Building a Unicorn from Prague: Avast CEO Vince Steckler (Part 7)

Sramana Mitra: You were able to find people with experience in Prague?

Vince Steckler: Not too successfully. For the most part, what we did was transplant people. For example, I brought over my old deputy from Symantec to run sales. He ran sales out of Prague for two or three years and groomed one of the Czech guys.

Sramana Mitra: He’s no longer with the company?

Vince Steckler: No, we rotated him back to the States. He runs Corp Dev in the States. His number two in Prague took over running sales. It doesn’t really work well with remote management or transplanted management. You have to have the skills transferred. We’ve done a fair amount of that. Then, we’ve moved heavily into three areas. There are four popular mobile security products in the world. None of them are American. The big ones globally are the two Chinese companies and the two Czech companies—us and AVG. Obviously, we know each other very well. We are very big in mobile.

We’ve also made a big push into the SMB market with a free security offering. We actually run that out of Charlotte, North Carolina. We’ve built that whole team up there. We also have a big foray into Big Data and web analytics. We run that out of San Francisco. That operates on all of the data that our security systems collect. We just bought, here in San Mateo, an enterprise mobile security company called Remotium. That will be the core of our enterprise.

Sramana Mitra: How big was the company?

Vince Steckler: The company was small. They had about 20 people. They had built a nice product – mostly bootstrapped and a little bit of seed funding. They were starting to look for a round of funding to take the product to market.

Sramana Mitra: The product is not in the market yet?

Vince Steckler: It is.

Sramana Mitra: They have customers?

Vince Steckler: They have pilots. They have a few distributors in Japan and the government market here.

Sramana Mitra: What gave you confidence that that’s the right product to take?

Vince Steckler: Because it’s unique. The reason why we’ve never gone back into the enterprise Windows security market is there’s nothing unique out there on end point. It’s a very crowded market. You can’t differentiate yourself. Everyone uses their phone for personal and company. You’ve got everything that you normally have. In an enterprise, a big issue you really have is your data privacy. You want to make sure that your corporate data doesn’t leak out. These devices are called mobiles for a reason. You use them. They leak. Employees leave and there’s nothing you can do. People don’t want to carry multiple devices.

What we do is we virtualize everything that the company does. Your iPhone or your Android phone is actually running two phones. It’s running a local phone that you use for everything personal. Then, it’s running a virtual phone, which is actually running on corporate servers.

Sramana Mitra: All the corporate stuff is on the virtual phone?

Vince Steckler: All on the virtual phone, but you can talk on the virtual phone. You can text message and do everything. To the user, there’s no difference. It also then makes it very secure from things like malware because there’s nothing on it to be executed. There’s nothing for malware to infect. It’s a completely different approach. Plus, it handles a lot of the Mobile Device Management (MDM) issues because you don’t have to provision all those company phones anymore. All you have to do is to provision them on the server. If someone leaves, you just turn them off. It’s a very unique approach.

Is it going to work? Nothing is guaranteed. To really crack into a market, you need something different. It’s very easy to go into enterprise, just like Symantec and everyone else has, which is you take what you have for Windows and you Androidize it. They’ve got different security threats.

Sramana Mitra: You’re starting to do inorganic growth strategies as well?

Vince Steckler: Except, they had no revenue. We’re not buying revenue. We’re buying a product.

Sramana Mitra: What about financing? You said you raised some money.

Vince Steckler: Our EBITDA is roughly 70%. We self-finance everything. We sold a bit of the company to Summit Partners about five years ago. About a year and a half ago, we had partnered with a firm called CVC, Europe’s largest PE firm. It used to stand for City Core Venture Capital. When Citi Core got out of the VC business, the European partners bought the business. CVC is best known for owning Formula 1. They have several massive funds that are €10 billion plus funds.

We had partnered with them on an M&A that we wanted to do. It didn’t work out, but we got to know each other. They wanted to buy the company, but not enough shareholders were willing to sell. We allowed them to buy 40% to 42% of the company, most of it from Summit. Summit had owned 25%. Summit sold 19% of their 25% to CVC. The founders sold some. CVC owns 42% and Summit owns 6%. Founders and management own 53%. In that transaction, it was pure secondary. Nothing went to the company. It was just shareholders selling to CVC.

We finance our own acquisitions out of our cash flow. We’ve got plenty of cash flow. We also have a great debt rating from SMP and Moody’s. We’re actually only one notch below investment, which for a very small company, is almost unheard of.

Sramana Mitra: What are you trying to do? Do you want to take this public?

Vince Steckler: We’re going to take this public. We made a run at taking it public in 2012 but the markets were horrible. We have built out a really unusual Board for a company like us. The Chairman of our Board is a man named John Schwarz. John had been the President of Symantec and the CEO of Business Objects. We have the ex-COO of SAP, the CFO of Yahoo!, the Head of Strategy for Vodafone, and a senior HP guy. We don’t have the normal investor-dominated Board.

The objective of everyone is to take the company public. It’s unusual for going public because number one, it’s very profitable and throws off a lot of cash. It’s high-growth. It’s consumer. That’s the negative of going public. The market, for the most part, do not like consumer-oriented technology companies. Our target for public is probably 2017.

Sramana Mitra: Very interesting story. Fabulous execution. Thank you for your time.

This segment is part 7 in the series : Building a Unicorn from Prague: Avast CEO Vince Steckler
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