Building a Mid-Market Cyber Security Company from Utah: Peter Bookman, CEO of Guard Dog (Part 3)

Sramana Mitra: In your case, the fact that you had a successful exit was helpful. Repeat founders always have an easier time raising money.

Peter Bookman: It does not hurt when your story can begin with, “I had a good horse and a good jockey. We won the race.” It does something else. You tend not to be alarmed, and you tend to be quite patient. It is fascinating that we got funding during that crisis.

I remember him pitching 236 venture funds to arrive at 237th who gave him the funding. They did exit. I tend to relay that wherever you’re located. I like to rely on incubators where we can rely on borrowing the jockey for a while. As a founder, I’ve always loved the need to get more help.

Sramana Mitra: First time founder has a very steep journey. I’ve done four startups as Founder CEO at the same time you’re describing. I started my first company while I was a grad student. The learning curve was so steep. At that time, you couldn’t learn from the internet because the internet was just being created. Let’s quickly touch through the highlights of Fusion-io and let’s come to your current venture.

Peter Bookman: Fusion-io was after spinning out of the incubator. All of the other stuff fizzled out. Fusion-io was so exciting for all of us that everyone went all-in on Fusion-io. There was some venture that followed as well. I think we did five rounds for that.

Sramana Mitra: I remember the company.

Peter Bookman: There was an interesting buyout circumstance from the seed round investors that were not part of the founding team. We’re not necessarily liking some of the deal terms. It’s something that I’m not an expert at, but I enjoy participating and having great capital partners who are able to say, “That’s okay. Why don’t we just offer you a deal where we buy you out?”

Sramana Mitra: It’s common right now. There’s this huge valuation explosion going on. If you’re a very small fund that has done the pre-seed and seed rounds, a lot of those are selling out in a Series C financing just because it’s long. What you’re describing is more common today.

Peter Bookman: It was an interesting thing to overcome. I’m not sure how prolific that is. I have not been tempted to be on the venture side. I do recall that it was common to allow fund one or fund two to be able invest using the next fund. There was this timeline of the spinout and the incubator and saying, “We can’t participate. Also, we don’t like the dilution patterns.”

There’s a balance it seems. If you need capital, then you do. At the same time, each team member and partner is absolutely crucial and makes all the difference. A seasoned jockey, if you will, is going to be patient. It makes that much of a difference for the five rounds to follow.

Sramana Mitra: The issue is there is an incredibly large numbers of funds. Those funds have different positioning. I stress a lot in our accelerator on the notion of investor-entrepreneur fit. The people who are going to do your pre-seed round are not the people who are going to do your Series D. People who do two-sided marketplaces are not the ones that are going to do storage.

There’s a lot of specialization that has happened. If you’re a micro-VC with a $10 million fund, you can’t really prorata into Series D. I don’t know if your friend did some of that analysis. If you look at 236 venture funds, there are probably only 23 that are applicable to what you’re looking for. If you go knock on the wrong doors, the doors are going to be shut.

This is one thing that we stress a lot. We have relationships with hundreds of funds, but we don’t send everybody to everybody. If you’re trying to fund something in India, there’s no point going to a European VC who doesn’t invest in India. What you’re pointing out is right.

Peter Bookman: I have always been blessed to have been surrounded by gray hairs. Our CEO we brought in is amazing. I love his story. It’s not necessarily what you know; it’s who you know. I think that matters a lot for being able to seed feedback that allows us to say, “I’d rather have a conversation with the venture capitalist. If it leads to funding, wonderful. If not, it leads to a better understanding from their perspective.”

Sramana Mitra: It’s important to listen. What is the reason for rejection? We have identified the common reasons for why they get rejected. You want to go out to raise money, but that doesn’t mean you should go out to raise money.

This segment is part 3 in the series : Building a Mid-Market Cyber Security Company from Utah: Peter Bookman, CEO of Guard Dog
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