the idea and figuring you know what would that be the business. You know when you were at Bain incubating this is that a different founder or a different operator from the one that you’re today right? where you have you know four rounds that you’ve done 200 employees I mean you’ve had to grow. Along the way to in the same speed or or or even better speed that the company so that you were not outpay so how have you managed to do that.

Sam Li: Yeah, very very much so and you know I think the the tricky part is it happens very fast right? and in in a good way that you know we have to have two co-founders and we have to continue to. Look at our own strengths and weaknesses and reinvent our growth I was running the product and engineering side of the house to start with right now I’m focusing on the business side right? So that is that is a functional change for myself. But also I think you know in in the early days it’s really about proving the product market fit getting things done. Doing the unscalables and that requires a lot of hands-on work by the founders themselves because if not you was going to do it as we continue to grow the the product has been proven very quickly. It shifts into business operations. How do you scale a sales team. How do you compete? How do you figure out the message. The marketing message that resonates how do you scale engineering and you know product team in in a cost-efficient way. So all of those other challenges starts to come in which are quite different from looking for product market fit. So. That’s the time where your energy shifts around. You know, hiring the executive team being in touch with the you know other players in the space understanding the strategic implications and also a little bit ah a lot more kind of Cfo type of financial management which you know you don’t have to do it yourself, but you need a.

Sam Li: Find the right people in there. Another thing is like performance management right? It’s like they are you want to make sure the right people are in the seat and you don’t have a lot of time to waste compared to you know some of the larger companies so getting the right people on the bus is going to take a lot of your time.

Alejandro Cremades: So in this regard you know for getting the right people on the bus and for having the people in the bus too. You know so that they continue to be there because of the future that you’re living into that is very compelling there needs to be a vision and I vision that always a yousha shared you know with all these investors to be able to land the ninety.

Sam Li: Um, it is.

Alejandro Cremades: $8000000 so my question to you is imagine if you were to go to sleep tonight some and you wake up in a world where the vision of thorro pass is fully realized what does that world look like.

Sam Li: Yeah, it’s a great question thorough Pass’s mission is to ensure compliance is never a blocker to innovation and I think that just really resonates me with me from day one. Even even when when we started the company. It came from a personal pain point that I had. Why am I wasting my time on the busy work of compliance versus actually thinking about security actually thinking about strategy or actually making my company. Yeah more more ready for future Growths. I Think that really resonates with our customers as well, right? It’s like compliance is a great thing and technology companies are not always good at it and you know every people want to do the right thing but they’re getting bogged down by you know, taking screenshots to submit to a auditor’s port or you know.

Sam Li: Creating policies and procedures that they don’t actually execute or have the tools to manage those are the work that thoroughpass wants to take away from our customers so that they can focus on for smaller company focus on their innovation whether it’s securing cancer or you know building the Ai tools. Focus on that for larger companies which we’re selling to like you know compliance professionals to think more about you know, ah threat management protecting your company strategies on you know how do we make compliance a enabler for you to go to a new market or open up new segment. Versus the busy work of getting everything in place chasing around the company for evidence submission for your upcoming audit. So that that is the vision that sopi is here to to help people realize.

Alejandro Cremades: So obviously we’re talking about the future here I want to talk about the past but doing so with a lens of reflection. So let’s say I was to put you into a time machine and I bring you back to the moment where you were at Harvard you know doing the Nba and then and I give you the opportunity of going back.

Sam Li: Um, in here.

Alejandro Cremades: In time to that moment where you were starting to think about a future where you could you know launch perhaps your own business and let’s say you’re able to whisper to that younger self to that younger some one piece of advice before launching a business. What would that be and why given what you know now you know obviously. 1 startup that didn’t work so well, you know your experience at Bain being an entrepreneur in residence now being the founder and operator of Rocket Ship what would you tell that younger self.

Sam Li: Ah, it’s great question so you know I think I did what I would told him now which is to you know, go for it and you know to do my first startup. I think that that was you know, not this most risky move right? I have my Mba I have like ah you know, soft landing if I have to you know if the startup doesn’t work. But I think you know taking that leap of face is still a big decision that I had to make and you know I think. On the second startup I spent a year looking for that idea and it did a lot of reflection you know model thinking around what kind of ideas will work. What would not I think for the first idea. Obviously it will be great if it succeeded but it’s really about the experience and the thrill and the you know just. Feeling the the hardship of entrepreneur that is the lesson that I learned that people depend on you. Their jobs depend on it that you can make decisions that you know otherwise people have to wait many years to climb to climb the corporate ladder to make at a very small scale but potentially have big impact. I think these are feelings that is very hard to get in the classroom or even work in a large company right? You can be a innovation group at a large company or you can do you know very special project in the company but nothing beats that you have to.

Sam Li: Raise money you have to convince your first employees to join the startup that nobody has heard of you have to take a pay cut to to be a founder like these kind of experience is is you just have to experience it and you know I want to just give give myself another push that hey like don’t don’t worry about that consulting. Interview spend more time on on startup ideas.

Alejandro Cremades: I Love it I Love it some. So for the people that are listening that will love to reach out and say hi. What is the best way for them to do So yeah.

Sam Li: Yeah, you can find me as Sam At Thoroughpast Dot Com and you know we’re still on first name basis. And yeah, we’re here in New York our office is in Chelsea and we have people around the country also have a big team in Latin America

Sam Li: Centered in Costa Rica so come say hi. We have a couple conferences including saster primary summit that we’re going to. We’re here to help.

Alejandro Cremades: Amazing! Well hey Sam Thank you so much for being on the deal maker show. It has been an honor to have you with us.

Sam Li: Is it has been very fun. Thank you.

*****

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