Sandhya Hedge 00:08
In today's episode, I have a guest that is a veteran of the cyber security industry, having led three successful companies, the latest of which is Arctic Wolf Networks. Last valued at about $6 billion, AWS is the leader in the cybersecurity category known as MDR, which is managed detection and response, which it offers as a service. And what makes this story really special is that the company had a pretty rough first five to six years and then finally hit a tipping point, after which the growth of the business has been just phenomenal compared to very few other enterprise software companies in history to be growing so fast, at this scale. So welcome to the podcast, Founder of Arctic Wolf, Brian NeSmith. Brian, please say hi.
Brian NeSmith 01:02
Thank you. Pleasure to be here.
Sandhya Hedge 01:03
And another reason this episode is special is that I have a co-host today who's my partner and the founder of Unusual Ventures, John Vrionis. John, say hello.
John Vrionis 01:14
Hi, Sandhya.
Sandhya Hedge 01:15
So John actually led the first venture investment in Arctic Wolf 10 years ago, which was a $7.5 million round, just as Brian started this company. So this interview is going to be really epic. It's very special to have both of you here together. So going back to that moment in 2012, Brian, maybe you can kick us off by sharing a bit about what was happening when you decided to start Arctic Wolf Networks? What was going on in your mind? You had done this a couple of times before. You know how hard it is. What was the opportunity? What got you excited?
Brian NeSmith 01:53
Sure. So we have to kind of rewind prior to the official start date, like you often do in these things. They don't come into existence out of nowhere, they come from a set of ideas. I had ostensibly retired. I actually knew John, we joined a small company that's had its own struggles. And so I got to know John, through that experience really well. Talk about the fundraising because that was a big part of the motivation for me, having worked with a venture company, especially challenging, dynamic. How do they behave? What do they do? And that was a real strong proof point for me, that the partner you get in with matters a lot, especially when times can get difficult. I got bored. I got retired. I got bored. I called up by my Co-Founders, Kim and Tron Blade, who’s based in Waterloo, Ontario at my previous company and since we worked together at the previous company says, “Well, I'm bored too.” And that's a bad formula, two bored, you know, kind of entrepreneurial folk, and jump in and do something. And so we got together over her kitchen counter in Waterloo and brainstormed a half dozen different ideas. Five of the six would have made it, one would have been a complete abysmal failure. And we decided to focus on this one. Mostly because I wasn't as excited about starting a company that was going to get acquired, not to say that we couldn't have got acquired, but it wasn't going to be a feature that had to be a part of a bigger company. And so I wanted it to be something that was a little more category defining, but didn't have to be category defining. But I thought that could be sustained and grow into a truly large entity. Which created some later challenges for us and what we were doing, but that was really the start of everything there.
Sandhya Hedge 03:49
And what was kind of the market insight? When you decided to start a company, what were you looking for in terms of an actual problem to chase and why?
Brian NeSmith 03:59
So the actual space we focused on, today is called MDR, that managed detection response. I look at this like a neighborhood watch for your IT infrastructure. So it's collecting data from the environment and understanding when things are not doing what they should be doing. We called it continuous monitoring at the time. The essence of the idea came from my prior company Blue Coat. The security solution produced really voluminous locks, like massive log data, huge wealth of information, and found it very rare that a customer was able to understand what that data was telling them. And so that was the kernel of the idea. If you look across everything that's in your environment, you know, your endpoints, your servers, your security devices, your firewalls, every one of them's producing data. There's a huge amount of wealth in that data mixed with a massive amount of noise. And so the thought process was we could build a solution that would get through all that, but brought out specific items that are relevant to the end customer. And you know, in that we call it continuous monitoring and evolved over several iterations through different names into what we're doing. But that was the original thought process of what we wanted to build.
Sandhya Hedge 05:18
And John, as an investor, what was exciting about the problem area Brian wanted to focus on? What piqued your attention?
John Vrionis 05:28
Well, it actually all started with Brian. Brian and I, as he had said, we worked on a board together. I had recruited him to an early stage company and I had worked with him through multiple rounds of funding, and unfortunately, not a great exit. I don't know if Brian knows this, but when I was in business school at Stanford, we actually studied cash flow, or blue coats. So I remember him as the protagonist in that case. And my mentor, Andy Rachleff, and Brian worked together. Andy, as an investor, and Brian as the CEO. So we had that history. And then Brian is the proud father of daughters like myself, and also a lover of soccer. So we had hit it off both on a professional and a personal level. So when he came to me, I was already positively inclined about anything that he was going to do, although I did think he was retired. So I was a bit surprised when he came. But he made this very compelling argument, as the good founders do about why the industry was changing, why there was a need for what Arctic Wolf would inevitably become. And it felt like he had what we call that proprietary insight. He understood the market and how the world was evolving. And he saw the opportunity uniquely because of his experience. So the combination of those two things, I was really excited to work with Brian again.
Sandhya Hedge 06:55
Awesome. Well, going back to 2012, you've raised your seed round from John. And then I think very soon after you actually also did a preemptive A, which almost feels like you're back in 2021. But you know, you did this way back before it was the norm. You had a pre-emptive A round, led by red point. What was happening on the product side? As a repeat founder, how did you approach developing the product, testing the hypothesis? What was the Product-Market Fit journey for opticals?
Brian NeSmith 07:31
Yeah, so just a slight correction there. So the Lightspeed was the A round with John. And then the B round was with red point. It was a fairly simple process. Red point had missed out on the A round. They didn't get selected in and the person that was leading that just wanted to get in came to me. And we weren't actually trying to raise money at that time. We just added the money at that point in time. That being said, a lot of this is when you have an idea of a company you think somebody is going to want, you don't actually know if it's true, really know if it's true, until you go out and try to get somebody to pay money to buy it from you. I started with a group of engineers, I was the only non-engineer, even though I have an engineering degree, I haven't really practiced engineering. So I no longer can qualify as an engineer in the truest sense of the word. I spent most of that first year and a half selling early, starting to think about our target customer. What's that profile look like? And a realization, especially for a b2b business, is there's a lot of direct interaction with the customer and a bunch of things to kind of help you figure out how you're going to get that Product-Market Fit. One of the things that I think is a common misnomer is, I think it's a question that comes up all the time, is how do you know you have Product-Market Fit? I don't think that's actually the best question. I think what's really important is the process. How are you going to go about learning how you're going to get Product-Market Fit? Because Product-Market Fit is hard work, its intelligence, its luck, you can't control it. But the process you go through and figuring out how to get a Product-Market Fit for a b2b company, I think is something that can be done, and you can't dictate the outcome, but you can dictate the process.
Sandhya Hedge 09:25
Could you walk us through what that process felt like?
Brian NeSmith 09:29
Sure. In its simplest form, and you see this illustrated if you talk to, what's your elevator pitch? I don't think that's good enough. Think about it. You get five seconds to get somebody to listen for 15 seconds. Then 15 seconds to get a minute, and a minute to actually ask for a meeting to talk about what you do. So those three sessions, and ultimately the pitch that you're going to give them to get them to buy the product, those have to be scripted. And you don't have to wait to have the product that you want to sell to do those scripts. You can go test them and start learning and iterating. And I actually wrote those scripts out early, early on. I was the only one doing that. I was the sales development rep., The SDR, I was the SDR that would give them the 15-second pitch, I was the one that would do the pitch. And then I did an interesting thing, I created an alter ego early, early on, that was not me as the CEO but me as a salesperson. I call that person Brian Robinson. And, I was Brian Robinson doing the sales pitch for some customer dynamic, what's the CEO selling, but when is the sales guy. And so you know, I would do that pitch and do it as Brian Robinson. And it also afforded me, if people would ask for a discount, I could say, well, you know, I gotta go talk to the CEO, and we'll see what he can do. And I did get caught once I fessed up immediately. But it kind of put in me that idea that I'm not the CEO salary, I don't need to look like it. It's the story itself, it’s not my personality or my title that is going to get me the meeting, and I wrote those scripts. I did it myself before I hired anybody in sales that are rated on them. And even after I started hiring people into those specific positions, I still participated fairly actively in selling, right along with those people. Even as we were still learning that product market, I reserved about 20% of capacity for an alternate script. So in that quarter, I'd hold a free day, everybody could try their own script and tell me what worked. What we do now, and just trying to find ways to iterate and create that rapid learning dynamic. I think I articulate to people, you can't dictate the outcome, you're going to get a product to get it. But what you can do is control the process and be as efficient as possible about what doesn't work. And it can be frustrating and painful because, I guarantee this, you will get a lot more about what doesn't work than what does work. But there are hundreds of iterations of what doesn't work util you find what does work
John Vrionis 12:16
If I could chime in Sandhya, one of the things about Brian that was so compelling was his perspective on the market. But at the same time, his willingness to continue to try different scripts, as he called them. So he and Kim had this fundamental insight about the security market being broken, in the sense that most companies were cobbling together a bunch of point products, and then building a security operations center to try to really get to the root cause of a lot of the most recent attacks. And he just saw that because he had been one of those point product vendors. And he saw the opportunity to build a platform that brought a lot of that data together. But also how to articulate that. How to compel a customer about the value proposition, when they were accustomed to buying something else more of a point product. It took time, it took a lot of time. And it was a creative process. It's very difficult, difficult to put a schedule to. But he would always come to us as investors with these different scripts, these different positioning statements, these different narratives, as he was working his way through the process. And as he said, there's no guarantee that the outcome is a success. But he knew that by following a process and continuing to iterate and iterate and iterate, he was maximizing his probability of finding it.
Sandhya Hedge 13:38
Makes sense. I'm curious, what were the reactions you looked for in a pitch to say “Oh, this meeting went very well. I think my bias was leaning and hard versus they said nice things, but actually, that meeting was a complete dud”?. Could you share examples of how you built your own gauge?
Brian NeSmith 14:03
So the five-second pitch. Did you get a 15-second pitch? I actually literally track that. And then the 15 seconds to, I get a minute. And I would understand no, they hung up after 15 seconds. Okay, well, something five or 15 Didn't work. And then sometimes I get to the minute pitch, and I'd say “Hey, could you take a 15-minute meeting? Where I will give you a more thorough overview?” They'd say “no,” you know, they'd be polite. I'd say” Hey, could you share? Could you for a minute tell me what you didn't like or what didn't resonate with you?” And I would encourage them because what I would do is I criticize myself like this because then that opens the door, because people are naturally generally polite. They won't tell you why they don't want to do it. And you know, ultimately, it's very obvious your five-second pitch gets you the majority of the time a 15-second, a 15 gets you the minute, your minute gets the full meeting. For the full meeting it was scripted and pitched and we would try to get newcomers to, we did something a little different. In a typical inner level product, people want to do a PLC, I didn't want to do PLCs. So what we would do is get customers to buy the first month service. And so we did PLCs, it's like, I'm not going to do a PLC, this is worth it to you. And I'll put you on a month-to-month subscription. So pay for the first month. And if you're not willing to, then my guess is the PLC would have been a waste of our time. So it's every step of the way, asking for the order, you know, five seconds, can you give me 1550? Can you give me a minute? Minute, can you give me a minute meeting and then a 15-minute meeting? Are you ready to buy it? You know, because I'll only charge you a month. And if you don't like it, you can cancel after a month, and you can move on. And it's hard. The printer, you don't like rejection? And so, you know, it's your little baby that you're building. And you know, they run it for a month? And they say yeah, it wasn't worth it to me. And you know, you may have the basic idea, right? But I guarantee every entrepreneur has to iterate on even the basic idea to really turn it into something that's truly going to be successful.
Sandhya Hedge 16:17
What were some of those iterations like? You know, do you remember kind of the very first original form of the idea and then how you guys evolved it based on the feedback?
Brian NeSmith 16:27
Yeah, we talked about it as most pitches we talked about, we did continuous monitoring, we had SIEM as a service, we even had this term firebreak, which I think was kind of reaching the pinnacle of my team getting frustrated with me. So, as far as mostly, I'd say, iterations on that piece. Ultimately, all that aside, by focusing on the process and measuring it, you get to reward that I've learned things, things that I've improved the product, things that I'm improving how I talk about things here, we didn't really achieve Product-Market Fit. And I think this is a lesson, because it's not always about your iterations. Sometimes the market just has to come your way. And for us, you know, five and a half years into it, our audience, but the big ransomware events occurred with the UK hospitals, changed the dynamic in our space, because prior to that, yeah, hackers got into your network, they steal your stuff. So what, wasn't that big of a deal? Yeah, they say it is a big deal. But they didn't really care about it. When those events return those hospitals to the Dark Ages. Also, nobody woke up and said, Hey, a hacker could bring down my entire infrastructure. And so everything shifted. You could just feel the wind, when you talk to people, they're like, oh, somebody that would watch and tell me when that's about to happen and warn me and correct me. And then they just start taking stuff away from you. They can't stop you there. They're like, Yeah, let's do the meeting. Yes, let's take the next call. Let me get my other team on the phone, all sorts of kinds of signals that tell you on that, and those are the indicators of it. But ultimately, the real indicators, people buy it, and they keep it, it tells you more than anything.
Sandhya Hedge 18:15
And this was like 2017-2018, right? About five, six years after the optical first bond. So what was that kind of wandering through the wilderness process like? What did the board conversation sound like? And you went back and said, No, we're still figuring it out?
Brian NeSmith 18:37
Well, this is what made it especially frustrating was not that there was no success. So it's like we're getting some traction. And we've been doubling for almost 10 years. And so every year, we're getting growth, it's just a traditional model, it wasn't like three times three times two times two times it's been, you know, 2x 2x 2x 2x. And now at the size we're getting the two x's start to matter. And so not every company grows the same way. And I think that a couple things. One, I have the experience, where I've lived it, and I was comfortable being fully transparent, like where we screwed up, where we made mistakes, where that was a waste of money. Okay, well, that wasn't a waste of money, but I did learn something, you know, and that's the benefit of experience. But I think even as a young entrepreneur, there's no reason not to be transparent. It's you'll just benefit measurably like that just even for you, you're not trying to mean just that the books in your heads about what you told your investors versus what's I think, for whatever reason, and I think that coupled with I saw proof points in the individual, not in the overall market, but in the individual where people did rip it out of my hands. And I believe that eventually the market would come about, I'd be, you know, misleading to tell you that I knew I was going to be the Rance that that was going to cause that, but I knew something would happen in our space that would, that would trigger that kind of event to take place. And so that transparent. And then also just, sharing the anecdotal information about when it was successful, and what made it successful and as proof points that this is going to happen.
John Vrionis 20:24
Yeah, I mean, Brian, you can't understate that, I think, for our audience, right? The fact that Brian was brutally honest and brutally transparent, it actually gave us confidence in him, right, to continue to persevere. You know, I think way too often VCs believe in this mythical. Well, it's supposed to triple and then double. But it's an artificial growth rate that you're putting on a startup. And while we'd all love to see those happen, it's unrealistic, especially when you're creating a new category, that that company is going to grow according to some spreadsheet exercise. And so I think what happens is rounds happen, valuations go up, and all of a sudden, people with hindsight, say, Oh, we're supposed to triple, triple, double, double. And when they don't, they kind of panic. And in this case, because Brian was so transparent, and so truthful about the struggles, and you know, the moderate successes, we continued to have belief, I certainly did, in him. And believing that eventually the market would come around, if we could really figure out how to position and get the narrative right. And I think that that was true, he's underselling his ability to continue to do that. But there was also a macroeconomic shift in people's thinking. And sometimes it's just about being around, surviving. Until that happens, and having the antidote, you know, in this case that people really recognize now that they need it.
Sandhya Hedge 21:53
Makes sense. And Brian, in a very important question, especially in this environment, how did you think about, your burn and your team, while you were kind of going through this, more of the wilderness start, right? Like, the big tipping point hasn't happened yet? You can see that. How did you think about planning your team expansion accordingly? And what did your team look like in maybe two or three years?
Brian NeSmith 22:30
So I was selling and marketing and my marketing skills aren't great, my design skills aren't great. But what I was comfortable doing was selling and doing the pitch and I didn't think I needed something to articulate the value proposition to the customer. So, now does it start writing, start getting a little bit of traction and resources, paying attention to the metrics, like, having five of something, are you learning any better or any faster than having to have something if to have some things you're learning fast enough, then don't add more to you really prove a formula, although we've raised a lot of money over the history, through all the way up, even raise that much money, we made it last a good six, six and a half years. And it's really on the last couple of rounds to the fundraising, increasing in, the volumes increase. And so it's just being measured and being honest with yourself, it's running a big marketing campaign going to change it in our particular world. Now, I didn't have trouble getting to people to give them my initial five-second pitch, you know, and so that's not my problem, then. Okay. And it's this, that steps to the other funding, so just be cautious when you're doing it. Now, it's very different for a b2c or some other type of company, for a b2b company, there's no reason you don't need a big massive marketing, spits, you know, spins and launch and all those things to kind of prove that people really want to buy what you're selling.
Sandhya Hedge 24:05
Makes sense. And, so kind of looking at that time period, again, you probably needed to like go out, raise that next round before the tipping point had really played out. And you have the pressure of being compared to the gold standard, or even triple for three years benchmarks. What was your fundraising process, like, like, join us? John has given me a spoiler alert here that it was really tough. So we'd love to dig into that and really, like help all the founders who are going to pretty much go through the same experience in the next 18 months or so of fundraising in a very challenging environment, where the standards have been raised extremely high for ABC rounds. I would love to hear from you, kind of what your approach to fundraising in that environment was.
Brian NeSmith 25:01
So yeah, the A and the B. I think just my reputation and historical experience were fairly straightforward. We're talking about the B2, I'll talk about why we call it a B2, the C and the D. They were full-on agony. And, the B2 round, kind of should have indicated to me, so I, and now at the benefit of hindsight, I go back. I'd like to tell you that the venture world, everyone really kind of looks through to the root of everything and understands and is willing to swim against the tide, but it's a momentum-style business, like a lot of public markets are things going with this is that we what we were doing as a service was delivered as a service, it wasn't a product company. And I think the experience in the venture industry, and generally with service companies, has not been great. It's been pretty bad. And the second part is our initial focus. When I found through my iteration, small customers were the best fit, not super small, but kind of the 100 to 500 employees. And that type of investment is general for a lot of venture investors. So even going into the pitch for the B to the C and the D, which is well, you're selling to small companies, and you're selling a service. And then, on top of that, you know, the metrics, we hadn't grown into them yet. So we weren't experiencing that kind of growth that John alluded to, that they liked to see. And even though I think we were getting good traction, the B2 frankly, have, I think, in the end to probably 80 plus companies in the b2 round. And they all said no, I had three or four that got close, but ultimately ended up at no. One in particular, one potential venture group, it was a split one partner wanted to do it, the other one did not. And I was called by the other partner, to find out through history there. And then John and I, we both have our personal money, and that kind of set the round, the B2 was done at the same value, a year and a half later, so there's no increase, you arguably could call it a down round. The way I don't think of it like that I know other people do, we needed the money, taking the money at that price, I would have taken the money even at a lower price. But we did the down round, that me stepping up, John stepping up on the personal side. And then we created the metrics, we were then some of the existing investors to participate, not all of them. And then we were able to actually, with that, able to add a few others, we added a country company out of Europe and 18 and a few others to round out the rounds. So we did the B2. The C was probably my lowest point in the company. At that point, I went talked to 150 plus companies. Partly I think now you got to remember, still got the Small Business still got the delivered as a service. Now you got the failed success of the B2, or the failure of the B2. A hang over you as this rain cloud. And I had talked to and God knows across the board actually went to a session with John, to his credit, this company would not be here without John going to the wall with who became the lead ultimately, in the C round. And I think they did as much challenge reputation and what they're doing. And they've obviously done very well with that investment as a result.
Sandhya Hedge 28:38
Yeah, they look like geniuses now.
Brian NeSmith 28:42
I think it's fair to say that John looks like the genius as the piece there. But you know, it was I mean, just to give you sad, disheartening as I had scheduled a two week vacation with my family to Italy and I canceled it. And the rest of my family went off to Italy and that vacation, I'm not sure my wife has forgiven me for doing that. And it was as stressed as I think I've been in a long time related to work related items. But then John stepped in, we made the pitch. They did invest, we had a few other smaller people follow along. But a very, very small uptick, the valuation was right around 80 to 100 million post the B and the B2. And we only went up to like, you know what people are used to jumping hundreds of millions, you know, even into the billions of that category. And then the D round thing now this is kind of now 2017-18 I did get one investor, a PE firm that wanted to invest but it was a bit of you giving your soul over to them. They control everything about it. And we said no. I said no. I remember sitting in the board meeting and they're like to beat you don't you don't have anybody else ready to do it at this point in time but it comes at a price and we chose not to. And we were able to stitch together around with Bluecloud. And stereo cap again, not you're a typical, not your typical investors, then we got other people to follow on. And then after that it became pretty easy. Fundraising is either sleazy or ridiculously hard. I don't know, there's usually not a middle ground in these things, particularly hard for everyone. And honestly, I was a bit surprised. It worked before said no other folks, I had multiple firms say no more than a few times, part of the D round. I had one particular firm a very well known firm in the valley. Now call me again, and talk to him again. And they said no, again, and then call me back in again. So I get this, I do just get one rejection in that D round. I got three from that firm. I think we were struggling with how to think about it, and what to do. But if you believe in it, you kind of bet and you gotta be willing to fail on point, you know, it's yeah, it was a nonzero chance it could have all failed.
Sandhya Hedge 31:07
Yeah, I think I have so many follow-up questions. Let's see, I think first, question for John, like, what, what gave you the conviction, because you have to decide as an investor, when you have multiple companies that some of which are struggling, all of which need your help, you have to kind of decide like, Okay, where are you going to really, do something monumentally different. And so I'm curious, what gave you the conviction to step in with Brian and go to the wall, like you said?
John Vrionis 31:42
Well, it's definitely not that I was a genius. So I think we need to just make that really clear. Anybody who knows me knows that's already true. But yeah, honestly, it was mostly about Brian, in the end, back to that transparency, that belief in and you know, we're, I'm a bit of a product nerd, myself. And so I had done a lot of work around the space, and the customer problems, and increasingly just had conviction, both in Brian and the need in the marketplace, and that our solution at Arctic Wolf was actually the right one. It was just going to be a matter of time, and not being afraid of the grind. Right? As an investor, you make investments, and then it's almost like a poker game, you turn over some cards, you have more data, and you have to decide, do you want to stay in the game and keep betting? Or do you want to fold based on what you know. And in this case, I was really convinced that the right answer was to stay in, maybe more than any other investment I've been a part of. And so over time there were those nuggets of success that continue to give everyone belief. But to Brian's point, a lot of times investors don't like to acknowledge they made a mistake. So we did have this overhang where we had tried to pitch the story before, people said no. Some of the other early investors, the funds, despite being multistage funds, they weren't stepping up in a meaningful way. Like they just were a lot of issues that created a headwind for Arctic Wolf. And then when it was obvious, Brian was beating people away with the stick. I mean, just people throwing money at him, like you wouldn't believe. But those three financings, they were lean, they were lean and, you know, scrappy years. So it's just really a credit to him and the team that they persevered.
Sandhya Hedge 33:41
Question for you, Brian. What do you think in hindsight, I think two separate questions, one in hindsight, what decisions do you feel like you made that helped you survive through that phase, where you might potentially be seeing other people trip up, like, how do you survive, and it's lean, and you need to kind of wait for the market to meet you in terms of readiness. And then to like, what would you do differently if you had to do it again, in terms of the whole fundraising process itself?
John Vrionis 34:13
Well, he had an amazing spouse. I just want to plug that was the real reason that he survived. Go ahead. I know you're gonna say
Brian NeSmith 34:21
yeah, I mean, that is a big part of it, too. Is that these commit a significant personal sacrifice, not just time but G and psyche and stuff like that, and you can live through some pretty dark times where just yet what I get, like, I don't understand this, like, what's what's happening there. Ice is, you know, for someone here is that, the transparency that's required. We talked A board level I think also applies to your team. And even in the present day, we're very transparent as a company, how we're doing and where we're going and, and explained to folks now I had a history with a lot of these early folks. So they knew me from prior. And I'm not sugarcoating when I'm delivering to you like, this is okay, this is pretty dicey may not work, you know, what's going to happen. So I think that transparency, you can't lose sight is the senior executives that you have to be able to tell a story, this is why it's happening, you know, this is what, you know, to give some explanation for and explain what you're doing to get better, and what you're doing so, and getting the team bought in that, I mean, that's it a lot of cases, that's what sustain me, I saw the team members, I saw some of the early customers that we were getting success with, using the product and keeping with it. Very first customer is still a customer. So it kind of highlights some of the value that we got there early on. So there wasn't there was no response. That's a different thing, that you're getting somewhat of a response. And you just think that the markets not really that. I believe that we were getting a response, the market just hadn't quite come into its own and if we get just be impatient that this is going to pay off in a big way, obviously, with hindsight now we look like geniuses, but what about time to tell you that I knew for sure that was going to happen, but that was my that was my best assumption.
Sandhya Hedge 36:34
And, going back to, kind of the 200 Plus rejections and those two fundraising rounds, do you feel like there's something you would have done differently in hindsight?
Brian NeSmith 36:50
So the positioning of the company I overemphasize, delivered as a service, where I think that the venture community and to see a product and size that much better, especially in the B2 round, where we could have made it much more of the technology in the portfolio. And I think we ended up making mistakes there that created, as John was highlighting, so then we did fix that as we went into the C and the D, but it's too late. Like they, they have a view of it, that now kind of tend to what you're doing.
Sandhya Hedge 37:22
So I think this goes back to you're gonna feel common that people are not trying to get to the root of your story, they're kind of reacting to the first 5-15 seconds. So you have to be very careful what you lead with.
Brian NeSmith 37:39
That's right.
Sandhya Hedge 37:42
Makes sense. Maybe moving on a little bit to the board situation, like how you're communicating to the team, how you are handling your board. I'm curious John, do you have advice for other founders based on like, what were your best experiences? Brian, what would you like other founders who are going through hard times in terms of scaling their company? Like, what is it that you need to see to give you that conviction that you had with Brian?
John Vrionis 38:18
Well, I think when things aren't going well, which, in every startup there's a time when that's the case. As an investor, you want to be helpful. And, you know, one of the few benefits you can bring is your perspective, the reality that you've seen a lot of companies go through their ups and downs. And the truth is, you know things are probably not all going right. So if the CEO isn't telling you that things aren't going right, they either don't know or they're not telling you on purpose. And neither is good, right? And so, in this case, Brian was always very open about the things he was trying and what wasn't working and what was. And that allowed us to work together on how to solve these things. I never lost belief in Brian. And sometimes I think investors fool themselves. They think they add value in all these ways. But I actually think the single most important thing an investor can do is continue to give that founder a sense of belief in them that we're going to get through it. And for me, that was a lot easier with Brian because of how he handled the openness, in terms of, hey, this isn't working, this is working. He always kept us informed. He treated us like partners in this, and I think that made a huge difference. So if I had to give any advice, it would just be that it's really along those lines. Treat your investors truly like partners. And the good ones understand that there's going to be ups and downs. But if you want them to help they need to know what's going on, what's going sideways or wrong so that they can.
Brian NeSmith 40:11
The thing I'd add to that, openness is not simply just spewing raw data at your board members. So part of the job is exactly framing the problem and understanding it and putting it in a way that they, the board members, can add value in what you're doing. And so I like to bring challenges to the board when I think I have different potential answers. But I haven't made up my mind yet. So it's a little bit of an art form. So if you get too far down the line, you've already made up your mind, then when you bring it to the board, and they disagree with you now, what do you do, but if you bring it to the board, when you can frame the problem, it's a mistake for an entrepreneur, think to go to the board and have no idea what to do not if you're doing that, basically, you're saying you give up, what should I do now, that doesn't mean you can't go to some of your investors, and you just need to have a pep talk like and you can do that just ask say, Hey, I'm really struggling right now give me a little bit talk. And I've done that before. We had board members, I'm like, I don't even want to tell you about anything, I just need a little bit of a pep talk to show how good I am, you know, give me some confidence in what we're doing. And also just making clear that, you know, by focusing on the showing the measurements and showing the data associated that process, I can't guarantee the outcome, but I can show you all the work we're doing in the process and what we've learned along the way, and you can have ideas and we're open to whatever you want to do. So all those things I think are part of it so open doesn't forgive you for not being prepared, not doing the work, not getting ready. It's critical for someone to understand cuz I think sometimes someone's confused is that it's like, I'm just gonna dumped you my last meet. That felt okay, no, that's not value, like, frame it, help it put it in.
John Vrionis 42:03
And have a plan. Right, Brian? I mean, I would say that you, despite the problems, you always had a suggestion or a plan that you wanted feedback on as opposed to just venting. One other thing, I'm conscious of time, so I do. But I also wanted to say that I would often bring Brian my problems. You know, sometimes it's nice to think about other people's problems as just a little bit of a respite. And so I always valued, you know, an opportunity to kind of say, Hey, Brian, and these other companies are struggling with these things. What do you think? And anyway, it just made it more of a two-way dynamic.
Brian NeSmith 42:36
I have a story, not from Arctic Wolf, but from a sicko venture investor. I should probably give him credit, because I quote him all the time to other entrepreneurs that come to me, like John Fiber who retired. The company before that wasn't really playing out, same sort of thing. And so we had a board meeting, the A, B, and C, nobody wanted C, it was clear the board wanted B and the management team wanted in this conversation. You know, after a while, you realize you're talking in circles. So we said I called a break, I went walking down the hall with John and he looked at me and said I just want to be clear that if you choose A and it doesn't work out, you're gonna get fired. And first time CEO is a little bit taken aback, what am I going to do? And then he will dramatically pause and he goes, but if you choose, you know, option B, it doesn't work out, you're gonna get fired anyway. And his basic point, and I think this is something I tell him all the time is, you know, because it's your industry it's doing, you have to be willing to get fired. And I'm not saying you got to behave in a bad way. But you gotta be willing to stand by your convictions and present the case and do it and I had another situation with a very well known persona in the industry that was on my board and a plan for me, that I categorically disagreed with. And I said, I'm not going to do that. And they ultimately resigned from the board, it was a bit of a hit for us. But those are all kind of that developing that inner strength and the conviction in your thoughts being open minded, but you're still like, even if the board tells you to do x and it doesn't work out, it's still going to be your fault as the CEO so I'd leave you with that advice, which is listen to your call and you need to live by it.
Sandhya Hedge 44:31
Awesome. Well, on those awesome words of advice, we'll wrap this episode up. Thank you so much for spending time with us Brian and it was really lovely to see you and John take time to kind of share all these learnings from 10 years of this relationship, navigating, you know, the extreme rocket ship journey of particles Network. It was a real joy learning about it from both of you. Thank you so much.
Brian NeSmith 45:04
Thank you.
John Vrionis 45:05
Thank you Sandhya.
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