Bootstrapping Using Services First, Raising Money Later: Rohyt Belani, CEO of PhishMe (Part 5)

Sramana Mitra: One of the things that’s obviously a huge benefit of this model is valuation. I imagine your Series A valuation is way larger than many others who would try to go raise money early. We did the story of Tableau. Tableau raised Series A at a $20 million pre-money valuation. They bootstrapped for two years and they were $6 million before they raised their first round of financing. Their first round Series A valuation was $130 million. What was your experience in terms of valuation and where were you raising money?

Rohyt Belani: Our primary institutional investor has been Paladin Capital based in Washington DC. Especially in this latest round, we had a lot of interest from Silicon Valley investors. As you rightly pointed out, the valuation was pretty wide. By the way, I’ve read quite a few of your blog posts and I find them very intriguing. I’m not one of those entrepreneurs who’s solely focused on valuation. That’s not a criterion of success for me. A lot of people get the Unicorn status but they signed away for liquidation preference. I’m more of, “What’s the deal holistically?” If you seduce me with the high valuation, that’s not going to work with me. I really haven’t focused on that. Obviously, those terms have been confidential but I can tell you they’re not wild valuation. Given that we bootstrapped in the early days and been able to push every round a little further down the road, we definitely raised at valuations that would be higher than a company about our size that’s not bootstrapped. The last round we raised was very close to a nine-digit valuation.

Sramana Mitra: You raised your first round in 2012. That’s where we are. What happened after you raised the money? Location-wise, where are you?

Rohyt Belani: We’re headquartered in Virginia. Even though I’m the CEO, I’m based in New York City. We have a satellite office here and that’s purely by choice. When we raised in mid-2012, the goal was to primarily focus on the sales and marketing expansion. We saw a clear opportunity. We had done enough to get the product market fit right by getting our first 20 paying customers. We even had a Fortune 10 company. We have several Fortune 500 companies. We really wanted to light the fire. We got our VP Sales who has experience in building a small sales and marketing operations. That’s where we focused 80% of the capital. 20%, of course, was on the continued innovation and build out of the product. That’s where we deployed the capital. Since the beginning, we’ve continued growing greater than 100% year on year. Our growth rate is at 892% cumulative for the last three years.

Sramana Mitra: Talk to us about strategies about customer acquisition. What are some of the things worth discussing in a strategy conversation?

Rohyt Belani: When people ask me about growth drivers, which is a key part of strategy. The one thing that I really focus on above sales and marketing execution is innovation. We’re a company that’s focused on innovating – being the first-to-market in what we do and disrupting the mindset. When we came out with our first phishing simulation service, we were the first automated phishing simulation service. We’ve had a few people copy us.

Then we evolved the product further and said, “We can actually turn these people to cyber informants.” We put a little button in the email client that they can press when they see a suspicious email. We’re the first company to do that. Everything else that was associated with report phishing was something that you would send to Microsoft or Google Cloud and not know what’s going on versus, “This will go into my internal IT security team for analysis in a format they can consume.” Then we said, “We’ll help you analyze and operationalize this human intelligence. It’s something that no one’s done in cyber security.

You cover a lot of security companies. What I found really interesting that hasn’t been in this space for 14 years is that the industry has continually discredited humans. Humans are the weakest link. We actually now see the contrary. When we give humans tools to report suspicious things, they come in in a more timely fashion. People are more aware.

This segment is part 5 in the series : Bootstrapping Using Services First, Raising Money Later: Rohyt Belani, CEO of PhishMe
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