Head in the Cloud | Gil Friedrich from Avanan

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Gil Friedrich 0:00
You know, as you grow, you need the, you know, I’m stating the obvious, but you need a process and you need people that can define the process and you need people that manage the process.

Alexander Ferguson 0:16
Welcome to UpTech Report. This is our founders journey series UpTech Report is sponsored by TeraLeap. Learn how to leverage the power of video at Teraleap.io. I’m excited here to be joined by my guests, Gil Friedrich, this is actually part two, you can go back and listen to Part one where we heard more about their platform. He’s the co founder and CEO of Avanan. He’s based in New York, and they’re a cybersecurity SAS company started 2014. All around cloud and email and collaboration, security. Welcome back. It’s good to have you on. Excellent, happy to regroup. So now here, I want to hear about the journey like already in before avataan. Like, how did you first get into cybersecurity tech? Was it just like immediately beginning in cybersecurity? Or were you just fascinated with technology at the beginning?

Gil Friedrich 1:03
It was so coincidence that I’m almost embarrassed.

To mention this, I was

I did my university degree. And I did that. Right after my military service in the in the Israeli military where, you know, salary wasn’t great. So after about six months, of basically just, you know, working on my thesis, I was

out of money, completely different field, it was, you know, sort of AI but in the area of image processing and face recognition. And I told my professor,

you know, I running out of money, do you mind if I started a job because I finished my research and just needed to write my thesis. And he said, that’s funny, say that. I’m about to start a company, do you want to join?

And I knew nothing. And

he told me the idea, etc. And I almost, I knew so little that I said, you know, whatever, I’ll join, I’ll see you every day. And that will make sure I write my thesis. And so I joined I wrote my thesis, I submitted my thesis. And then I also got into a cybersecurity company that, you know, ended up going public in NASDAQ. And, you know, I saw the potential I enjoyed the success. The almost happenstance being Jose, I need a job and he says, I’ve got a, I’m going to start a company, come join me. And that was the first cybersecurity company you were part of, and the first job I ever had. So first, well, you know, the first professional job. Right, right. And that was called that that was for scouts. I was first getting to that was 14 1414 years that you were focused on that guy right now. I’m looking at LinkedIn here. Yes, absolutely. So I, I started there at the end of 2000.

And I, three years later, three and a half years later,

I was appointed as the VP of r&d. So basically, I ran the r&d team there until about 11, still with forescout moved from Tel Aviv to New York and more focused on

Alexander Ferguson 3:13
you know, more like an outbound VP of technology that was the title of working with customers with partners. So on that shift from working on the product itself to now external working with with customers, there’s a lot of folks out there that that start from the the tech side, but move to outward facing and sales, what was some of the lessons learned that you had in that growth, and now working externally with customers?

Gil Friedrich 3:39
I think lesson number one was short answers.

I mean, you know, I just remember my first presentations, were always

I can think of the slides I would make and the number of words I had to use in order to express a simple a simple idea. I think I really got better there and you know, how to explain maybe complex technical terms in in simpler words.

These are the areas where I felt like, you know, I needed to be better and I became gradually better over time.

I have to tell you that personally, I love r&d work. I love the development, I mean, even a tavern and you know, I haven’t done it for a few years, year number one we got together I was coding with, you know, my two other co founders, just sitting in a room coding and I loved every moment.

When we started hiring people, they looked at our code and they just you know, it was horrible. So they ditched it and started over. Oh wow. But they still enjoyed that piece very much and having the flexibility I guess to also be able to start there with with your version one. You know, just gave us a lot of

to start. He gave us a lot of flexibility.

Because, you know, we didn’t need to hire people, we have co founders, hardly any salary. You know, so from just from a security perspective,

we came after a year with something relatively mature working, where we could start, you know, better customers, etc, without waiting to hire people, etc. Now, you had mentioned already in the in the first episode, where

Alexander Ferguson 5:24
you saw the this challenge when you were at at forescout. And you’re like, Alright, we got to start something. So can you just can you walk me through? Like the, the the phases from from? What are 2011 to 2014? To then starting in 2014? With Avanan? What did it look like to begin a company with your co founders.

Unknown Speaker 5:45
So

Gil Friedrich 5:47
I guess the challenging part that it was a super fascinating time first as well, because

during those three years,

pretty much every one of the major banks in the world became a customer. And, you know, as you can imagine, quite a few are headquartered in around New York, New York City or, you know, the vicinity. So I was very fortunate to just be, you know, be part of that. I, you know, I wasn’t in sales, I didn’t have a very significant role in the process, but he would still call me into demos, and I was involved in a lot of the customer conversations.

So he just gave me a lot of access,

you know, to just start to compile all the information I was getting.

And,

and so when you when you hear something for the first time, you know, a need that is underserved, you know, you shelf it somewhere in your brain, and then you hear it from the second time, it comes back to the front of your brain. And when you hear it for the third time, now you say, Okay, now I need to actively, you know, check this notion. And so the next one, you’re actually asking the customer, you know, is does the concern, is this a problem you have, etc. And as you collect those data points,

you know, that you’re up to something. And I think,

you know, most of the people they solve a problem they have, or they see, you know, like, I think the guy that invented the wheel wasn’t about, you know, fishing, he probably had to carry some big stones, you know, to the top of the mountain, whatever. So, so I think in that respect, we just, we were so involved in those custom conversation that, you know, we could test, test the notion test the idea before we started, and that was very important. Before we were able to start a new company. You have two three other co founders? Correct? Correct. And did you guys just talk amongst yourselves, like how did it form between the other co founders that they became your co founders to start Avenue.

So we worked really well, at forescout. And we knew each other

for many, many years.

And we it wasn’t just that we work together, we enjoyed working together when we just felt great chemistry. So it was very, very natural, it was almost, you know, the joke we had is bringing the band together.

Two out of the four, we’re no longer forescout employees. So

already left in 2000 9008. But we you know, we call them back.

And so part of it was, was that just great chemistry. And I think also bringing

diverse skill sets. So you know, one came really from the sales and marketing side, and the other was pure r&d. And one was product. So just

as a balance of all the skill sets in a four person crew. Exactly. And so it meant that, you know, for senior position, and all had VP positions at forescout. So from, from that respect, we didn’t need to hire a ton of people in order to to kickstart a company, we had the basic skill set to start. And then we started to hire people that can tell us what we need to do. At the beginning, did you raise money right from there? Did you bootstrap? How did you approach that?

So for a few months, it’s your

garage story, even though it wasn’t in the garage, but it nights,

you know, finishing the day job and try to work on some sort of a proof of concept or mocap.

And I think it was very important in our investor discussions, because it’s one thing to come with slides. It’s another to say, hey, let me show you a demo. So I think it really helped us to come with a demo.

And

we also had not customers necessarily but reference people.

That would say, you know, I need this, I have this problem. So access to customers was also very important.

In our life, we raised the seed round, then we had an A round, and then we had to be round. This is where we’re at right now. Gotcha. So the seed was very easy. In all honesty, I mean, it’s never easy to get money, but just high level, you know, we’re, we’re a team with the right story with the right background.

So we started to get term sheets relatively fast.

Wrong day was very hard.

Why was it so hard? Because so we were asking for, I guess, a lot of money for a high valuation before we had a single paying customer.

So there was a misalignment there. And we still try for, I want to say maybe six months to go with that, after six months, we had three paying customers.

with six more, you know, in the pipeline about to sign one of those six is a fortune 500.

So at that point, the entire conversation with VCs changed, where it was no longer

it was no longer about

this guy is going to invest, I already felt that the feedback was different. So I already felt that, you know, if it’s not this one, it’s the next one, if not the next one, the next one, because

Alexander Ferguson 11:30
the gap was really being able to show money flowing in. So being really able to show that the people are taking their checkbooks out, paying for this, etc. That’s interesting. I was like, if you’re having trouble raising your round on the on your set terms, one would think well just change it so that a lower valuation or ask for less money. But your approach is no, let’s just keep going and get more customers to show that we are actually at that evaluation. Absolutely. And since then, we always took the approach of

Gil Friedrich 12:00
you know, when you take around, you immediately spend more, but spending away that towards the next time, you’ll need money, you’ll be very close to, you know, breakeven. And it just gives you a ton of flexibility. Because, you know, you go through investors, and he’s, you know, time is on your side, because you’re growing fine, don’t invest now. You know, we, you’re always talking to investors always in

any way, even now, when I don’t know if we’ll take another round or not where we’ll be conversation is, you know, fine, we’re growing so quickly. So you know, you don’t want to pay this valuation, now you’ll play, you’ll pay double in, in a year. So

really, that I think that’s important. And I learned that after I around our B round was again, easy, easy in the sense that, you know, we got new term sheets from New VCs, and then our existing VCs just said, you know, what we are taking around they have the right of first refusal, they just took around are so bullish about the company. And

Unknown Speaker 13:01
yeah, yeah.

Alexander Ferguson 13:04
So Avanan, how did you come up with a name?

Gil Friedrich 13:08
It’s the wife of my,

my co founder.

And she’s

in Hebrew Avenue, and I’ve basically mean cloud and then mean cloud. And when you think about what we initially did, it’s almost like you’re clouds of clouds. And it just came together nice as as clouds of cloud. Or sometimes it’s thought of as thick clouds in Hebrew. So like, no, hardening the cloud and making sure it’s safe. So from here, you you begin, but you’re, you have the funding, or seed rounds, okay, around was difficult, but you You got it, you start to get customers to get those first initial customers, what were some lessons learned there that you can share?

It’s probably the hardest part in the life of the company, to be honest, even now with, you know, 4000 customers and growth pains, we’ve experienced our biggest growth brain was probably between 200 customers to 500 customers, where, why is that the biggest growth anything, just, you know, historically, I’m not sure if it’s general for us, that was the time where we had to change the methods of, you know, how we operate, how we handle customers, etc. but

but even even with that, I think getting the first customers is the toughest because,

you know, in the enterprise in something like email that is so sensitive, no one wants to be an early adapter.

And,

you know, vetting you out, etc.

is not easy. You know, we already have customers that bought solutions that we developed, so they knew how

Think they knew how we,

you know that that was useful?

Alexander Ferguson 15:06
And if you don’t have that, then I think you need to hire someone that does because because in the beginning, he almost asked him for favor, there’s no other way to say this. So it’s a part of it’s just patience. And just asking someone, Hey, could we do me a favor? Let’s get started. Let’s try, and you meet them where they are. And then you can

rope, you’re able to expand and scale from there.

Or for you to be able to manage this. And you said, scaling from 200 to 500. Customers, obviously, that changes the dynamics and part of it takes the right team, what would you say are some lessons learned for building the right team? So I think one thing I learned is that,

Gil Friedrich 15:53
you know, as you grow, you need the, you know, I’m stating the obvious, but you need a process, and you need people that can define the process. And you need people that manage the process that do the day to day of the process.

And there is a gap there that I’ve seen everywhere, whether it’s marketing, or sales, or r&d, or whatever, that the,

you hire someone that ran a process in another company, right, a similar process with whatever Customer Success support, whatever.

And they can describe that process to you. But very often, they’re not the people that define the process in that organization, and your organization is different. So the people that define the process, and the people that run the process, are not necessarily the same person. And when you hire as you scale, you’re you’re thinking, Okay, let me hire someone that had the past experience. You know, running a support organization, well, your organization is different in whatever they did before, doesn’t necessarily met. So really, you need, you need the people that can help you define that process, understand the problem define the process, not necessarily ronix.

So I think that’s a challenge. And we made that mistake several times in similar areas.

Alexander Ferguson 17:12
That’s a powerful lesson learned of not knowing that there’s two different people, one that can be great at running process, those who read creating a new process, and just taking an existing process from a different company and applying it to to their new job at your company, is not necessarily good idea. And so it’s how do you determine how do you when you’re when you’re interviewing someone, whether they fit into one category, the other?

Gil Friedrich 17:39
So you need to drill down into what they were running, where they were, what was working, what was not working, why they did what we did, you sort of try to see if they have that bigger picture, bigger perspective.

And also, you sometimes

what we ended up doing that worked really well, is taking people not necessarily from the same discipline. So for example, the person that eventually got us to, you know, a customer success process that works in a support process that really, really works. never had any job in support or customer success. Seriously. Yeah, he just he ran a huge r&d team that worked really, really well. So he understood the process, you know, in the bits and bytes, very detailed oriented, was able to define that process. And now he came to this new problem. And he was able to, you know, build a process that works. So it’s not necessarily the prior experience, it’s more or less ability to understand the bigger picture, problem solving skills of seeing a situation and coming up with a solution for that MIT fits just perfectly for that. Exactly.

Alexander Ferguson 18:53
But for you as a leader, are there any books, audio books, podcasts that you’ve read in the past that you would recommend others?

Unknown Speaker 19:01
Um,

Gil Friedrich 19:03
so I’ll tell you what I

I almost want to say that

take everything with a grain of salt. And I’ll tell you why. Because I read a book when I knew nothing about sales and marketing, right? And I’m very grateful to our CFO that wasn’t a co founder, but he’s a founding member, also a friend from forest graduate. We took over when when sales started.

Because everything I learned, I learned from him in sales and marketing. And initially, he recommended the book to me about inbound and inbound marketing. And I think it’s really good

as an initial book, and I think it’s called inbound. But then

I read the sarcastic book about the company and the person that wrote that book that said,

you know, it’s all

it’s probably not the whole truth. Let’s put it this way.

There’s a lot of truth in it, but it’s probably more. And it’s all about that balance between you know, you want inbound, right? You want people to come from you beg for your solution. And just like with no problem, but that doesn’t exist anymore, because for every problem, there’s 50 companies that can solve it.

And you have to go out bound. So the notion of just you do your writer blogs, and people will come doesn’t work. And to find that balance, understand that, that balance and see what works for you.

I guess if you read that book, inbound, you know, to the letter, you probably fail, because it’s not the reality.

And so, yeah, so anyway, that helped me i

i think there’s a book called outliers that probably many people read, and I read as well. And they,

I think he gives a lot of perspective in different

stage of the business and the, you know, the time you need to spend into the problem, the perseverance, and even the feeling of entitlement, like there’s another thing I would say help small startups, that maybe is a lesson learned, try to appear bigger than you are, right? You cannot say, Hey, we’re four guys on the left, and you can. So there are different ways to do this. And it’s about who you partner with, like, you can generally partner and have a press release with a big company, if you’re able to, you know, give them something they need.

And they need the innovation. So they would look for someone like you as well, so, but being able to do things, and at the end of the day appear bigger than you really are.

Really something about that book talks about, you know, entitlement, not in a negative way, but just in a feeling of,

you know, I generally feel like I’m coming to the world in a humble way. Nonetheless, there’s something about Listen, guys, no one knows about this problem better than I do. And I can help you understand this problem in, you know, again, not to come arrogant, but almost confidence competence in your product, and what you can what you can provide. Exactly, that’s the thing. I appreciate you these, these real world experiences are way better than any books that you can read that that you just mentioning, like

being able to partner with a large brand that you said that that can help raise them because it’s innovative. Did Is that what you did at the beginning? Did you do that? Something similar? Yes, we had partnerships very early, where some of our larger customers were brought to us through our partnership with you know, some of the biggest companies biggest names in IT security.

Then they also saw the success. And so they also are we am their solution for a period of time. So we have OEMs with some of the largest companies out there. Eventually, when we were able to hunt our own customers no longer made sense to OEM business wise. But even if you just go to someone like Gartner, and they’ll figure it out, even if you don’t tell them that, hey, this company OEMs you, you know now you’re no longer this tiny startup. Now you have an OEM with this conglomerate, so you’re probably doing something right. So doing an OEM with a larger partner, actually is a potentially good way to start to get that attention and get out there. Get credibility, for sure. Yeah. Wow. That’s a great one. That’s a great one. To close here. Any tech predictions? Would you make looking forward next year, two or 510 years from now, in the cybersecurity world? any predictions? That’s a tough one.

That’s a tough one. I mean, you know,

obviously, I think

there’s no turning back from some of the some of the things that happened with

with COVID and in many ways, it’s just accelerated probably things that would have happened anyway.

But

you know, the GTT TGT session of everything you know, my daughter’s going to school using an iPad and my you know, working from remote and all that way we buy the way we sell and all that is is here for good I’m sure.

I think it will.

I think it will change our company thinks about employees, obviously. I mean, we we used to prefer certain geographies. Now we don’t care we hire everywhere, anywhere.

Unknown Speaker 24:51
And

Gil Friedrich 24:53
and it’s a great thing because it opened us just to a ton more talent and hiring people is the toughest part for us.

Every business in the UK for sure, maybe in other fields as well.

So I think that that’s a huge positive not to care about geography.

The concern I always have there is, is does,

you know, will we see less connection to the company, right, we’ll start feeling like everyone’s outsource

also outsourcing the work. So

Unknown Speaker 25:29
balance that will have to come from that. So I think Yeah, probably more employee

Gil Friedrich 25:36
churn in some respect, or at least m companies trying to find new ways to, you know, to connect the employee to their brand, etc, when there’s no headquarters.

Alexander Ferguson 25:47
Again, I it’s not a huge prediction. It’s maybe just the challenges we have now. But these are the kinds of things that you know, keep us busy as we think about the enterprise and business into the next few years. I think you make very accurate statements of the future is predicated on the challenges we’re facing right now, where where do they will lead us but it’s if anything, it will be a more tech enabled digitized world and distributed where cybersecurity attacks can happen anywhere in new places, which is great to have a solution like yours. Thank you so much for the time that you’ve been able to share, get on the insights from your journey. For those that want to learn more about actual product, go back and listen to part one of our discussion where you could hear how we dove into the platform of Amazon. And you could also head over to avanan.com and be able to learn more about the product there. Thanks again for your time. My pleasure. Thanks, Alex. We’ll see you guys next episode of UpTech Report. That concludes the audio version of this episode. To see the original and more visit our UpTech Report YouTube channel. If you know a tech company, we should interview you can nominate them at UpTech report.com. Or if you just prefer to listen, make sure you subscribe to this series on Apple podcasts, Spotify or your favorite podcasting app.