All right. This is going to be the meet the VC panel. FYI, there are two mics there. If
you have any questions when it's Q&A, by direction here, please go to one of the mics. Cool.
Give me a big hand.
Cool. So my name is John Herring. I work at a company called Lookout. You know, the company
Lookout, for those who don't know, does mobile security. We started here at DEF CON. After
a number of years of doing research and spending time in the community, we were able to build
a business and ended up raising venture capital. So I thought it might be interesting to share
some of our stories and spend some time getting to know some of the top venture capitalists
who work in the security industry as well. So maybe we can introduce ourselves, starting
with you, JJ.
Hello. My name is John Jack. I go by JJ. Clever. I was the CEO of a security company called
Fortify Software, which was security at the application level. We were one of the pioneers
in that space, at least in terms of commercializing a lot of work that had been done prior to
us starting the company. We grew that company fairly well, became the standard in financial
institutions, governments, telcos, and actually the standard in commercial software providers.
People like Oracle and SAP and EMC all used this product in order to root out vulnerabilities
in the software that they delivered to their customers. That company was acquired by Hewlett
Packard in 2010. Previous to that, I was CEO of a couple of other companies, one we sold
to VMware, one we sold to a company called Corporate Data. And now I work part time with
a VC firm called Andreessen Horowitz. We have a number of investments in security.
And I also part time do some consulting and serve as an independent director on other
venture‑backed companies. Thank you.
Hi. My name is Matt Ocko. I very unglamorously go by Matt. I'm the co‑founder and co‑managing
partner of a firm called Data Collective. We like doing deep, dark, difficult stuff
that most of our venture colleagues, ironically, except for the guys on this panel, disdain
or don't understand. It's where we've made most of our money. It seems to be a reasonable
thesis across 220 companies over nearly 25 years. We've had fewer than 20 losses and
we've made our entrepreneurs about $30 billion net of boom, bust, IRS, you name it.
I think some of the distinguishing characteristics of our firm that may be a little unusual is
that three out of the four partners still read and write code. Still understand chip
design. If you show me a 10 million gate design and you're lying to me about the clock tree,
I will know. And we've really enjoyed doing really fundamental stuff. We're the seed investors
in Zen Source. We're very early on in VeriSign. A number of our companies in the security
space are important parts of Google and VMware and Facebook and some other demanding customers
around the world. And we love this stuff. And I'm very happy to be here today.
Good afternoon. My name is Ping Lee. I'm a partner at Excel. I've been doing venture
investing for close to ten years now. Excel is an early stage venture capital firm. We've
backed companies from the seed stage to the growth stage, offices here in the U.S., Silicon
Valley, in London, China, and India. And our goal is to always find exciting entrepreneurs
that are trying to build category‑defining companies and have been investing in security
for quite some time and look out. It's just one of many companies we work with.
Hi, I'm Deepak Jeevan Kumar from General Catalyst Partners.
We are an early stage and late stage venture capital firm with $2.5 billion under management.
And we have backed companies across multiple industries, including cyber security. Some
of our investments that you know of are Kayak, Airbnb, Stripe, Snapchat, more recently. And
we also have not shied away from hard technology investments. So actually, Excel and us used
to share an investment called BBN Technologies, where the early Internet research was done.
And one of our companies called Reveal Imaging did like a hardware for bomb scanners, and
they had only one customer called the TSA. So personally, I started writing code when
I was about seven or eight years old. I don't remember now. And the first one was Logo.
I don't know if you guys ever used Logo before. And I have hacked quite a bit, and I think
I was lucky to be involved in two of the largest supercomputing projects. I was an architect
on those projects in human history. So happy to share and happy to ‑‑ I hope we can
convince more of you to become entrepreneurs in cyber security.
So it's interesting. So this is my 11th year at DEF CON, and I can tell you when I first
started coming, it's not something I would have expected to see venture capitalists at
DEF CON. And it's definitely changed a lot as time has gone on. Just the interest from
a mainstream capacity in cyber security in general has changed a lot as this technology
has touched the fabric of society and people's everyday lives. I'm curious, what are you
guys looking for? I'm sure a lot of people in the audience are curious, you know, as
they're building projects and whatnot, what is it going to take to get funded by a venture
capitalist? What are the types of things you look for when you're looking for a security
investment, looking for people at a conference like this?
Okay. We're still going in reverse order. Because it says number four here. So I would
not ‑‑ I won't address the technical side of it, because my background, I think
you can tell from the introduction, I'm not a super ‑‑ I'm not a hacker, despite
the shirt that I proudly wear. I can tell you that I would say two things in terms of
what do we look for in a security investment. I mean, the first is obviously we look for
something that has a wide applicability so that the market opportunity is big. And if
you take ‑‑ if you think about how you can leverage a large market opportunity, one
of the key things is are you leveraging something beyond just a security solution? So a lot
of security solutions are, frankly, point solutions to address a tough problem in security.
And you can make some nice companies out of that. But if you're also leveraging another
major trend, so, for example, enterprises moving to the cloud and cloud‑based applications.
So one of the investments we made at Andreessen Horowitz in which I'm on the board is called
Cypher Cloud. And what Cypher Cloud does is essentially allow people who use Salesforce
and Office 365 and Gmail and Box and other cloud‑based applications, it allows them
to secure the data that's in the cloud such that if a government organization cites the
Patriot Act and says to Salesforce, give us all the data for XYZ company, the data is
encrypted. It won't be meaningful. So it's therefore protected. And when you're in a
heavy regulated industry, that's something you need to address. So there's a company
that not only has solved a security issue, but is also leveraging a broader trend in
technology, which is people moving workloads from on‑premise into the cloud in one form
or another. So that's an example of looking at an opportunity that might be bigger than
just a purpose‑built specific solution to a security problem.
And the other thing I would say is that we look for really smart entrepreneurs that are
super motivated, that really have a lot of drive, a lot of ambition and really want to
be successful. And so when you put those two together, you have kind of a winning formula.
So I think John makes an excellent point. Big markets are important. But in a number of
the investments that we've done, some of which actually ended up being co‑investments
with Ping's team at XL or John's team at Andreessen, as they went through the end of
their seed stage or into later stages, are distinguished by not addressing a big market today.
So, you know, half the Fortune 500 runs ‑‑ or more than half. 90% of the Fortune 500, 95%
runs these Potemkin Village antivirus systems. That's a big market. You can say, hey, 10 bucks
on every aging desktop PC for the U.S. and other G7 countries is a big market. We have
no interest in that. We're interested in the stuff that's going to cause a CIO or a CSO
to ‑‑ in a late stage adopter company, three years from now, to panic and say, I
must have this at all costs. Because one of the dark but unspoken truisms in venture
capital is anything worth doing actually takes a long time. And all of these sort of
huge fantasy outcomes that are celebrated as overnight successes or inevitable successes
like a Google, actually took seven or eight years of really hard work. Things like
CIRA, congratulations to Andreessen for having the foresight to invest in that, are kind
of random events. So when you're building a product, if it's doing something meaningful, by the time
you've got it polished and by the time somebody is going to pay you actually gives a crap, it's
been a couple years. Maybe more. So if you're looking at stuff that will motivate a customer
today, you've already put yourself out of the running. So to do that, to John's point, takes
incredible intestinal fortitude. It takes people who can solve difficult multidimensional
problems about how to run their company and keep their team happy and keep their customers
happy all at the same time on limited amounts of money. And because you're going for the gusto
for something in the future, it takes incredible tech jobs. So, I mean, everybody on this panel
is motivated not to invest in me too tech, even if it's looking three years out or something
undifferentiated. We want to see stuff that has sustainable competitive advantage. And so two
interesting examples. We're in a company called Sentinel that we did with Ping's crew at
Excel. Those guys are standing a lot of existing security assumptions on his head. They're doing
something very, very interesting that actually produces deterministic results for important
stuff and runs only in user space. They don't hook the kernel at all. I was astonished. I
didn't believe it. It took me a long time to understand it. But it's light years ahead of
anything else out there. That was worth doing. We're in a company with John and his team at
A16Z called Illumio that's doing things that people said was impossible to enforce security
for fungible workloads in the cloud. And by the way, John, I think it's fair to say that when
those guys started doing that, most people were disdainful that real corporate compute
workloads would move to the cloud. So anyway, I hope that's useful.
The one point I would echo that Matt just said is some of these security markets have become
really large are not obvious at first. And China, the great entrepreneurs are the ones I kind of
see around the corner. I remember when we first invested in John's company, John Herring's
company years ago around mobile security, the Android phone didn't exist. The iPhone was
just shipping. It wasn't obvious there was going to be any security problems on the mobile
phone at the time. And having that foresight to be that far ahead of the market and
understanding where the hackers are going to be I think is a real set of instincts that we
look for. Security is particularly hard to invest in because it's an arms race. Every time
someone comes to our office with a great idea, there's ten hackers out there with a better
idea that's going to get around his great idea. So you really have to find entrepreneurs
that we found that really have been coming to DEVCON for the last X number of years. They have
to be in the cutting edge of whatever the hacker community is thinking about and pushing the
envelope on. And that's really hard to find. Folks that actually understand the problem but
also understand the opportunity to build a company around, that intersection is really
rare. That's what we look for in security. I totally agree with most of those points. One
thing I would like to add is that we are at the intersection of three major trends at the
same time in the history of computer science and technology. Mobile, cloud computing and big
data. A lot of people have written about this. But what that means is that we are going to
see multidimensional security problems that we have never seen before. So it is an
amazingly good time to be thinking about innovations in cyber security. I actually wrote
an article yesterday on the Forbes on cyber security for the app economy. But the point I
make is that we have to make tools that are faster and more better than things that we have
seen before because of this multidimensional problem that exists today. And in terms of the
entrepreneurs that we look for specifically, number one, you need to be great evangelists
of your product without overselling it. Then number two is you should have the ability to
look around market changes because markets do change. Human behavior changes very rapidly
than what we think it does. And to Ping's point, you need to be best of breed in what you
do and you need to stand the test of your peer groups who are almost as good as you or even
better than you. I guess broadly speaking, everybody in this audience is kind of in the cat
bird seat for building a company. Because as much as fluffy consumer companies get love and
attention and big valuations, that's actually not where the real money is. And everybody in
this room is probably aware of somewhere between a mini to a full-scale security
holocaust that's in process. I mean, I'm pretty convinced that RSA up to 512 bits is
irretrievably broken, which means every bank and web server and DNS cert out there is
effectively vulnerable right now. I'd say that's a pretty large problem. And the only
alternative, I mean, there are alternatives. The only practical one is stuck rotting away
inside of RIM. So there's a giant $10 billion company right there that I don't see anybody
doing right now. People are fantasizing about the so‑called Internet of Things. I can't
even leave my Bluetooth on here because I'd really prefer not to pay for your guy's next
vacation. And so everything from my future pacemaker to the electric meter on my house to the
thing that orders food for my kids in my refrigerator circa 2020 is going to be produced by
the same ass clowns that can't even have effective security on my phone. So, I mean, John
asked a really good question. What are we looking for? Well, the answer is we're looking for
you guys to step up much as John did when everybody was pretty smug about the state of mobile
security, shock the hell out of us and produce a giant solution to a giant problem that nobody
was thinking about. And also I'd really like to not pay for your next vacation in the process.
I turned off my Bluetooth. Yeah, well, I remembered to turn off mine about an hour ago.
So let me ask the opposite question. So, you know, you meet lots of people working on super
interesting projects, many of which, you know, can be intellectually interesting but many
times won't end up being a business of the scale that we've talked about, billions of dollars.
That doesn't mean it's not interesting. When does it make sense not to raise venture capital
from someone like yourselves? How do you think about the difference between the types of
things you would want to actually fund and the types of things that someone might want to go
turn into a business? But it doesn't make sense to talk to people like you guys.
Are we pushing or popping the stack, John?
We're pushing the stack, it's you.
I'll try to be as brief as I can. There's a concept in finance called net present value.
How many of you guys are familiar with that? Awesome. That's a disturbingly well educated
hacker crowd. So the dirty secret or the other dirty secret of venture capital is that your
NPV utility curve and the VC's NPV utility curve can diverge pretty rapidly. So thanks to a
feature of preferred stock investment, most VCs get the right to keep investing in your
company every time you take money. Which means as long as we have deep enough pockets, our
stake doesn't go down and it may in fact go up a little bit. Your slice of the pie as more new
dollars pour in is in effect reduced over time as you continue to build a company. So if you
build a really giant company and you and your founding team own 10% and you sell it for a
billion dollars after 10 years, that's 100 million bucks. That seems like a pretty good
outcome. But if you own 80% of your company and you sell it for $100 million two years into it,
that's $80 million. So you would have had a better NPV selling earlier than later for a
supposedly more impressive number. And when you factor in risk, building billion dollar
outcomes is really freaking hard. You're definitely better off selling for 80 million bucks in
two years. Now, that's also, that magic outcome is hard to do. And I'm picking deliberately
simplistic examples. But when you are pretty sure that you have a point solution, I think as
John referred to, that solves a really difficult problem that's a quote unquote awesome family
business. Makes $10 or $15 million a year with great cash flow for you and your friends.
That's probably not a business that you want to take venture capital for. There's no reason for
you guys to dilute yourselves. If you need money, take angel money. Keep 80% of your equity.
And, you know, when one of the big bruisers panics and realizes they need this point solution
and pays you a hundred million bucks, laugh all the way to the bank. If you are doing one of
these global platforms that John and Ping alluded to, the kind of thing I alluded to, like
replacing all of RSA, then you probably need venture capital. You probably need people who have
been through it before, whether they're CEOs like John or other former operating guys like Ping
to help you build that gigantic business. So that's kind of how I see the world.
I'll give two examples to kind of put a finer point to what Matt's saying. The answer isn't always
venture capital. We are currently investors in a company called Tenable, which is the guys
that created Nessus. And that company was bootstrapped by the founders for I think five, six
years before we even put any money into the company. And it was profitable, growing very
rapidly. Nessus is a very popular vulnerability scanning tool. And they didn't need the money
because the business could fund itself. And they didn't need someone like myself because they
knew they didn't need those resources in the network to grow their business. It was growing very
fine. And in the last year or so, they decided they saw a larger opportunity around going global,
about attacking, extending the product line where they needed additional capital. More
importantly, they needed a partner that knew and had experience in expanding the business in
ways they haven't expanded before. So the decision to make and take venture capital was less
about the money, since the business is profitable, but more about the expertise and value add
a partner can bring. In the case of John Herring Lookout, it was very different, right? Obviously
from the very beginning, they were going after an exploding market in the mobile security
space where speed to market, time to market and getting out ahead of the mobile platform,
which is getting innovated by Google and Apple, was a precondition they just had to deal
with from day one. Venture capital was needed to accelerate the business and also helping
scale a team and do a lot of other things around company building was needed day one.
So I think it all really depends. And I don't believe for the majority of the businesses
out there that you require venture capital. I think it's something that you should look
at deeply before you take money. Because as Matt says, once you take money from another
partner, it's a partnership. And it's not a sole proprietorship anymore. That's a very
big transition. So I think it really depends on the opportunity and what you want to do.
If I could jump in, I think Ping makes a great point that sometimes there's a perception
that what venture capital is, is you get money and then the VC comes to your board meeting
hoping you're doing well. And that's... We do that though.
You really do, in the early stages, if you do decide to accept venture funding, you really
do need to look for a partner. You really do need to look for a firm that has people
and services that will add value to what you're trying to do. I mean, these firms you see
up here are all firms that have done a lot in security. So obviously we all have resources
that help you be successful. At Andreessen Horowitz we have a thing called the Executive
Briefing Center that John knows about that we bring in chief security officers and government
officials and all sorts of people on a weekly basis and bring in our portfolio companies
and they get to present to people even before they've released the product to test the market
for their idea. And as they mature, like John's company has, they get to talk to real buyers
of the solution. And that's a real big service that, for example, Andreessen Horowitz we
bring for our entrepreneurs. So to Ping's point, you really do want to pick a partner that's
often both the firm and the individual partner at the firm that's going to be your chief
liaison and help you grow the company. And actually I want to chime in and amplify John's
point. It's not just the firm. It's not brand. There's a company that John and I actually
have in common that's desired right now by a lot of people in the venture capital community.
And they met with one of the very senior guys at one of the top ten firms in the world.
Every Fortune, Forbes article, you know, New York Times, Wall Street Journal, TechCrunch,
I mean, however you want to view kind of external validation, this firm had it. And to some
extent this guy had it as well. And he was such an arrogant dickhead in the meeting that
the entrepreneur said, not only will this guy not be helpful, right, I mean, however
giant a check he wants to write, but he'll be actively harmful. And by contrast, and in
credit to JJ, the entrepreneur said, look, what I want is somebody like JJ, who's an
operating guy, who's done real stuff, who's been through good times and bad times, it can
help me move a little further down the road. He basically said, I want another partner
because I'm stuck in the boat with this person for ten years. And, you know, Ping and his
team are successful in this because they act like partners. And the entrepreneurs that we
fund early on like both of these firms because they're happy with them. We're still waiting
for Deepak to start writing checks, so it's a gentle nudge. We've got a few for you, buddy.
So let me frame this problem, right. The problem is this. As an entrepreneur, the odds of
failure are far higher than the odds of success. That's history, that's data, you can read
anywhere. So every step you take, every meeting you go to, everyone you talk to should be
able to increase the odds of success. That's a fundamental underpinning here. So all the top
venture firms I can say, largely speaking, are there to help you to increase the odds of
success. Helping to find the right mentors for you. Finding a mentor is really, really
important. I never underrate that. So I think most of the top VC firms can help you do
that. The other thing is, you know, when do you not take venture capital money to your
question? If the business is low risk, for example, one small check that we do is, okay,
can a bank lend to this company for expanding their business? Definitely not. And it's
not a VC investment. We look for really high risk investments that need to grow really
fast. Banks look for low risk investments that don't grow that fast. So typically,
venture capital money is going to help you go from zero to 10 million to 100 million in
like three to four years. In that situation, venture capital money is a good fit.
So maybe I can share a quick story for those who might be interested and are thinking about
starting companies. On the flip side of all of this, too, is you can hear an infinite
amount of no's, but you only need to hear yes once. And it's really important to keep
that in mind. I remember vividly when we were first getting off the ground, we were doing
obscure wireless research and a lot of mobile stuff, and there was not a lot of interest
in what we were doing at first. Ping wrote us a check and a few of our early angels did.
But most of our investors that we pitched did not understand what we were doing at all.
And it's really easy to get depressed when you're running around trying to raise money
and everyone is telling you you're basically an idiot. But having the fortitude to continue
on I think is one of the greatest lessons I've ever learned in raising venture capital.
And it never gets easier. You just get better. And hopefully the market is on your side.
But I vividly remember, I don't know if you ‑‑ sometimes it takes, you know, the irrational
‑‑ reasonable people will work on reasonable problems, but consensus, accurate predictions
never yield outsized results. Really important thing to understand. The outliers come from
things that are not obvious. And unreasonable people will work on unreasonable problems,
thus you probably need to be pretty unreasonable to do something amazing. And this guy, Vinod
Khosla, for those who don't know who he is, can be an unreasonable dude and he's very,
very brilliant. Found us in microsystems and I'll never forget we were pitching him and
everyone had been telling us no. And halfway through the meeting he's like, all right,
I've heard enough. I'm like, shit, he's going to throw us out. This is horrible. And he's
like, I'm in. What's the valuation? And he literally wrote us a $5 million check that
afternoon and I've never experienced anything like that after hearing no's for just like
50 no's and then something like that happens. And then not long after that, Excel got involved
and the company really started to take off and there's definitely a world where this
company never would have even existed if we wouldn't have kept going, not because we were
there to make money and not because we were there to build a business, because we love
what we do. I mean, there's 140 people at DEF CON from Lookout. We're a much bigger
company now and it's who we are. Nothing's changed, even when we're a lot bigger. That's
really exciting to me. So I think it's something really important to think about as everyone
here starts businesses is the foundations of passion and it's a lot about having the
fortitude to keep going. So my question for this group is how do you think about spotting
the nonobvious investments? Like when you see deals that you're willing to make a nonobvious
investment in, I'm curious, Ping, I know you've done a bunch of these, what are the things
that you look for in an entrepreneur when you're willing to make a bet that seems really
out there?
Yeah, I think the ‑‑ at least the way we think about it, the venture guys don't
come up with the ideas. We never confuse ourselves with the entrepreneurs. So what we look for
is for the entrepreneurs to provide that inspiration. And it really is from going out and talking
to as many entrepreneurs as you can. The reason I'm at DEF CON isn't because I'm going to
win, you know, any hack competition or anything like that. It's because I can spend time with
what I think are really smart people that are thinking about things 10, 15 steps ahead
of what I'm thinking about. And our job as venture guys is just to identify those people
that have those insights. So it's really in some ways I always say, like, the best entrepreneurs
are the ones that convince me that doing the impossible is actually possible. Because we
sit there every day and we see hundreds of ideas. And there's thousands of things wrong
with every idea. But there's always that one entrepreneur that comes through the door and
for some reason every question you ask of him or her, the answer comes back in such
a way that you're like, wow, this guy may actually pull this off. And I'm like, that
is really actually possible what he just said. And no matter how you poke and prod at them,
they've thought through every single angle of the problem. I can't tell you how thoughtful
the entrepreneur are that we back in whatever space they're in. It could be big data, cloud,
security, mobile. They've literally thought through every single possible permutation
of the problem. From the customer's angle, from the business model, to every single angle.
And it's really that that kind of gives us conviction. Not to say they have all the answers,
but they've thought through all the problems in the questions. So that's kind of how we
end up finding ourselves backing entrepreneurs, oftentimes in spaces that we did not have
any idea or know anything about before we worked with that entrepreneur.
I would actually echo that. I joked earlier in the kids' presentation where we're trying to drive
our investment limit down to 9-year-olds. We're working hard on this.
There's no law against that.
Yeah, there isn't. It's not child labor as long as the LLC is in the dad or mom's name.
So kidding aside, what I said there is I want entrepreneurs who will make me feel like a moron.
And my wife would say that's actually not very hard. But what I would say is, to Ping's point,
you can be in a meeting with an entrepreneur, and I've watched this process both at Excel and
Andreessen Horowitz and in my own career and deals we have in common. You think you're being
very clever. The entrepreneur, I'll pick a fairly abstruse example, the entrepreneur is doing
something that for some reason involves zero knowledge proofs. Maybe it's a hobby of yours.
You read a couple of the Scientific American articles about it or IEEE spectrum or ACM
proceedings, thingamajiggy, and you think you've actually caught this person out. And they're
nine steps ahead of you. And by the way, everything else that you ask, you have the sense as the
big baller VC that you're a child that this person is patiently explaining how the world really
works. And that's when, as empirical as we try to make VC, that's when you get the gut feeling,
especially if the person is passionate and engaged and driven about what they're doing, that
this is a human being that you can back. That they have this combination of, as Ping said, all
the answers, but the fire in the belly to go through with it. And, you know, John, you come
across as a fairly quiet guy, but clearly you had the fire in the belly as well as all the
answers when Vinod stopped you halfway through. One more thing is, we're wrong all the
freaking time. So to John's earlier point, or his earlier story, you can't look at a VC saying
no as a valid condemnation of your dream or objective or goals. You have to look at it as a
fallible human being or group of human beings with incomplete data making the best literal guess
that they can. And by the way, no's are good. I mean, one of the things that we brought
ourselves on is, no matter how crazy the idea, we will write a couple of paragraphs that
explain in detail our decision making for the no. We never send an email saying, yeah, it's
just not a fit. All right. Check you later. We say, hey, look, you know, you had this product
flaw and we talked to the four customers you asked us to and they were lukewarm and, you know,
you have 17 competitors and you only listed four. The market may be more crowded than you
think. And a lot of the time we get a thank you instead of an FU even when we say no because
it's actually useful for the entrepreneur. I've always wanted to do that. I do a lot of panels.
First time I could say fuck. I just wanted to get that out.
I guess being luckier because I've had entrepreneurs on occasion invent entirely new mathematical
symbologies to tell me how bad they wanted me to fuck myself. But John's absolutely right.
You can take a no as definitive. And I think when you do get a no, the one piece of feedback that I
have for everybody in this room is demand the reasoning behind it and use it to go strengthen
your pitch. And go see Vinod. Apparently he writes $5 million checks in less than 30 minutes.
So I think we've got about ten minutes left. I want to make sure we have time for Q&A. So
there's two microphones right there for those who want to ask questions. We'll start over
there. Let's talk about the logistical process of how you get started. You've talked about it
from a hypothetical. At what point are people interacting with you? Is it when they have a
full‑fledged product like a prototype? Obviously it's going to be different from hardware
software. Hardware is going to have a lot more capital expenditure to begin with. Let's talk
about some of the logistics of how they would interact with you to contact you guys.
Well, the ‑‑ so from my personal experience, not as a VC, but as someone who started a company,
I don't ‑‑ I don't think you ‑‑ I don't think you need to wait at all. I think you can
start building relationships with VCs by, you know, you get introduced or you introduce yourself and
you simply say I have a concept I'd like to talk to you about. Most VCs to ‑‑ I think
Ping said it earlier, want to talk to as many entrepreneurs as possible. And you can come in
and say I'm not ready to raise money yet, but I just want to test the waters with you with this
kind of concept. And good VCs will not only, you know, test the waters with you, but they'll give
you advice about, you know, you're thinking about this right, but have you thought about what your
cofounders would look like or, you know, one thing that I tend to tell a lot of people is you can't
just invent a product without thinking about how you're going to get that product into customer's
hands early on. Like you don't want to build this huge monolithic thing, I'll give you an example,
that requires an appliance and an agent on every end point. You know, it's just not going to get
sold. It may solve a problem, but it's no one buys technology now that requires something
implemented on every end point. So, yeah, you don't need to wait. You can start the process
right away and don't be afraid that, oh, shit, I didn't have a great... this is the place you can
swear, right? I didn't have a great meeting, so now I screwed my relationship with that particular VC.
If you did, then that VC is not the right VC anyway.
On the left.
Hello? Okay. So here it is. Talk about the impossibility. So I'm from New Jersey. You've
ever heard the expression waste management? Guys from New Jersey and New York, what business are
you in? Waste management? So I'm in the business of eliminating and killing and crushing foreign
adversaries for child pornography. Now, that's an impossible attempt to go against foreign
adversaries, organized crime figures, people who actually don't want to actually step up to the
plate. So I'm in the waste removal business. Something that nobody can say no to. Because
if you say no, you're saying no to helping kids. I challenge the panel right here, right now.
I got the technology. I got streaming data. I got security. I got everything you can possibly
imagine to get these people off the streets. Russians are making $8 billion a year just in
child pornography alone. And they're selling it through cyber security and other areas under the
radar. So what do you guys think about addressing an issue that actually collectively helps save
the youth of the nation that people say it's impossible to do? Who says it's impossible?
Everybody says it's impossible to address because nobody wants to address the issue because of the
ugliness of the intellectual property and the issue that goes along with it. Nobody wants to
stare at 80 million kids being raped. In video alone, nobody wants to go through the process,
filter it, decipher it and put it in the right position and remove it and try to figure out how
to get it out of the hands of people who then would actually not want to have it or have it
creep up on social media. So two comments. One, it is sunnier in California. I think we got a
better attitude about the impossible than maybe in Secaucus. So come visit. The second thing
I can't speak to my fellow panelists. I know some of them had tight schedules. But I will come find
you and I will listen for ten minutes to your impossible idea and I will give you the best
advice that I can. Any other opinion on the panel? I'll be outside right afterwards. Is it just you
or nobody else has any comments? I have no idea what my colleagues can do. But I will step up.
Great. Over here on the right. Yes. Hello. I'm an internet veteran from decades back.
And my question is, when are ideas too big for you guys to be interested in? I heard earlier
on you talked about Cypher Cloud, something like that. Well, I come from maybe a slightly
different alternate universe from this crowd, from the standards field and there's this,
gone through this multiple times in the past, but currently there's something called DNSSEC,
could be a platform for a whole bunch of security, solving a lot of problems,
maybe eating some security vendors' lunch as well. And I've heard when I'm looking for interest
from investors, not to make money myself, but to make this stuff happen, I get, well, you know,
Rick, that's a big play. That's too big. That's too rich. And so you were talking about looking
for the, I understand maybe it's one out of ten, then you're doing really good if you're successful.
So I understand risk is not something you're afraid of, but I'd like to get maybe one sentence,
short little response about when is something not appealing at all to you guys? That's just
too big. Thanks. Well, I couldn't hear everything, but just your question about when is something
too big, there really isn't anything too big. And when you're in the venture capital business,
we're about finding big opportunities. I think the thing that I would think about
with your particular opportunity is to actually break the problem down into smaller pieces.
Don't try to solve the end state right from the beginning. I think a lot of entrepreneurs
see the end state, but the market or the industry may not be as far along as where you want it to
be. So one of the failure modes we've seen in a lot of companies is being too early to a market
and just making sure that you line yourselves up with market realities. It will play out over
time. Sometimes things take longer or they take a path that's slightly different. So the end state
is usually bigger than what anyone imagines, but how you get there sometimes is very different.
I think a lot of people try to do the big thing first. So be patient, I guess. Great, thanks.
Okay. So I'm one of these people that has an idea. I'm not ready to come to venture
capital yet. And because what I'm working on is two-factor authentication, behavior and bio
in one fell swoop, I'm going to need to put an end point on every ‑‑ an appliance on every
end point. Unfortunately that's just the nature of the beast. How do I ‑‑ it requires software
and hardware. The hardware has been invented but not in the right size. And the software,
somebody could program it, that's not me. How do I get it to a point where I can bring it to
somebody to get some money so I can hire someone to build the hardware the size I need it and do
the programming? Because I don't have the money. How do I get it to a point where I can get some
help? You can come today and then we can talk about it. And I'm sure the ‑‑ to an earlier
point here, it's okay to go to VCs before you are ready, before the product is in the market,
so we can give you advice on what we have seen on how to bring this product to market.
I'm assuming I need to have you sign an NDA? VCs don't do that.
Yeah, we normally do not sign NDAs. Maybe I can chime in here.
Okay. A couple things. One,
the only purpose of an NDA that you can argue for is actually in the first to file patent regime
which would be to protect you from future claims by somebody that you'd exposed your
information in public and therefore you couldn't patent it. As it turns out, if you're talking to
somebody about financing your company, there's an exemption in the law for that that applies
internationally. So you're not jeopardizing your patents by talking to a VC under first to file.
And VCs can't sign NDAs because all it takes is a small handful of surly people
filing nuisance lawsuits and not our money but our time is then so consumed in that kind of
litigious regime that VCs would just stop investing in promising young companies.
So literally to protect, to achieve herd immunity, not signing NDAs is a form of vaccination.
As far as what you want to do, even if it's not the right thing for a VC, there's Kickstarter
and a whole bunch of other crowdfunding stuff. There is Angel List. We know the guy as well
there. We're actually investors in that platform. That's an awesome way of getting like‑minded
people to back you. And you know what? I don't know exactly what you're doing, but if you showed
up and said, you know, hey, I've got something that plugs into a USB port or works over low
power Bluetooth, next generation laptops, and I can provide bulletproof, authenticatable security
locked to an individual human being, you know, maybe that's my sign‑in for, you know, my true
crypt. I can unlock true crypt with your gizmo. You're right with me. Keep going.
There's half a million dollars of human beings interested in that on Angel List or Kickstarter
without a huge amount of effort. So I say go for it.
Matt's going to write you a $5 million check.
You need another 30 minutes before I raise you the $5 million. I'll make the time.
Unfortunately we're out of time, but I know the panelists will probably be up here after
for questions. So anyone who does have questions, just come on up and grab the panelists after.
Let's thank everybody. Appreciate it.