Building a Mid-Market Security SaaS Company from Canada: J. Paul Haynes, CEO of eSentire (Part 7)

Sramana Mitra: When you looked at your business through that lens, what were some of the salient points?

J. Paul Haynes: Our retention rate was 99%. When I shared that with our next investor, they had never seen anything that high. Our customer acquisition cost was too low. From our perspective, you got to get out in the market. You’re missing opportunities because you’re not spending enough on marketing.

I didn’t really have an appreciation for how well we were performing compared to our peers. Those retention rates were off the charts. I quickly learned that that was a differential thing when you’re raising financing. When I was reviewing these with a much more SaaS-focused investor, they wanted to come in preemptively. We’d just raised a round. They insisted.

Within six months of the sales and marketing growth round with Edison, we had another investor looking at us. They came in about a year later. It led directly to bringing in a growth equity firm. We went from startup seed venture to growth equity in 2011, 2013, and then 2014.

Sramana Mitra: What kind of revenue numbers were you doing in that time-frame when you brought in growth equity?

J. Paul Haynes: Their criteria was $500,000 a month. We were slightly above that. Maybe we were $600,000 a month.

Sramana Mitra: This money was also from Canada?

J. Paul Haynes: Edison was from New Jersey. Georgian Partners was the next investor. Many of their pieces were from the US including Cisco. That was a bigger decision for us. Do we want to take growth equity or do we want growth equity with strategic? We decided that it made a lot of sense so we brought Cisco into the cap table at that time. That was September of 2014.

Sramana Mitra: What happens in 2015?

J. Paul Haynes: We just continued growing and executing. We raised a C2 round. C1 was in 2014. C2 was in February of 2016. That was to fund expansion.

Sramana Mitra: Where did you finish 2016 revenue-wise?

J. Paul Haynes: I think 97% was SaaS revenue.

Sramana Mitra: What was the amount?

J. Paul Haynes: $21 million.

Sramana Mitra: What has happened in your market? In the mid-market managed security services SaaS, what has happened in the market in the duration that you’ve been in this business?

J. Paul Haynes: The competitors that we were running into, we are now displacing largely because their methods don’t work anymore. Their techniques didn’t change. To give you a simple example. Antivirus is all but ineffective nowadays. That entire market is giving way to a new category called endpoint protection. Looking at event logs has proven to be ineffective.

There are numerous cases of successful hacking activities when those techniques were in place. We are focused on a different approach which is to look at all of the threats that actually get through security controls and then we isolate on those and contain them. The part that’s quite differential is we focus on advanced detection and then when we see bad things happening, we contain them. That difference is novel. That’s now becoming table steaks.

The market has come to us because the techniques that we are employing were very advanced back in those days. Now they’re becoming mandatory. We have a significant lead on our competition from a method and technology perspective. The dynamic that’s occurring today is we have a lot more firms trying to move into our method. It’s very challenging for them to do it because it’s taken us years to perfect the techniques and practices.

Sramana Mitra: Very interesting story. It’s good to see a good story like this from Canada. We always try to look for stories that are not just the standard Silicon Valley story. Thank your for your time.

This segment is part 7 in the series : Building a Mid-Market Security SaaS Company from Canada: J. Paul Haynes, CEO of eSentire
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