Rolling Up E-mail Security SaaS: Gary Steele, CEO Of Proofpoint (Part 7)

SM: Your Series A investors are reaching the seven-year point and are probably looking for an exit.

GS: They are long-term, patient investors. They are not looking for a short-term returns in order to raise their next fund. We are in a very different spot from what other folks could be.

SM: The security industry has been built with roll-ups.

GS: It sure has. The only challenge I see is the cloud perspective. There are not as many cloud choices in our segment as there are in other segments. Finding on-premise capabilities and re-orienting them to the cloud works in some cases and does not work in other cases. You have to get the business model realigned because moving from perpetual licensing to SaaS is complex. There is also the architectural issue. Not all on-premise technologies are architected to work via a cloud. Those are the two things we look at.

We look at potential deals all the time. Our criteria are very tight. The board’s perspective is that there are plenty of M&A opportunities because we have executed well. We have delivered on every one we have done.

SM: Everybody whom I have talked to who has done roll-ups well has emphasized the culture.

GS: It sounds so soft and fuzzy, but it really is about that. It is so important. If people don’t like each other they do not work well together.

SM: You must have alignment on what you are trying to do.

GS: If we are headed north and somebody wants to go west, it just does not work. Often that is the biggest issue. People have different views as to the direction the technology can or should go. Often there is no right answer. It just comes down to the fact that we have selected north and we need everybody on our team to be going north as well.

SM: Real entrepreneurs like to run their own show.

GS: It is totally understandable. Bringing them in can be disruptive. We have to find people who fit in our environment and who want to play roles that we have. It may be a bad acquisition if you can’t plant people in roles they are excited about. We have had success with M&A, and we will continue to do more. There are lots of choices for us.

SM: As you evaluate cloud offerings and consider bringing them in, how difficult is it to integrate them into your architecture?

GS: It really comes down to the technology stack. In many ways, if the technology stacks are similar then it is much easier. You can hide a lot of things that people on-premise would see. Where you may have two databases instead of one, which can be hidden. Now, if one is a Windows stack and the other is a Linux stack, then it would be much more difficult to hide the stacks. That would also require different skill issues. On the backend today, we are all Linux/Java driving toward commodity components.

This segment is part 7 in the series : Rolling Up E-mail Security SaaS: Gary Steele, CEO Of Proofpoint
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