558th 1Mby1M Entrepreneurship Podcast with Deepak Balakrishna, Adya (Part 2)

Sramana Mitra: I also want to comment on what you said about go-to-market strategy. Cybersecurity is incredibly crowded. If you think about a large enterprise buyer who is usually a CISO, they don’t really have the bandwidth to look up every little startup out there. They have close relationships with the top players. When it comes to small companies, you have to go to market through some other way to reach these buyers. That’s what we assessed.

It’s becoming more acute now. As a result, there has been a shift in the thinking of VCs who are investing in these early-stage cybersecurity companies. They are also thinking about operating with a very small amount of capital. At the point where you need to scale your sales, that’s where investors are seeking exits into strategic players.

What we did with Adya very much speaks to the trend of the market. Coming back to you Deepak, talk about the exit. What were the circumstances around the negotiation? What you don’t want to disclose is okay – whatever you’re comfortable sharing.

Deepak Balakrishna: It was June of 2018 when Sramana made the first introduction to Philippe. He introduced us to his Chief Product Officer Sumedh who is now the CEO of Qualys. We pitched to a couple of his executive team members. Unbeknownst to us, Qualys has a platform of products of which they are looking for acquisitions. They are explicitly looking for someone in the cloud application.

Very quickly, it moved away from a partnership to an acquisition conversation. There were some issues around company structure and taxation which slowed things down a little bit. In early 2019, we closed the acquisition. The entire journey was a little over two years. In terms of pricing, it was a good exit worth a couple of million dollars. There were a couple of times where we went back and forth on the price. By October, we had settled on the terms. Then the holidays came. By January, we closed.

Sramana Mitra: One thing you said that I want to highlight is that Philippe had drawn on a napkin and showed me what he was trying to do. It was like a plug-and-play architecture where you can bring in new products and acquisitions to enhance the Qualys portfolio.

This notion is everywhere. There are a lot of companies who are trying to find entrepreneurs to build on their platform. Some of these are being acquired. Expect this trend to be a big trend going forward. If you are designing your exit for a bootstrapping to exit scenario, it pays to align with the platform.

With Deepak’s situation, the fact that it was so easy to integrate and weave Adya into Qualys was a big win. When a company is acquiring you, the company is thinking about how they’re going to get value of this acquisition. That whole thinking of ease of integration and ease of achieving value is very much present in the discussion and the thought process of any such acquisition. That is a good nutshell summary of the Adya scenario.

Thank you for your time.

This segment is part 2 in the series : 558th 1Mby1M Entrepreneurship Podcast with Deepak Balakrishna, Adya
1 2