1 00:00:00,110 --> 00:00:04,720 Goon: All right. This is going to be the meet the VC panel. FYI there are two mics 2 00:00:04,720 --> 00:00:07,990 there. If you have any questions when it's Q&A by direction here, please go to one of 3 00:00:07,990 --> 00:00:13,049 the mics. Cool. Let's give them a big hand. (Applause). 4 00:00:13,049 --> 00:00:20,049 JOHN HERING: Cool. So I'm John Hering. I work at a company called Lookout. Lookout 5 00:00:23,430 --> 00:00:27,230 does mobile security. We actually started here at DEF CON. After a number of years of 6 00:00:27,230 --> 00:00:30,870 doing research and spending time here in the community, we were able to build a business 7 00:00:30,870 --> 00:00:34,440 and ended up raising venture capital. So we thought it would be interesting sharing our 8 00:00:34,440 --> 00:00:38,870 stories and getting to know some of the top venture capitalists. 9 00:00:38,870 --> 00:00:43,050 Maybe we can introduce ourselves, starting with you, JJ. 10 00:00:43,050 --> 00:00:50,050 JOHN JACK: Hello. My name is John Jack. I go by JJ. Clever. I was the CEO of a security 11 00:00:51,420 --> 00:00:57,130 company called Fortify Software, which was security at the application level. We were 12 00:00:57,130 --> 00:01:02,110 one of the pioneers in that space at least in terms of commercializing a lot of work 13 00:01:02,110 --> 00:01:07,560 that had been done prior to us starting the company. 14 00:01:07,560 --> 00:01:13,400 We grew that company fairly well. Became the standard in financial institutions, governments, 15 00:01:13,400 --> 00:01:20,040 telcos and actually the standard in commercial software providers, people like Oracle and 16 00:01:20,040 --> 00:01:26,940 SAP and EMC all used this product in order to root out vulnerabilities in the software 17 00:01:26,940 --> 00:01:32,360 that they delivered to their customers. That company was acquired by Hewlett Packard 18 00:01:32,360 --> 00:01:39,360 in 2010. Previous to that I was CEO of a couple other companies. One we sold to VMware. One 19 00:01:40,600 --> 00:01:47,600 we sold to a company called Corporate Data. And now I work part time with a VC firm called 20 00:01:51,150 --> 00:01:57,049 Andreessen Horowitz. We have a number of investments in security. 21 00:01:57,049 --> 00:02:02,960 And I also part time do some consulting and serve as an independent Director on other 22 00:02:02,960 --> 00:02:09,960 venture backed companies. Thank you. MATT OCKO: Hi. I'm Matt Ocko. I very unglamorously 23 00:02:12,090 --> 00:02:19,090 go by Matt. I'm the co-founder and co-managing partner of a firm called Data Collective. 24 00:02:20,370 --> 00:02:27,020 We like doing deep, dark, difficult stuff that most of our venture colleagues ironically, 25 00:02:27,020 --> 00:02:33,010 except for the guys on this panel, disdain or don't understand. It's where we've made 26 00:02:33,010 --> 00:02:40,010 most of our money. It seems to be a reasonable thesis across 220 companies over nearly 25 27 00:02:42,319 --> 00:02:49,190 years we've had fewer than 20 losses and we've made our entrepreneurs about $30 billion net 28 00:02:49,190 --> 00:02:56,190 of boom, bust, IRS, you name it. I think some of the distinguishing characters 29 00:02:59,269 --> 00:03:04,459 of our firm that may be a little unusual is that three out of the four partners still 30 00:03:04,459 --> 00:03:11,440 read and write code. Still understand chip design. If you show me a 10 million gig design 31 00:03:11,440 --> 00:03:18,440 and are lying to me about the clock tree, I will know. And we've really enjoyed doing 32 00:03:18,440 --> 00:03:24,610 really fundamental stuff. We're the seed investors in XenSource and very early on in VeriSign 33 00:03:24,610 --> 00:03:30,310 a number of companies in the security space are important parts of Google and VMware and 34 00:03:30,310 --> 00:03:35,140 Facebook and some other demanding customers around the world. And we love this stuff and 35 00:03:35,140 --> 00:03:39,860 I'm very happy to be here today. PING LI: Good afternoon. I'm Ping Li, a 36 00:03:39,860 --> 00:03:46,860 partner at Accel. Been doing venture investment for about ten years now, brought Accel over 37 00:03:48,950 --> 00:03:55,950 from the see stage to the growth stage. Offices over in the U.S., Silicon Valley, London, 38 00:03:56,930 --> 00:04:02,159 China and India. Our goal is always to find exciting entrepreneurs that are trying to 39 00:04:02,159 --> 00:04:06,489 build category defining companies and been investing in security for quite some time 40 00:04:06,489 --> 00:04:11,260 and this is just one of many companies we work with. 41 00:04:11,260 --> 00:04:18,260 DEEPAK JEEVANKUMAR: Hi I'm Deepak Jeevankumar from General Catalyst Partners. Okay. We are 42 00:04:21,979 --> 00:04:26,159 an early stage and late stage venture capital firm with $2.5 billion under management and 43 00:04:26,159 --> 00:04:31,469 we have bagged companies under multiple industries including cyber-security some investments 44 00:04:31,469 --> 00:04:38,469 are Kayak, Caribbean Bay, Stripe, Snapchat. And we also have not shied away from hard 45 00:04:43,009 --> 00:04:47,240 technology investment. So actually I used to share an investment 46 00:04:47,240 --> 00:04:53,599 called BBN technologies where the early Internet research was done and one of our companies 47 00:04:53,599 --> 00:05:00,339 called reveal imaging are hardware for bomb scanners and only one customer called TSA 48 00:05:00,339 --> 00:05:06,569 so personally I started writing code when I was about 7 or 8 years old I don't remember 49 00:05:06,569 --> 00:05:11,479 now and first one was logo I don't know if you ever used logo before. 50 00:05:11,479 --> 00:05:18,249 And I have hacked quite a bit and I think I was lucky to be involved in two of the largest 51 00:05:18,249 --> 00:05:24,319 super computing projects I was an architect on those projects in human history. So happy 52 00:05:24,319 --> 00:05:31,319 to share. And happy to --> I hope we can convince more of you to become entrepreneurs in cyber-security. 53 00:05:31,580 --> 00:05:35,430 So it's interesting this is my 11th year at DEF CON I can tell you when I first started 54 00:05:35,430 --> 00:05:40,969 coming it's not something I would expect to see venture capitalists at DEF CON it's definitely 55 00:05:40,969 --> 00:05:45,339 changed a lot as time has gone on just the interest from a mainstream capacity and cyber-security 56 00:05:45,339 --> 00:05:50,849 in general has changed a lot as this technology has touched the fabric of society and peoples 57 00:05:50,849 --> 00:05:56,240 everyday life I'm curious what are you guys looking for I'm sure people in the audience 58 00:05:56,240 --> 00:06:00,099 are curious as they are building projects and whatnot what will it take to be funded 59 00:06:00,099 --> 00:06:04,229 by a venture capitalists what are the types of things when you're looking for a security 60 00:06:04,229 --> 00:06:08,150 investment and looking for --> looking for people at a conference like this? 61 00:06:08,150 --> 00:06:15,150 Okay. We're still going in reverse order. Because it says No. 4 here. 62 00:06:18,069 --> 00:06:25,069 So I would not --> I won't address the technical side of it because my background I think you 63 00:06:25,189 --> 00:06:30,349 can tell from the introduction is not --> I'm not a super --> I'm not a hacker despite the 64 00:06:30,349 --> 00:06:37,349 shirt that I proudly wear. I can tell you that I would say two things 65 00:06:37,360 --> 00:06:43,029 in terms of what do we look for in a security investment. I mean, the first is obviously 66 00:06:43,029 --> 00:06:50,029 we look for something that has a wide applicability so that the market opportunity is big. 67 00:06:50,129 --> 00:06:55,429 And if you take --> if you think about how you can leverage a large market opportunity, 68 00:06:55,429 --> 00:07:01,580 one of the key things is: Are you leveraging something beyond just a security solution? 69 00:07:01,580 --> 00:07:07,129 So a lot of security solutions are frankly point solutions to address a tough problem 70 00:07:07,129 --> 00:07:09,809 in security. And you can make some nice companies out of 71 00:07:09,809 --> 00:07:13,219 that. But if you're also leveraging another major 72 00:07:13,219 --> 00:07:19,039 trend, so for example, enterprises moving to the cloud and cloud-based applications, 73 00:07:19,039 --> 00:07:23,899 so one of the investments we made at Andreessen Horowitz in which I'm on the Board is called 74 00:07:23,899 --> 00:07:30,899 CipherCloud and what CipherCloud does is essentially allow people who use sales force and Office 75 00:07:31,349 --> 00:07:37,839 365 and Gmail and box and other cloud-based applications, it allows them to secure the 76 00:07:37,839 --> 00:07:43,319 data that's in the cloud such that if a Government organization sites the Patriot Act and says 77 00:07:43,319 --> 00:07:49,300 to sales force give us all of the data for XYZ company the data is encrypted it won't 78 00:07:49,300 --> 00:07:54,309 be meaningful so it's therefore protected when you're in a heavy regulated industry 79 00:07:54,309 --> 00:07:59,439 that's something you need to address so there's a company that's not only solved a security 80 00:07:59,439 --> 00:08:06,439 issue but is also leveraging a broader trend in technology which is people moving workloads 81 00:08:07,919 --> 00:08:11,610 from on premise into the cloud in one form or another. 82 00:08:11,610 --> 00:08:18,610 So that's an example of looking at an opportunity that might be bigger than just a purpose-built 83 00:08:21,860 --> 00:08:28,860 specific solution to a security problem. The other thing I would say is we look for really 84 00:08:31,050 --> 00:08:38,050 smart entrepreneurs that are super motivated. That really have a lot of drive, a lot of 85 00:08:41,029 --> 00:08:47,509 ambition and really want to be successful. And so when you put those two together, you 86 00:08:47,509 --> 00:08:54,269 have kind of a winning formula. So I think John makes an excellent point. 87 00:08:54,269 --> 00:09:00,930 Big markets are important. But in a number of the investments that we've done, some of 88 00:09:00,930 --> 00:09:07,930 which actually ended up being co-investments with Ping's team at Accel or John's team at 89 00:09:08,449 --> 00:09:15,449 Andreessen is as they went through the end of their seed stage or into later stages, 90 00:09:15,940 --> 00:09:21,250 are distinguished by not addressing a big market today. 91 00:09:21,250 --> 00:09:28,250 So you know half the Fortune 500 runs or more than half --> 90% of the Fortune 500, 95% runs 92 00:09:30,740 --> 00:09:37,740 these village anti-virus systems. That's a big market you can say hey, 10 bucks on every 93 00:09:39,399 --> 00:09:44,800 aging desktop PC for the U.S. and other G7 countries. It's a big market. 94 00:09:44,800 --> 00:09:50,170 We have no interest in that. We are interested in the stuff that's going to cause a CIO or 95 00:09:50,170 --> 00:09:57,170 a CSO to in a late stage adopter company three years from now to panic and say: I must have 96 00:09:59,680 --> 00:10:06,680 this at all cost. Because one of the dark but unspoken truisms in venture capital is 97 00:10:08,939 --> 00:10:12,449 anything worth doing actually takes a long time. 98 00:10:12,449 --> 00:10:14,689 And all of these sort of -- (Applause). 99 00:10:14,689 --> 00:10:20,439 MATT OCKO: Huge fantasy outcomes that are celebrated as overnight successes or inevitable 100 00:10:20,439 --> 00:10:27,439 successes like a Google, actually took 7 or 8 years of really hard work. Things like Nacera 101 00:10:33,310 --> 00:10:38,740 to Andreessen for having the foresight to invest in that are kind of random events. 102 00:10:38,740 --> 00:10:43,000 So when you're building a product, it's doing something meaningful. By the time you've got 103 00:10:43,000 --> 00:10:47,910 it polished and by the time somebody is going to pay you actually gives a crap it's been 104 00:10:47,910 --> 00:10:52,800 a couple of years, maybe more. So you're looking at stuff that will motivate 105 00:10:52,800 --> 00:10:57,629 a customer today you've already put yourself out of the running. 106 00:10:57,629 --> 00:11:03,480 So to do that, to John's point, takes incredible intestinal fortitude. It takes people who 107 00:11:03,480 --> 00:11:09,000 can solve difficult multidimensional problems about how to run their company and keep their 108 00:11:09,000 --> 00:11:14,550 team happy and keep their customers happy all at the same time on limited amounts of 109 00:11:14,550 --> 00:11:21,480 money. And because you're doing for the gusto for some of you in the future, it takes incredible 110 00:11:21,480 --> 00:11:28,480 tech jobs. So everybody on this panel is motivated not to invest in me too tech even if it's 111 00:11:29,019 --> 00:11:34,569 looking three years out or something undifferentiated. We want to see stuff that has sustainable 112 00:11:34,569 --> 00:11:41,569 competitive advantage. So two interesting examples. 113 00:11:41,670 --> 00:11:48,670 We're in a company called Sentinel. We did with Ping's crew at Accel. Those guys are 114 00:11:54,540 --> 00:11:59,509 stemming a lot of existing security assumptions on its head. They are doing something very, 115 00:11:59,509 --> 00:12:04,499 very interesting that actually produces deterministic results for important stuff and runs only 116 00:12:04,499 --> 00:12:07,790 in user space they don't hook through kernel at all. 117 00:12:07,790 --> 00:12:13,509 I was astonished. I didn't believe it. It took me a long time to understand it. But 118 00:12:13,509 --> 00:12:18,180 it's light years ahead of anything else out there. That was worth doing. We're in a company 119 00:12:18,180 --> 00:12:23,579 with John and his team at A16Z called the Lumio that's doing things that people said 120 00:12:23,579 --> 00:12:30,579 was impossible to enforce security for fungible workloads in the cloud. 121 00:12:32,019 --> 00:12:35,850 And by the way, John, I think it's fair to say that when those guys started doing that, 122 00:12:35,850 --> 00:12:41,310 most people were disdainful that real corporate compute workloads would move to the cloud. 123 00:12:41,310 --> 00:12:47,629 So anyway, I hope that's useful. Yeah the one he point I would echo that 124 00:12:47,629 --> 00:12:51,410 matches that is --> I would --> some of the security markets that become really large 125 00:12:51,410 --> 00:12:56,560 aren't obvious at first and China the great entrepreneurs are the ones that kind of see 126 00:12:56,560 --> 00:13:01,639 around the corner I remember when we first invested in John's company, John Hering's 127 00:13:01,639 --> 00:13:07,420 company years ago around mobile security the Android phone didn't really exist. The iPhone 128 00:13:07,420 --> 00:13:11,920 was just shifting. It wasn't obvious there was going to be any security problems with 129 00:13:11,920 --> 00:13:16,860 the mobile phone at the time. And having that foresight to be that ahead of the market and 130 00:13:16,860 --> 00:13:22,579 understanding where the hackers are going to be I think is a real set of instincts we 131 00:13:22,579 --> 00:13:27,279 look for. Security is particularly hard to invest in because it's an arm's race every 132 00:13:27,279 --> 00:13:31,639 time somebody comes to our office with a great idea there's ten hackers out there with a 133 00:13:31,639 --> 00:13:36,699 better idea that's going to get around his great idea so you really have to find entrepreneurs 134 00:13:36,699 --> 00:13:41,360 that we found that really have been coming to DEF CON for it the last X number of years 135 00:13:41,360 --> 00:13:46,029 they have to be on the cutting edge of whatever the hacker community is thinking about and 136 00:13:46,029 --> 00:13:51,379 pushing the envelope on and that's really hard to find. Folks that actually understand 137 00:13:51,379 --> 00:13:55,970 the problem but also understand the opportunity to build a company around that intersection 138 00:13:55,970 --> 00:14:00,520 is really rare and that's kind of what we look for in security. 139 00:14:00,520 --> 00:14:07,520 I totally agree with most of those points. The one thing I would like to add is we are 140 00:14:09,749 --> 00:14:13,589 at the intersection of three major trends at the same time in the history of Computer 141 00:14:13,589 --> 00:14:18,629 Science and technology, mobile, Cloud Computing and big data. A lot of people have written 142 00:14:18,629 --> 00:14:23,819 about this. But what that means is that they are going to see multidimensional security 143 00:14:23,819 --> 00:14:30,319 problems they have never seen before. So it is an amazingly good time to be starting to 144 00:14:30,319 --> 00:14:36,269 think about innovations in cyber-security. Actually yesterday I saw an article on cyber-security 145 00:14:36,269 --> 00:14:42,819 for the app economy but the point I make is that we have to make tools that are faster 146 00:14:42,819 --> 00:14:46,870 and more better than things that they have seen before. Because of its multidimensional 147 00:14:46,870 --> 00:14:53,870 things that existed in terms of entrepreneurs that we look for specifically, No. 1 you need 148 00:14:55,860 --> 00:14:59,790 to be great evangelists of your product without overselling it. 149 00:14:59,790 --> 00:15:06,790 Then No. 2 is you should have the ability to look around market changes because markets 150 00:15:06,850 --> 00:15:12,209 do change human behavior changes very rapidly than what we think it does. 151 00:15:12,209 --> 00:15:16,459 Then and to Ping's point you need to be best of breed in what you do and you need to stand 152 00:15:16,459 --> 00:15:22,189 the test of your peer groups who are almost as good as you or even better than you. 153 00:15:22,189 --> 00:15:29,189 John, if I might, I guess broadly speaking, everybody in this audience is kind of in the 154 00:15:31,009 --> 00:15:38,009 cat-bird seat for building a company because as much as Fluffy consumer companies get love 155 00:15:40,550 --> 00:15:47,189 and attention and big valuations, that's actually not where the real money is. 156 00:15:47,189 --> 00:15:53,519 And everybody in this room is probably aware of somewhere between a mini to a full-scale 157 00:15:53,519 --> 00:16:00,519 security Holocaust that's in process. I mean, I'm pretty convinced that RSA up to 158 00:16:01,009 --> 00:16:08,009 512 bits is irretrievably broken. Which means every bank and web server in DNS out there 159 00:16:08,300 --> 00:16:13,199 is effectively vulnerable right now. I would say that's a pretty large problem. And the 160 00:16:13,199 --> 00:16:18,069 only alternative --> you know I mean there aren't alternatives. The only practical one 161 00:16:18,069 --> 00:16:25,069 is stuck rotting away inside of RIM. So there's a giant $10 billion company right there that 162 00:16:25,209 --> 00:16:30,910 I don't see anybody doing right now. You know, people are fantasizing about the 163 00:16:30,910 --> 00:16:36,860 so-called Internet of Things. I can't even leave my Bluetooth on here because I really 164 00:16:36,860 --> 00:16:43,860 prefer not to pay for you guys' next vacation. And so everything from my future pacemaker 165 00:16:45,540 --> 00:16:52,160 to the electric meter on my house to the thing that orders food for my kids and my refrigerator 166 00:16:52,160 --> 00:16:58,980 circuit 2020 is going to be produced by the same ass clowns that can't even have effective 167 00:16:58,980 --> 00:17:05,800 security on my phone? (Applause). 168 00:17:05,800 --> 00:17:10,520 So I mean, John asked a really good question: What are we looking for? Well the answer is 169 00:17:10,520 --> 00:17:15,659 we're looking for you guys to step up much as John did when everybody was pretty smug 170 00:17:15,659 --> 00:17:21,490 about the state of mobile security, shocked the hell out of us and produced a giant solution 171 00:17:21,490 --> 00:17:27,270 to a giant problem that nobody was thinking about. And also I would really to --> like 172 00:17:27,270 --> 00:17:31,799 to not pay for your next vacation in the process. I turned off my Bluetooth. 173 00:17:31,799 --> 00:17:36,629 Well I remembered to turn off mine about an hour ago. 174 00:17:36,629 --> 00:17:40,740 Let me ask the audience a question. You meet lots of people working on super interesting 175 00:17:40,740 --> 00:17:47,010 projects many of which can be intellectually interesting but many times won't end up being 176 00:17:47,010 --> 00:17:50,210 a business of the scale we talked about of billions of dollars doesn't mean it's not 177 00:17:50,210 --> 00:17:54,950 interesting when does it make sense not to raise venture capital from someone like yourselves 178 00:17:54,950 --> 00:18:00,130 how do you think about the difference between the types of things you would actually want 179 00:18:00,130 --> 00:18:03,980 to fund and the types of things someone might want to turn into a business or doesn't make 180 00:18:03,980 --> 00:18:09,870 sense to talk to you guys. Are we pushing or popping the stack. 181 00:18:09,870 --> 00:18:15,690 We're pushing. I'll try to be as brief as I can. There's 182 00:18:15,690 --> 00:18:22,120 a concept in finance called net present value. How many of you guys are familiar with that? 183 00:18:22,120 --> 00:18:28,110 Awesome. That's a disturbingly well educated hacker crowd. 184 00:18:28,110 --> 00:18:35,110 So the dirty secret or the other dirty secret of venture capital is that your MPV utility 185 00:18:38,279 --> 00:18:45,279 curve and the VC's MPV utility curve is diverge pretty rapidly. So thanks to a feature of 186 00:18:48,250 --> 00:18:53,799 preferred stock investment, most VCs get the right to keep investing in your company every 187 00:18:53,799 --> 00:18:58,380 time you take money. Which means as long as we have deep enough pockets, our stake doesn't 188 00:18:58,380 --> 00:19:01,399 go down and it may in fact go up a little bit. 189 00:19:01,399 --> 00:19:08,399 Your slice of the pie as more new dollars pour in is in effect reduced over time as 190 00:19:09,220 --> 00:19:13,450 you continue to build a company. So if you build a really giant company and 191 00:19:13,450 --> 00:19:19,770 you and your founding team own 10%, and you sell it for a billion dollars after ten years, 192 00:19:19,770 --> 00:19:26,720 that's $100 million that seems like a pretty good outcome but if you own 80% of your company 193 00:19:26,720 --> 00:19:32,610 and you sell it for $100 million two years into it, that's $80 million. 194 00:19:32,610 --> 00:19:39,610 So you would have had a better MPV selling earlier than later for a supposedly more impressive 195 00:19:40,559 --> 00:19:44,500 number. And when you factor in risk, building billion 196 00:19:44,500 --> 00:19:51,500 dollar outcomes is really freaking hard. You're definitely better off selling for 80 million 197 00:19:51,940 --> 00:19:57,070 bucks in two years now that's also --> that magic outcome is hard to do and I'm picking 198 00:19:57,070 --> 00:20:04,070 deliberately simplistic examples. But when you are pretty sure that you have a point 199 00:20:04,690 --> 00:20:10,380 solution I think as John referred to that solves a really difficult problem that's quote-unqoute 200 00:20:10,380 --> 00:20:17,380 awesome family business makes 10 or $15 million a year with great cash flow for you and your 201 00:20:18,299 --> 00:20:24,649 friends. That's probably not a business that you want to take venture capital for. There's 202 00:20:24,649 --> 00:20:30,220 no reason for you guys to dilute yourselves. If you need money take angel money keep 80% 203 00:20:30,220 --> 00:20:37,220 of your equity and when one of the big bruisers panics and real ice they need this solution 204 00:20:38,179 --> 00:20:42,419 pays you a million bucks laugh all the way to the bank if you are doing one of these 205 00:20:42,419 --> 00:20:49,419 global platforms that John and Ping alluded to, the kind of thing I alluded to like replacing 206 00:20:50,440 --> 00:20:55,779 all of RSA then you probably need venture capital, you probably need people who have 207 00:20:55,779 --> 00:21:00,630 been through it before whether they are CEOs like John or other former operating guys like 208 00:21:00,630 --> 00:21:07,429 Ping to help you build that gigantic business so that's kind of how I see the world. 209 00:21:07,429 --> 00:21:14,049 I'll give two examples to kind of put a point to what Matt is saying. The answer isn't 210 00:21:14,049 --> 00:21:19,470 always venture capital. You know, we are currently an investor for a company called Tenebel (phonetic). 211 00:21:19,470 --> 00:21:26,070 A guy that created Nexus and that company was bootstrapped by the founders for I think 212 00:21:26,070 --> 00:21:30,860 five, six years before we even put any money into the company it was profitable growing 213 00:21:30,860 --> 00:21:37,860 very rapidly Nexus is a very popular scanning tool they didn't need the money because the 214 00:21:37,960 --> 00:21:42,630 business could fund itself and they didn't need someone like myself because they knew 215 00:21:42,630 --> 00:21:46,250 they didn't need those resources in the network to grow their business. It was growing very 216 00:21:46,250 --> 00:21:48,690 fine. And then in the last year or so they decided 217 00:21:48,690 --> 00:21:53,909 they saw a larger opportunity around going global but extending the product line whether 218 00:21:53,909 --> 00:21:58,970 they need additional capital more importantly they needed a partner that knew and had experience 219 00:21:58,970 --> 00:22:03,500 in expanding the business in ways they hadn't expanded before so the decision to make and 220 00:22:03,500 --> 00:22:07,250 take venture capital was less about the money since the business is profitable but more 221 00:22:07,250 --> 00:22:13,260 about the expertise and value add a partner can bring. In the case of John Hering's lookout 222 00:22:13,260 --> 00:22:18,269 it was very different obviously from the very beginning they were going after exploiting 223 00:22:18,269 --> 00:22:22,690 market in the mobile security space where speed to market, time to market and getting 224 00:22:22,690 --> 00:22:28,750 out ahead of the mobile platform which is getting innovated by Google and Apple was 225 00:22:28,750 --> 00:22:33,440 a precondition they had to deal with on Day 1 where venture capital was needed to accelerate 226 00:22:33,440 --> 00:22:37,960 the business and also helping to scale the team and doing a lot of other things around 227 00:22:37,960 --> 00:22:43,590 company building was needed Day 1 so I think it all really depends I don't believe for 228 00:22:43,590 --> 00:22:47,330 the majority of the businesses out there that you require venture capital. 229 00:22:47,330 --> 00:22:51,309 I think it's something that you should look at deeply before you take money. Because as 230 00:22:51,309 --> 00:22:57,230 Matt says, once you take money from another partner, it's a partnership and it's not a 231 00:22:57,230 --> 00:23:02,250 sole proprietorship anymore and I think that's a big transition so I think it really depends 232 00:23:02,250 --> 00:23:06,909 on the opportunity and what you want to do. If I could jump in, I think Ping makes 233 00:23:06,909 --> 00:23:13,909 a great point that sometimes there's a perception of what venture capital is you get money and 234 00:23:14,429 --> 00:23:18,950 then the VC comes to your Board meeting hoping you're doing well. 235 00:23:18,950 --> 00:23:21,179 We do that, too. (Chuckles). 236 00:23:21,179 --> 00:23:28,179 That -- You really do --> in the early stages, if 237 00:23:28,470 --> 00:23:35,470 you are --> if you do decide to accept venture funding, you really do need to look for a 238 00:23:35,490 --> 00:23:40,679 partner. You really do need to look for a firm that has people and services that will 239 00:23:40,679 --> 00:23:46,740 add value to what you're trying to do these firms you see up here have done a lot of work 240 00:23:46,740 --> 00:23:53,429 in security obviously we all have resources that helps you be successful. At Andreessen 241 00:23:53,429 --> 00:24:00,429 Horowitz we have the executive briefing center that John knows about that we bring in chief 242 00:24:00,440 --> 00:24:06,279 security officers and Government officials and all sorts of people on a weekly basis 243 00:24:06,279 --> 00:24:13,029 and bring in our portfolio companies and they get to present to people even before they 244 00:24:13,029 --> 00:24:20,029 have released the product to test the market for their idea and as they mature like John's 245 00:24:20,039 --> 00:24:27,039 company has, they get to talk to real buyers of the solution and that's a real big service 246 00:24:27,510 --> 00:24:33,690 that for example Andreessen Horowitz we bring for our entrepreneurs. 247 00:24:33,690 --> 00:24:39,730 So to Ping's point you really do want to pick a partner that's often both the firm and the 248 00:24:39,730 --> 00:24:46,730 individual partner at the firm that's going to be your chief liaison and help you grow 249 00:24:47,200 --> 00:24:52,100 the company. And actually, I want to chime in and amplify 250 00:24:52,100 --> 00:24:58,289 John's point. It's not just the firm. It's not brand. 251 00:24:58,289 --> 00:25:04,210 There's a company that John and I actually have in common that is desired right now by 252 00:25:04,210 --> 00:25:11,210 a lot of people in the venture capital community. And they met with one of the very senior guys 253 00:25:11,850 --> 00:25:18,850 at one of the top ten firms in the world. Every Fortune, Forbes article, you know, New 254 00:25:20,789 --> 00:25:26,950 York Times Wall Street you know TechCrunch, however you want to view external validation 255 00:25:26,950 --> 00:25:33,950 the firms had it and to some extent this guy had it as well and he was such an arrogant 256 00:25:35,700 --> 00:25:42,700 dickhead in the meeting that the entrepreneur said not only will this guy be helpful whatever 257 00:25:43,840 --> 00:25:50,840 giant a check he wants to write but he'll be actively harmful. And by contract and in 258 00:25:51,399 --> 00:25:58,399 credit to JJ the entrepreneur said look what I want is somebody like JJ who is an operating 259 00:25:59,409 --> 00:26:03,539 guy, he has done real good stuff who has been through good times and bad guys and can help 260 00:26:03,539 --> 00:26:08,380 me move a little further down the road basically said I want another partner because I'm stuck 261 00:26:08,380 --> 00:26:15,380 in the boat with this person for ten years. And you know Ping and his team are successful 262 00:26:16,149 --> 00:26:22,690 in this because they act like partners. And the entrepreneurs we fund early on like both 263 00:26:22,690 --> 00:26:28,029 of these firms because they are happy with them we are still waiting for Deepak to start 264 00:26:28,029 --> 00:26:35,029 writing checks. So it's the a gentle nudge. We have a few for you, buddy. 265 00:26:35,470 --> 00:26:42,470 Let me frame this problem as an entrepreneur the odds of failure are higher than success. 266 00:26:46,990 --> 00:26:52,720 Every step you take every meeting you go to, everyone you talk to should be able to increase 267 00:26:52,720 --> 00:26:56,929 the odds of success. There's a fundamental underpinning here so 268 00:26:56,929 --> 00:27:02,039 all of the venture firms I can say largely speaking are --> they help you to increase 269 00:27:02,039 --> 00:27:07,750 the odds of success through introductions to the top CIOs and CSOs helping to find the 270 00:27:07,750 --> 00:27:13,049 right mentors for you finding a mentor is really, really important never underrate that 271 00:27:13,049 --> 00:27:18,279 so I think some of the top VC funds can help you do that. 272 00:27:18,279 --> 00:27:25,279 The other thing is when do you not take a venture capital money to your question. If 273 00:27:25,490 --> 00:27:30,220 the business has low risk for example one small check we do is can I bank --> can a bank 274 00:27:30,220 --> 00:27:37,220 lend to this company for expanding their business? Definitely not. Then it's not a VC investment. 275 00:27:37,830 --> 00:27:42,610 We look for really high risk investments that need to grow really fast banks look for low 276 00:27:42,610 --> 00:27:48,019 risk investments that don't grow that fast typically venture capital will help you go 277 00:27:48,019 --> 00:27:54,590 from 0 to 100 million in three to four years in that situation venture capital money is 278 00:27:54,590 --> 00:27:59,220 a good fit. So maybe I can share a quick story for 279 00:27:59,220 --> 00:28:04,029 those who might be interested and are thinking about starting companies. On the flip side 280 00:28:04,029 --> 00:28:09,539 of all of this, too, is you can hear an infinite amount of nos but you only need to hear yes 281 00:28:09,539 --> 00:28:14,080 once and it's really important to keep that in mind I remember vividly when we were first 282 00:28:14,080 --> 00:28:19,440 getting off the ground we were doing obscure wireless research and a lot of mobile stuff 283 00:28:19,440 --> 00:28:23,779 and there was not a lot of interest in what we were doing at first Ping wrote us a check 284 00:28:23,779 --> 00:28:29,570 and a few of our early angels did but most of our investors we pitched didn't understand 285 00:28:29,570 --> 00:28:35,820 what we were doing at all. And it's really easy to get depressed when you're running 286 00:28:35,820 --> 00:28:39,870 around trying to raise money and everyone is telling you you are basically an idiot 287 00:28:39,870 --> 00:28:44,269 but having the fortitude to continue on I think is one of the greatest lessons I've 288 00:28:44,269 --> 00:28:48,080 ever learned in raising venture capital and it never gets easier. 289 00:28:48,080 --> 00:28:53,059 You just get better. And hopefully the market is on your side. But I vividly remember I 290 00:28:53,059 --> 00:28:57,779 don't know if --> sometimes it takes the irrational -- like reasonable people will work on reasonable 291 00:28:57,779 --> 00:29:02,450 problems but consensus accurate predictions never yield outside results really important 292 00:29:02,450 --> 00:29:07,929 to understand the outliers come from things that aren't obvious and unreasonable people 293 00:29:07,929 --> 00:29:11,059 will work on unreasonable problems thus you probably need to be pretty unreasonable to 294 00:29:11,059 --> 00:29:18,059 do something amazing this guy Vinod can be an unreasonable dude and he's very brilliant 295 00:29:19,549 --> 00:29:23,950 founded Sun Microsystems I'll never forget we were pitching him everyone had been telling 296 00:29:23,950 --> 00:29:27,730 us no and halfway through the meeting he's like I've heard enough and I'm like shit he's 297 00:29:27,730 --> 00:29:34,250 going to throw us out this is horrible he's like I'm in what is --> he wrote us a $5 million 298 00:29:34,250 --> 00:29:39,700 check I never experienced anything like that after hearing 50 nos and something like that 299 00:29:39,700 --> 00:29:45,039 happens not long after that Accel got involved and the company started to take off and there's 300 00:29:45,039 --> 00:29:49,700 definitely a world where this company would never have existed if we didn't keep going 301 00:29:49,700 --> 00:29:53,740 not because we were there to make money or build a business but because we love what 302 00:29:53,740 --> 00:30:00,740 we do there's 140 people at DEF CON from Lookout we're a much bigger company it's who we are 303 00:30:01,120 --> 00:30:05,039 nothing has changed even though we're a lot bigger that's really exciting to me and so 304 00:30:05,039 --> 00:30:08,639 I think it's something really important to think about as everyone here starts businesses 305 00:30:08,639 --> 00:30:13,610 the foundation is passion and it's a lot about having the fortitude to keep going. 306 00:30:13,610 --> 00:30:19,769 So my question for this group is: How do you think about spotting the non-obvious investments? 307 00:30:19,769 --> 00:30:23,970 Like when you see deals that you're willing to make a non-obvious investment in. I'm curious 308 00:30:23,970 --> 00:30:28,720 Ping I know you've done a bunch of these what are the things you look for in an entrepreneur 309 00:30:28,720 --> 00:30:31,690 when you're willing to make a bet that seems really out there. 310 00:30:31,690 --> 00:30:38,210 PING LI: I think the non--- at least the way we think about Accel the venture guys 311 00:30:38,210 --> 00:30:45,120 don't come up with the ideas. We never confuse ourselves with the entrepreneurs. What we 312 00:30:45,120 --> 00:30:50,590 look for is for the entrepreneurs to provide that inspiration it really is from going out 313 00:30:50,590 --> 00:30:54,440 and talking to as many entrepreneurs as you can. The reason I'm at DEF CON isn't because 314 00:30:54,440 --> 00:31:00,970 I'm going to win any hack competition or anything like that. It's because I can spend time with 315 00:31:00,970 --> 00:31:05,580 what I think are really smart people that are thinking about things 10, 15 steps ahead 316 00:31:05,580 --> 00:31:10,679 of what I'm thinking about. And our job as venture guys is just identify 317 00:31:10,679 --> 00:31:16,039 there's people that have those insights so it's the really in some ways I always say 318 00:31:16,039 --> 00:31:21,740 the best entrepreneurs are the ones that convince me that doing the impossible is actually possible 319 00:31:21,740 --> 00:31:26,259 because we sit there every day and see hundreds of ideas and there's thousands of things wrong 320 00:31:26,259 --> 00:31:30,139 with the ideas but there's always one entrepreneur that comes through the door for some reason 321 00:31:30,139 --> 00:31:36,309 every question you have him or her the answer comes back in such a way like this guy might 322 00:31:36,309 --> 00:31:42,000 actually pull this off that's actually really possible what he just said and no matter how 323 00:31:42,000 --> 00:31:46,860 you poke and prodded them they thought through every single angle of the problem. I can't 324 00:31:46,860 --> 00:31:52,000 tell you how thoughtful the entrepreneurs are that we back in whatever space they are 325 00:31:52,000 --> 00:31:55,909 in it could be big data clout security mobile they have literally thought through every 326 00:31:55,909 --> 00:32:02,029 single possible permutation from the problem from the customer angle to the business model 327 00:32:02,029 --> 00:32:07,840 every single angle that's what gives us conviction not to say they have all the answers but thought 328 00:32:07,840 --> 00:32:13,080 through the problems and the questions that's how we find ourselves backing entrepreneurs 329 00:32:13,080 --> 00:32:17,759 oftentimes in spaces we didn't have any idea we knew anything about before we wrote for 330 00:32:17,759 --> 00:32:24,440 that entrepreneur. I would actually echo that. I joked earlier 331 00:32:24,440 --> 00:32:31,440 in the kids presentation where we're trying to drive our investment level down to 9 year 332 00:32:32,129 --> 00:32:36,169 olds we're working hard on this. There's no law against that actually. 333 00:32:36,169 --> 00:32:43,169 There isn't it's not child labor as long as the LLC is in the mom or dad's name. 334 00:32:45,419 --> 00:32:52,350 (Applause). So kidding aside what I said there is I 335 00:32:52,350 --> 00:32:58,350 want entrepreneurs who will make me feel like a moron. And by --> my wife would say that's 336 00:32:58,350 --> 00:33:02,620 actually not very hard. But -- (Chuckles). 337 00:33:02,620 --> 00:33:08,580 What I would say is to Ping's point, you can be in a meeting with an entrepreneur. 338 00:33:08,580 --> 00:33:15,320 And I've watched this process both at Accel and in Andreessen Horowitz and in my own career 339 00:33:15,320 --> 00:33:22,320 in deals we have in common. The --> you think you're being very clever, you know. The entrepreneurs 340 00:33:24,090 --> 00:33:31,090 I'll pick a fairly obtuse --> they do something that involves zero knowledge proof maybe it's 341 00:33:31,799 --> 00:33:38,799 a hobby of yours maybe you read a couple of articles about it IEE spectrum or --> you think 342 00:33:42,710 --> 00:33:47,860 you have actually caught this person out and they are 9 steps ahead of you and by the way 343 00:33:47,860 --> 00:33:54,860 everything else that you ask, you have the sense as the big baller --> as the big baller 344 00:33:55,169 --> 00:34:00,870 VC that you're a child that this person is patiently explaining how the world really 345 00:34:00,870 --> 00:34:07,870 works and that's when as empirical as we try to make VC that's when you get the gut feeling 346 00:34:09,010 --> 00:34:15,620 especially if the person is passionate and engaged and driven about what they are doing 347 00:34:15,620 --> 00:34:21,400 that this is a human being that you can back. That they have this combination of as Ping 348 00:34:21,400 --> 00:34:28,400 said all the answers. But the fire in the belly to go through with it. And you know 349 00:34:29,960 --> 00:34:36,040 John, you come across as a fairly quiet guy. But clearly you had the fire in the belly 350 00:34:36,040 --> 00:34:41,610 as well as all of the answers when Vinod stopped you halfway through. 351 00:34:41,610 --> 00:34:48,610 I have one more thing is we're wrong all the freaking time so to John's earlier point or 352 00:34:50,040 --> 00:34:57,040 his earlier story, you can't look at a VC saying no. As a valid condemnation of your 353 00:35:00,640 --> 00:35:07,450 dream or objective or goals. You have to look at it as a fallible human being or group of 354 00:35:07,450 --> 00:35:14,450 human beings with incomplete data making the best literal guess that they can. 355 00:35:15,000 --> 00:35:19,470 And by the way, nos are good. I mean one of the things that we pride ourselves on is no 356 00:35:19,470 --> 00:35:25,490 matter how crazy the idea, we will write a couple of paragraphs that explain in detail 357 00:35:25,490 --> 00:35:29,840 our decision making for the no. We never send an e-mail saying yeah it's just 358 00:35:29,840 --> 00:35:35,290 not a fit. All right. Check you later. We say hey look you had this product flaw 359 00:35:35,290 --> 00:35:41,000 and we talked with the four customers you asked us to they were lukewarm and you know 360 00:35:41,000 --> 00:35:46,480 you have 17 competitors. You only listed 4. The market may be more crowded than you think. 361 00:35:46,480 --> 00:35:53,480 And a lot of the time we get a thank you instead of an F you. Even when we say no. Because 362 00:35:54,640 --> 00:35:57,020 it's actually useful for the entrepreneur. This is the one conference you can actually 363 00:35:57,020 --> 00:35:58,920 say fuck on stage. Okay. 364 00:35:58,920 --> 00:36:03,130 I've always wanted to do that I've done it in a lot of --> I've been in a lot of panels 365 00:36:03,130 --> 00:36:10,130 the first time I can say fuck on a panel. I just want to get that out. 366 00:36:10,660 --> 00:36:16,220 (Applause). I guess Ping is luckier because I've had 367 00:36:16,220 --> 00:36:21,350 entrepreneurs on occasion invent entirely new mathematical symbologies to tell me how 368 00:36:21,350 --> 00:36:26,870 bad they wanted me to fuck myself. (Chuckles). 369 00:36:26,870 --> 00:36:32,560 But John is absolutely right. You can't take a no as definitive. And I think when 370 00:36:32,560 --> 00:36:36,290 you do get a no the one piece of feedback that I have for everybody in this room is 371 00:36:36,290 --> 00:36:43,290 demand --> demand the reasoning behind it. And use it to go strengthen your pitch. And 372 00:36:45,040 --> 00:36:49,840 go see Vinod apparently he writes $5 million checks in less than 30 minutes. 373 00:36:49,840 --> 00:36:53,260 I think we have ten minutes left I want to make sure we have time for Q&A there's 374 00:36:53,260 --> 00:36:58,370 two microphones there for those who want to ask questions. We'll start over there. 375 00:36:58,370 --> 00:37:02,960 So let's talk about the logistical process of how you get started you've talked about 376 00:37:02,960 --> 00:37:08,480 it from a hypothetical but at what point are people interacting with you is it when they 377 00:37:08,480 --> 00:37:12,600 have a full fledged product like a prototype it will be different from hardware and software 378 00:37:12,600 --> 00:37:19,520 but let's talk about some of the logistics of how they would interact with you to contact 379 00:37:19,520 --> 00:37:25,240 you guys. Well so from my personal experience not 380 00:37:25,240 --> 00:37:32,240 as a VC but as someone who started a company, I don't think you need to wait at all. I think 381 00:37:34,910 --> 00:37:41,910 you can start building relationships with VCs by you get introduced or you introduce 382 00:37:43,930 --> 00:37:49,630 yourself and you simply say I have a concept I would like to talk to you about. Most VCs 383 00:37:49,630 --> 00:37:54,990 I think Ping said it earlier want to talk to as many entrepreneurs as possible. And 384 00:37:54,990 --> 00:37:59,220 you can come in and say: I'm not ready to raise money yet but I just want to test the 385 00:37:59,220 --> 00:38:06,220 waters with you with this kind of concept. And good VCs will not only you know test the 386 00:38:06,720 --> 00:38:11,070 waters with you. But they will give you advice about you know you're thinking about this 387 00:38:11,070 --> 00:38:16,740 right but have you thought about what your co-founders would look like or you know one 388 00:38:16,740 --> 00:38:22,830 thing that I tend to tell a lot of people is you can't just invent a product without 389 00:38:22,830 --> 00:38:28,140 thinking about how you're going to get that product into customers hands early on. Like 390 00:38:28,140 --> 00:38:33,310 you don't want to build this huge monolithic thing I'll give you an example that requires 391 00:38:33,310 --> 00:38:39,610 an appliance and an agent on every endpoint. You know it's just not going to get sold. 392 00:38:39,610 --> 00:38:45,200 It may solve a problem. But it's --> no one buys technology now that requires something 393 00:38:45,200 --> 00:38:50,620 implemented on every endpoint. So yeah you don't need to wait. You can start 394 00:38:50,620 --> 00:38:55,630 the process he right away. And don't be afraid that oh shit I didn't have a -- 395 00:38:55,630 --> 00:39:00,859 This is the place you can swear, right? (Chuckles). 396 00:39:00,859 --> 00:39:05,100 I didn't have a great meeting so now I screwed my relationship with that particular 397 00:39:05,100 --> 00:39:09,880 VC. Not at all. If you did, then that VC is not the right VC anyway. 398 00:39:09,880 --> 00:39:16,130 On the left. Yeah. Hello. Okay. So here it is. You talk 399 00:39:16,130 --> 00:39:20,120 about the impossibility. So I'm from New Jersey you've ever heard the expression Waste Management 400 00:39:20,120 --> 00:39:24,770 the guys from New Jersey what business are you in Waste Management so I'm in the business 401 00:39:24,770 --> 00:39:30,930 of eliminating and killing and crushing foreign adversaries for child pornography now that's 402 00:39:30,930 --> 00:39:37,660 an impossible attempt to go against foreign adversaries organized crime figures people 403 00:39:37,660 --> 00:39:43,090 who actually don't want to actually step up to the plate so I'm in the waste removal business. 404 00:39:43,090 --> 00:39:47,170 Something that nobody can say no to. Because if you say no you're saying no to helping 405 00:39:47,170 --> 00:39:52,040 kids. Well I challenge the panel right here right now I got the technology I got streaming 406 00:39:52,040 --> 00:39:57,140 data I got security I got everything you can possibly imagine to get these people off the 407 00:39:57,140 --> 00:40:01,550 streets the Russians are making $8 billion a year just in child pornography alone and 408 00:40:01,550 --> 00:40:07,550 selling it through cyber-security and other areas under the radar so what do you guys 409 00:40:07,550 --> 00:40:11,030 think about addressing an issue that actually collectively helps saves the youth of the 410 00:40:11,030 --> 00:40:14,330 nation that people say it's impossible to do? 411 00:40:14,330 --> 00:40:19,380 Who says it's impossible? Everybody says it's impossible to address 412 00:40:19,380 --> 00:40:22,600 this because nobody wants to address the issue because of the ugliness of the intellectual 413 00:40:22,600 --> 00:40:26,860 property and the issue that goes along with it nobody wants to stare at 80 million kids 414 00:40:26,860 --> 00:40:33,290 being raped and video alone nobody wants to go through the process filter it decipher 415 00:40:33,290 --> 00:40:36,430 it and put it in the right position and remove it and try to figure how to get it out of 416 00:40:36,430 --> 00:40:41,010 the hands of the people who didn't want to have it or have it creep up on them either 417 00:40:41,010 --> 00:40:47,940 in social media or areas -- Two comments, one it is sunnier in California. 418 00:40:47,940 --> 00:40:52,820 I think we got a better attitude about the impossible than maybe the Secaucus so come 419 00:40:52,820 --> 00:40:59,820 visit the other ones I can't speak to my fellow panelists I know some of them have tight schedules 420 00:41:00,810 --> 00:41:05,200 but I'll come and find you and I'll listen for ten minutes to the impossible idea and 421 00:41:05,200 --> 00:41:08,890 give you the best advice I can. Any other opinion. 422 00:41:08,890 --> 00:41:15,260 I'll be outside right afterwards. Is it just you or nobody else. 423 00:41:15,260 --> 00:41:18,510 I have no idea what my colleagues can do but I will step up. 424 00:41:18,510 --> 00:41:25,200 Over here on the right. Yes. Hello. I'm an Internet Veteran he 425 00:41:25,200 --> 00:41:31,160 from decades back and my question is when are ideas too big for you guys to be interested 426 00:41:31,160 --> 00:41:36,580 in I heard earlier on you talked about CipherCloud or something like that well I come from maybe 427 00:41:36,580 --> 00:41:41,490 a slightly alternate universe from this crowd, from the standards fields and there's this 428 00:41:41,490 --> 00:41:46,200 -- gone through this multiple times in the past but currently there's something called 429 00:41:46,200 --> 00:41:53,200 DNS Seq could be applied for lots of security maybe eating some securities lunch as well 430 00:41:54,280 --> 00:41:59,660 when I'm looking for interest in investors not to make money myself but to make this 431 00:41:59,660 --> 00:42:06,660 stuff happen I get well Rick that's a big play that's too big that's too rich and so 432 00:42:08,480 --> 00:42:12,410 you were talking about looking for the --> I understand maybe it's one out of ten then 433 00:42:12,410 --> 00:42:17,360 you're doing good if you're successful risk is not something you're afraid of but I would 434 00:42:17,360 --> 00:42:23,620 like to get one sentence short little response about when is something not appealing at all 435 00:42:23,620 --> 00:42:30,620 to you guys thanks. I couldn't hear everything but just in 436 00:42:31,300 --> 00:42:36,890 your question about when is something too big. There really isn't anything too big when 437 00:42:36,890 --> 00:42:41,590 you have --> when you're in the venture capital business we're about finding big opportunities 438 00:42:41,590 --> 00:42:47,340 the thing I would think about with your particular opportunity is to actually break the problem 439 00:42:47,340 --> 00:42:53,110 down into smaller pieces don't try to solve the end state right from the beginning. I 440 00:42:53,110 --> 00:43:00,110 think a lot of entrepreneurs see the end state but the market or the industry may not be 441 00:43:00,270 --> 00:43:05,270 as far along as where you want it to be so one of the failure modes we've seen in a lot 442 00:43:05,270 --> 00:43:10,780 of companies is being too early to a market and just making sure that you align yourselves 443 00:43:10,780 --> 00:43:15,120 up with market realities. And it will play out over time sometimes things take longer 444 00:43:15,120 --> 00:43:19,140 or they take a path that's slightly different so the end state is usually bigger than what 445 00:43:19,140 --> 00:43:23,610 anyone images but how you get there sometimes is very different I think a lot of people 446 00:43:23,610 --> 00:43:30,090 try to do the big thing first. So be patient I guess. 447 00:43:30,090 --> 00:43:35,610 Great, thanks. Over here. So I'm one of these people that has an 448 00:43:35,610 --> 00:43:40,510 idea. I'm not ready to come to venture capital yet and because what I'm working on is too 449 00:43:40,510 --> 00:43:47,510 factor authentication behavior and bio in one fell swoop I'll need to put an endpoint 450 00:43:47,580 --> 00:43:53,330 on every --> and appliance on every endpoint unfortunately that's just the nature of the 451 00:43:53,330 --> 00:43:57,780 beast. It's required software and hardware. The hardware has been invented but not in 452 00:43:57,780 --> 00:44:02,570 the right size. And the software somebody good could program it that's not me. 453 00:44:02,570 --> 00:44:07,120 How do I get it to a point where I can bring it to somebody to get some money so I can 454 00:44:07,120 --> 00:44:11,730 hire to build the hardware the size I need it and do the programming because I don't 455 00:44:11,730 --> 00:44:15,420 have the money how do I get it to a point where I can get some help. 456 00:44:15,420 --> 00:44:22,100 You can come today and we can talk about it. And I'm sure the --> to an earlier point 457 00:44:22,100 --> 00:44:27,040 here, it's okay to go to VCs before you are ready, before the product is in the market 458 00:44:27,040 --> 00:44:32,270 so we can give you advice on what we have seen on how to bring these products to market. 459 00:44:32,270 --> 00:44:35,089 I'm assuming I need to have you sign an NDA. 460 00:44:35,089 --> 00:44:38,650 We don't do that. We normally don't sign NDAs. 461 00:44:38,650 --> 00:44:42,910 Maybe I can chime in here. Okay. 462 00:44:42,910 --> 00:44:49,910 A couple of things, one, the only purpose of an NDA that you can argue for actually 463 00:44:52,400 --> 00:44:59,350 in the first to file patent regime which would be to protect --> protect you from future claims 464 00:44:59,350 --> 00:45:04,100 by somebody that you had ex pod your information in public and therefore you couldn't patent 465 00:45:04,100 --> 00:45:08,730 it. As it turns out, if you're talking to somebody about financing your company, there's 466 00:45:08,730 --> 00:45:14,070 an exemption in the law for that that applies internationally. So you're not jeopardizing 467 00:45:14,070 --> 00:45:19,120 your patents by talking to a VC under first to file. 468 00:45:19,120 --> 00:45:25,670 And VCs can't sign NDAs because all it takes is a small handful of people filing nuisance 469 00:45:25,670 --> 00:45:32,670 lawsuits and not our money but our time is then so consumed in that kind of litigious 470 00:45:33,720 --> 00:45:40,720 regime VCs would stop investing in promising young companies so to achieve herd immunity 471 00:45:45,090 --> 00:45:49,940 not signing NDAs is a form of vaccination as far as what you want to do even if it's 472 00:45:49,940 --> 00:45:54,300 not the right thing for the VC there's kick starter and a whole bunch of other crowd funding 473 00:45:54,300 --> 00:46:01,300 stuff there's AngelList we know the guys well there we are actually investors in that platform. 474 00:46:02,700 --> 00:46:08,270 That's an awesome way of getting like minded people to back you and I don't know exactly 475 00:46:08,270 --> 00:46:14,400 what you're doing but if you showed up and said you know and said I have something that 476 00:46:14,400 --> 00:46:20,970 plugs into a USB port or works over low powered Bluetooth next generation laptops and I can 477 00:46:20,970 --> 00:46:27,690 provide bullet proof authenticatable security locked to an individual human being. 478 00:46:27,690 --> 00:46:34,690 Maybe that's my sign-in for you know my true crypt. I can unlock true crypt with your gizmo. 479 00:46:35,890 --> 00:46:41,890 You're right with me, keep going. There's half a million dollars of human 480 00:46:41,890 --> 00:46:46,740 beings interested in that on AngelList or kick starter without a huge amount of effort 481 00:46:46,740 --> 00:46:50,230 so I say go for it. Matt is going to write you a $5 million 482 00:46:50,230 --> 00:46:54,970 check right now congratulations. You need another 30 minutes before I write 483 00:46:54,970 --> 00:46:57,260 you the $5 million check. I'll make the time. 484 00:46:57,260 --> 00:47:01,260 Unfortunately, we're out of time but I know the panelists will probably be up here 485 00:47:01,260 --> 00:47:04,430 for questions anyone who does have questions just come up and grab the panelists after. 486 00:47:04,430 --> 00:47:05,800 So let's thank everyone. I appreciate it. (Applause)