Child Entrepreneur Caleb Sima: Cofounder Of SPI Dynamics (Part 5)

SM: What was the genesis of creating that product? Was it your work on the pentest contracts?

CS: The head of Bell South told me that if I could automate my Web assessments techniques and provide a product that he could run in-house, he would purchase it from me. I already had thoughts in mind about how to automate it. Later I was at a security conference when I ran into Wade Malone, who was a good friend of mine from Security First. He told me he was starting a company focusing on financial fraud. I told him I was trying to do a company on Web security. We exchanged ideas and he felt I had a better idea. I did not know much about business and he knew a lot about it, so we joined to create SPI Dynamics. I also brought on a friend, Brian Christian, to help out. That group of cofounders started doing consulting while we built our product.

We started getting together and building products. At the same time, our consulting services paid our bills and our first pentesting engagement was with S1. We knew all the contacts there, and security was important to them because they were an online bank. I hit their website first, and I broke into it. I then started downloading account details, transactions, credit card numbers, and everything else you can imagine. The way the vulnerability worked, if a customer service representative was viewing your account on-screen, I could download your data. I had an account with S1, so I called a customer service representative and then used that to break in.

I called S1 and told them what I was doing, and they instantly decided they needed to do a 24-hour remediation. Their VP of development, Denis Hurst, and I worked on remediating those vulnerabilities. Denis was blown away. He was also a developer and was fascinated with what we were doing and offered to help us on a part-time basis.

SM: Did you have any product in place while you were doing this S1 engagement?

CS: We did not have anything that resembled a product. Denis came on and started helping me to write the application. He eventually came on full time as our first developer and is now a senior sales rep at HP. We started building the product in 2000. It was right when the bubble burst. While I was with ISS, I was making $130,000 a year as a 19-year-old. My first year’s salary at SPI was $16,000. I put everything on credit cards, and my roommate was paying most of my bills. I had to sell my sports car. Wade started pressure washing houses on the side to bring in money while we were coding. All the revenue we made in services had to go to pay developers and contractors.

SM: How did you structure the ownership of the company?

CS: Wade had a slightly higher ownership percentage than I did, I was in the middle, and Brian had the smallest percentage. At the time it was a 50/40/10 split.

SM: When did you bring your product to market?

CS: The first sell of our product was to BCBS of Iowa. They bought our product at a $5,000 in 2001. That came because our first sales guy was a former technical recruiter. He would cold call businesses part time and do sales. BCBS of Iowa bought it over the phone. Bell South was our second customer but our first six-figure deal. That was two years later, and it was our first enterprise sale.

SM: Between 2001 and 2003 were you still consulting to pay bills?

CS: Consulting kept us alive, and by 2003 we had seven or eight people working for us. We decided to go to the ghetto in Atlanta to get our first office. We would count the number of condoms and bullet casings in the parking lot each morning. It was right behind a strip club. If I worked late at night, I would see shady deals go down in the parking lot.

We hit a bad patch where we could not sell a product or find services deals for thirty days. We ran out of cash, so we could not pay our rent to keep the office open. A couple of our employees pitched in money to continue paying rent for the company to stay open. All of a sudden, things picked up. People suddenly “got it,” and Web security made sense. At that point I figured we needed to get funding and a real CEO because a competitor came out and was making noise in the market.

This segment is part 5 in the series : Child Entrepreneur Caleb Sima: Cofounder Of SPI Dynamics
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