Slavik Markovich is the Founder and CEO of Demisto, a security orchestration, automation, and response (SOAR) platform that was acquired by Palo Alto Networks in 2019 for $560 million. On today’s episode, Jon Sakoda speaks with Slavik about how his time in the Israeli army kickstarted his entrepreneurial journey and what mistakes he made as a first-time founder.
Slavik Markovich is the Founder and CEO of Demisto, a security orchestration, automation, and response (SOAR) platform that was acquired by Palo Alto Networks in 2019 for $560 million. On today’s episode, Jon Sakoda speaks with Slavik about how his time in the Israeli army kickstarted his entrepreneurial journey and what mistakes he made as a first-time founder.
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SLAVIK MARKOVICH: We move here. I start checking schools and finding a house. And suddenly, everything dies. Everything crashes. And we kind of started like seriously calculating how long of a runway we now have with the situation as is, and should we actually pack and go back to Israel?
JON SAKODA: Welcome to the Decibel podcast. I’m excited to welcome my friend Slavik Markovich. Slavik was most recently the founder and CEO of Demisto, a company that was successfully acquired by Palo Alto Networks. He is a great friend and an adviser to many founders. And he has a lot of wisdom to share about what to do and what not to do when you’re finding product market fit. He has a lot of really funny stories to share with us today.
Slavik, I am really excited to have you on the show.
SLAVIK MARKOVICH: Jon, thank you for having me. Super excited to be here and happy to share whatever small nuggets of wisdom I have.
JON SAKODA: You have a really interesting background, having lived overseas and having served time in the army. If you don’t mind, could we start at the very beginning? Tell us about where you grew up and eventually how you found your way here to the US.
SLAVIK MARKOVICH: Ooh, you’re actually taking us to the very beginning. So, I actually was born in Belarus and grew up there until I was almost seven years old. And then we moved to Israel. And that’s what I considered to be my kind of motherland, hometown, and consider myself Israeli. And I was there until I moved to the US. And so, when we moved, I have very, very little memory of Belarus, right? I was too little to remember anything except of a lot of snow. But I do remember quite a lot of after moving to Israel. And that’s something that kind of stays with you, being an immigrant initially, not knowing the language. My parents didn’t know the language. They obviously did not work for whatever they were. So, my father had a masters in mechanical engineering, and he was cleaning pools and doing agriculture just to make do. And my mother, the same. She had a masters degree in music, and she was cleaning houses initially when we moved. So, the first period when we moved to Israel is kind of a shock. But I think we got acclimated very fast. And yeah, that’s it.
JON SAKODA: In the past, you have mentioned to me that serving time in the Israeli Army, the IDF, was a very important experience for you personally. Tell everyone about what you learned there, and how does the army give you experiences that you think can be helpful when you start a company?
SLAVIK MARKOVICH: So, first of all, the IDF, Israeli Defense Forces, are mandatory. So, everybody has to go to the Army when they turn 18. When I got into the Army and the project that I was part of, that was when I was kind of introduced to a real system with real needs, real customers. And the system has to be operational. And if it’s not operational, bad things will happen in real life. So, you build it in such a way that part of the requirements are that if communication lines are down and if bases are
being offline because they are bombarded, the system still needs to continue working. So, it was my first kind of foray into things like multi-master replication, where you can have the data fully distributed and everything can operate autonomously, and then you do conflict resolution on the back end. So, pretty cool.
JON SAKODA: And to take us back in time, this is in the 1990s. So the idea of having a fully distributed system that could act autonomously and also maintain state was technically very
challenging. Today with the cloud, I think many people take for granted how hard it was to do this without all of the network infrastructure that we have today. Is that a fair statement?
SLAVIK MARKOVICH: For sure. For sure. It’s still challenging today to get all these things right. I guess you have a lot more tools and capabilities, but the architecture is still hard to get right. The scales are different, right? When you build something for the internet is kind of a much bigger scale. But yeah, I mean, that’s kind of also my first kind of entrepreneurial journey, I should say, in the army is where I kind of understood what is it to interview customers, because you get variety of weird use cases and users in the army.
So, my first kind of, I’d say, lesson learned there was that we distributed the system to the bases. And one of the bases had this downtime every morning, 8:00 AM. The system would go down, and we just didn’t understand why and what’s going on. And we tried to debug. And there’s not enough logs. There’s no core dumps, no kernel panics. Really mysterious. And so, I said, okay, let’s go there in person and see what’s going on. So, we went to this base, traveled. And it was really funny. We’re kind of sitting in front of the system, kind of thinking, okay, let’s debug it. Let’s understand why it’s going down in this particular hour or around it. And then this guy comes in. He’s one of the commanders there, but not very senior and not very computer literate, so to say. And he comes in and he kind of unplugs the system, puts in his coffee machine, makes himself coffee, and then asks us, “Hey, do you guys want coffee?” He’s very welcoming. And then kind of goes and replugs the computer. And so—
JON SAKODA: Oh my God, that’s such a great story.
SLAVIK MARKOVICH: Yeah. That one’s pretty funny. It kind of taught me, there’s nothing that can replace the direct contact, going out there and talking with your customers and seeing what they’re doing, because you can have many assumptions. But all of that kind of dies in the field.
JON SAKODA: This story is a really good example of how the IDF really does teach you basic training that is helpful for starting a company. Is this why a lot of Israeli IDF graduates eventually go on to become entrepreneurs? And what was your story?
SLAVIK MARKOVICH: So, I think that it actually trains you pretty well, right? All the things, the ways entrepreneurs kind of makes us somewhat successful are like moving fast, making fast decisions, making do with not enough resources or money or whatnot. So, when after I left the army, I kind of joined and started a consulting firm, because that’s very common. If you’re very good in technical things, you usually don’t go and work for a company or go and do consulting, so—at least in Israel.
And one of the projects that I actually ended up consulting to was Sony PlayStation. And that actually led me to my first startup, because I was really, really kind of shocked that they let some consultant from Israel get access to their databases. The starting place they shared online, there’s like millions of credit cards and information there. I would connect over SSH to the box and directly log in. And this is probably one of the best ways to start something, feel the pain personally and say, “Oh, it doesn’t make sense.” And so, this is how I started my first startup, Sentrigo, by saying, “Okay, there must be some way to monitor what is going on in the database, and that cannot be just over the network,” because a lot of the traffic is encrypted, like SSH, for example, or something like that.” So, this is how I started my first startup.
JON SAKODA: So your first company, Sentrigo, was founded in 2006. And this was right around the same time that I was entering the venture business. If I go back then, there were not that many people starting cybersecurity companies at that time. The industry was a lot smaller back then. How did you raise venture capital?
SLAVIK MARKOVICH: I was a consultant for very large projects, I guess, 2002 to 2006, so to speak. And then I started the startup. It wasn’t as funder-friendly as it is right now. Still remember chasing venture capital money, you know, selling my soul, so to speak. Eventually we raised $3.5 million. I was so impressed with my self. I gave, I think, 44% of the company for that money, so it was completely different scale than what you have right now. That was kind of my first foray into startups.
JON SAKODA: So, remind everyone for a moment what Sentrigo did. I know you eventually had a successful exit, but you have also mentioned to me that you had a lot of hard lessons learned along the way. What was the original idea?
SLAVIK MARKOVICH: Yeah. So, Sentrigo was a very interesting company. So, hard technical problem to solve. Was very interesting from a technical perspective, right? So, what we did in the beginning, at least, was the activity monitoring of databases. Looking at all the activity on the database in a way that is efficient—it doesn’t change the performance characteristics of the database, and also is not being controlled by the database administrators, right? It was super challenging.
But the biggest challenge for us actually was a go-to-market challenge. And that taught me so much. You have to actually convince two separate decision makers to do the buying, right? You have the security, the CISO, and you have the database administrator. And they both have a very strong say. You have to put them in the same room. And they’re not usually talking with each other. And they sometimes don’t necessarily like each other. Try to never go into this business where you have two decision makers—like decision maker and an influencer is fine. But when you have two decision makers that can veto each other, it’s so hard to do go-to-market with that.
JON SAKODA: Now, this is actually a really important and very, very subtle piece of wisdom. And so, looking back, was there any way to, I guess, decode this puzzle early on? Was there a way you could have maybe avoided putting yourself in this position where the go-to-market was so hard? What did you learn from this whole experience?
SLAVIK MARKOVICH: 100%, for sure. Look, remember, that was when I just started my kind of entrepreneur journey. I knew nothing about nothing. And it’s not like you had so many entrepreneurs to consult with and so on, right? It wasn’t as popular as today. And I actually didn’t know any other entrepreneurs. So I started with a problem, found a technical solution. And I thought, “I’m golden. That’s it.” I didn’t think about go-to-market at all. Like, nothing. So, I didn’t do a lot of discovery and interviews of potential customers. I actually kind of forgot the lesson that I learned in the army of going out and talking with customers all the time. I was so enamored with the technical beauty of the solution that that’s what I was focusing on. And, you know, it bit me in the ass eventually, right? So, go-to- market was very hard. So, I think I could have interviewed and learned much more, and maybe adjust the go-to-market strategy. But we didn’t, and we did fairly well as an enterprise sales company, right? So, we had very cool customers, like Fortune 100 customers. And we closed a decent size of deals. And so, I said, “Okay, we’re moving the HQ to the US.” So, me and my co-founder Nathan moved to the US. And then it was July 2008, and then the credit crunch happened. That was one of the, I think, more scary experiences that you can have, because—
JON SAKODA: Well, because I was going to say, this technology was probably quite targeted at people like financial services companies, right? Is that right?
SLAVIK MARKOVICH: Yeah.
JON SAKODA: And so, your core customers are all going out of business at this time.
SLAVIK MARKOVICH: Yes. So, exactly. So, we move here. I start checking schools and finding a house. And suddenly, everything dies. Everything crashes. We had outstanding bills that were canceled in millions of dollars.
JON SAKODA: Oh no.
SLAVIK MARKOVICH: They were actually canceled. So, that almost never happens, right? So, once you have IPO, it’s pretty much a done deal. And suddenly, people cancel bills for you. And we kind of started seriously calculating like, how long of a runway we now have with the situation as is, and should we actually pack and go back to Israel and pick it up? Because in Israel, you have your support net. The likelihood of something bad happening is very low. And then we tried to raise—and also, there’s no money to be had from VCs because everybody was just shutting down and saying, “Hey, we’re in a wait and see kind of period.”
JON SAKODA: No, that is right. I do remember in 2008 and 2009, if you remember, Bear Stearns went bankrupt, Lehman Brothers went bankrupt, and venture funds didn’t have very much money. It was just a very tough time.
SLAVIK MARKOVICH: Yeah, no. Yeah. But we kind of survived. That kind of taught me, okay, always have a big enough war chest to survive those slumps, right? That’s an experience that I would kind of not wish to re-experience it.
JON SAKODA: Eventually, you were successfully acquired by McAfee. I guess maybe walk me through that experience.
SLAVIK MARKOVICH: Right. So, we knew the market is limited just because of the go-to-market toughness of having two decision makers. And so, yeah, we looked out and said, “Okay, who can we partner with to actually maybe have a bigger force multiplier on the go-to-market motion?” And McAfee was one of those folks that we kind of decided to partner with. ArcSight at the time was another. And so, we kind of said, “Okay, let’s do a bit of go-to-market together, have a co-sale program. And with McAfee, that was pretty successful. So, their sales guys managed to sell our solution to some of the largest banks that we personally didn’t have access to. And so, that led to the usual discussion. Hey, how about we do some strategic collaboration? And from there, for us, it was, I’d say, a fairly easy decision because we were still burned from the 2008, 2009 crunch. And we kind of said, “Okay, at this point, let’s take some chips off the table.”
JON SAKODA: Absolutely.
SLAVIK MARKOVICH: That was kind of the thought process. And this is why we eventually agreed to be acquired by McAfee. McAfee at the time was one of the largest cybersecurity companies in the world, right? Super interesting.
JON SAKODA: Yeah. You spent a few years there, right? SLAVIK MARKOVICH: Yeah.
JON SAKODA: So, you must have had a very successful migration. And I know that those were some of the glory years at McAfee. And then eventually, it looks like maybe you somehow got over your PTSD. Talk to me about eventually what led you to start another company.
SLAVIK MARKOVICH: Yeah. So, I always knew that I’m not going to end up in McAfee for a long time. I actually gave myself three years. Eventually, I stayed four, so that’s the power of inertia there. But as part of us being acquired, I got to know my future co-founder, Rishi. So, we had offices next to each other. And I had this small espresso machine in my office. And he would come in, and every morning, we would drink coffee and kind of chat. And I was probably, after three years at McAfee, I was kind of giving up. And then Rishi and myself and my other two co-founders in Israel kind of decided, okay, what’s next?
And so, it was always kind of obvious we were going to do something together. And so, when I came to start Demisto, my second startup, I was way more experienced. I knew what it meant to be an entrepreneur. I knew what it meant to start a startup. I knew what to look for, go-to-market and so on. Even, I don’t know if you call it small things, but super important things, like work/life balance. I actually understood much more about what works for me and how should I kind of do that. And so, that journey, you really cannot compare it, right? And the second startup, it was such a positive experience all around that it was clear to us that even after the second startup, we’re going to have a third one, so.
JON SAKODA: Well, let’s talk about being a second time founder at Demisto. So now you have all the benefits of the lessons learned from the first startup. Looking back, was there a different formula for the second time that you think made a big difference in the ultimate outcome?
SLAVIK MARKOVICH: Oh yeah. I think there’s a couple of things. And I think what really worked well is the fact that we were actually four co-founders, which is kind of a lot. And so, we got to share the burden, which is a tremendous help. You know, you’re not alone out there. And sharing between four is really nice. The other thing is that we decided from the get-go to be fully equal in everything. So there was not ever any discussion around, “Hey, why is he getting more than me?” or something like that. To us, again, it worked well.
JON SAKODA: Can you talk about decision making? I think a lot of people love the idea of having a lot of founders and co-founders. But with four founders, how did you all decide to make decisions?
SLAVIK MARKOVICH: I think we kind of four don’t have a lot of ego, so it was a lot of times, we agree on things. So, eventually, look, I was the CEO. So, in some cases, I actually had to make a decision when we couldn’t agree. But I can probably count those type of decisions on hand, right? It’s usually, we all agree on a course of action and go forward. So, that was that. I think we’re all also very good friends in life, not just in work. And we actually consider being friends in life even more important, right? Those guys are like my brothers, like family. And so, that’s super important to us. So, that never was an issue for us, honestly.
JON SAKODA: That’s awesome. So, it sounds like a big difference between the first company and the second company is just having a bigger founding team, which sounds amazing. How did you guys
come up with the idea this time around? Was there something special about that process that was unique and different?
SLAVIK MARKOVICH: I think a big part, and again, that’s lesson learned from previous startup, was going out and talking and interviewing a lot of potential customers. So, we started with an idea, and now hindsight, it was a shitty idea. So, we started with this idea. We went—I still remember, it was, I will say, of 2015, we had like 50 meetings, interviews with CISOs. And we presented our idea, which was, by the way, an EDR but with a P2P distributed database that was super scalable. That was the idea. And pretty much, the common response was, “Another endpoint? No thank you.” After we have Cylance and CrowdStrike and McAfee? No thank you.
And so, we actually asked them, “What is currently top of mind for you? What’s hurting you? What’s preventing you from being successful? What are you focusing your time on?” And we actually did a very open-ended questions interviews with those CISOs. And they talked about the same things, right? “There’s not enough people. We cannot hire fast enough. We have very fragmented processes on the back end of how to respond. We don’t feel in control.” All of those things. And that kind of led to this whole Demisto journey. And so, we pivoted even before we started to something completely different, just based on all the feedback that we got. So, that, I think, was really important. So, one decision maker for a problem that really hurts and is very kind of common across everybody, it’s a very different way to start than when I started Sentrigo.
JON SAKODA: Remind everybody what Demisto does. We have some people in the audience who I’m sure are incredibly familiar with security orchestration. But it would be great just at a high level to remind people what the product did.
SLAVIK MARKOVICH: Yeah. So, the space, as Gartner calls it, is SOAR, security orchestration automation and response. And the idea is that you connect to all the security tools in your organization and can define a process, or in security speak, it’s like a playbook or a run book, where the process is consistent on how to respond to alerts or whatnot. So, what we did was, on a very, very high level, you have like three pillars there, which are kind of the whole case management, okay, where to collect all the tickets or the issues or the alerts, who to assign to them, you know, all the priorities, all of those things. Then the playbook part, which is, can we automate allow things, make the process consistent and so on. And then we also had a collaboration part, which was an innovation. Nobody did it before in this talk, is okay, when you’re dealing with a ticket, sometimes you’re not doing it by yourself. There’s a team. And so, how do you collaborate? And this is where we had this Slack-like process to do that. So, those three pillars eventually became Demisto.
JON SAKODA: So, this time around, you have a great team, you have a great idea. Everything’s going great. Tell me about some of the highest highs, and more importantly, the lowest lows. What was it like scaling up product market fit from the very beginning? How hard was it to go from having early adopters and early customers to scaling up revenue with a sales team, and how long did it take you guys to really figure out your go-to-market?
SLAVIK MARKOVICH: Yeah, for sure. So, when we actually had our first product, we didn’t have any sales guys, right? So, just Rishi and myself talking with folks in the community, doing a few demos. We closed $640k ARR in the first quarter where the product was available, which is great, you know?
JON SAKODA: That is crazy.
SLAVIK MARKOVICH: Yeah. It’s really awesome. So, we actually felt that the product market fit was right there from the get-go. And that actually led to an interesting mistake that we did, because if you’re talking about highs and lows, at this point, we said, “Oh, we have product market fit. We got everything figured out. Let’s hire a large sales team.” And so, at this point, we raised our second round, $20 million. We had money. And we hired a VP sales, we hired sales guys.
JON SAKODA: You built the army. You put people all over the map.
SLAVIK MARKOVICH: Yeah. Yes. And we kind of said, “Okay, go. Here’s what worked for us. Go.” JON SAKODA: “This is so easy. Look what we did on our own.”
SLAVIK MARKOVICH: Yeah, it’s easy. It’s like we’re closing deals. And really funny, because founders selling and sales guys selling is a completely different ocean, right? As a founder, you get CISOs to really want to talk with you because you’re coming with a lot of experience, and you’re kind of the living spirit behind the product, so they will give you the time of day. They have a lot of sales guys talking with them. And so, CISOs not necessarily want to talk with them.
JON SAKODA: Demystify this for founders, because I know that there are a lot of founders out there that have less than a million dollars of ARR, right? They have a handle of customers. And then they raise money, and they’re told, “Hey, hire a head of sales and start building your sales force.” So, when are you ready and when are you supposed to hire salespeople?
SLAVIK MARKOVICH: First of all, when you hire, don’t hire too many. Don’t hire a team, I think. When you actually have enough experience is probably 10 design partners. That would be a good place to start. And also, take into account, which we didn’t, these sales guys have ramp-up. They need to be trained. They need to develop their own playbook for the sales process. And we honestly, we hired those sales guys, and we said, “Go.” And then we stopped doing sales. We kind of focused on the product. And the end result is that I remember that board meeting where we have the new investors coming in, and we just raised $20 million based on the fact that we did $640k, and we closed one deal, $110k, for the entire quarter. And that was an awkward board meeting, because—
JON SAKODA: Right. With an army of people selling the product.
SLAVIK MARKOVICH: Yeah, exactly.
JON SAKODA: Yeah.
SLAVIK MARKOVICH: And you’re kind of—you’re almost not sure what happened. It worked so easy for you. Why can’t they do it?
JON SAKODA: Right. It was just me before, and I closed five customers. SLAVIK MARKOVICH: Exactly. Exactly.
JON SAKODA: Now I have 10 salespeople, and we closed one. The math is not supposed to work this way.
SLAVIK MARKOVICH: Yeah, no. So, make sure to give them the time. And the sales guys not necessarily have your experience. You have to equip them with all the material, and you have to train them and do a lot of demo sales with them, and they would with you and so on. But we almost did the opposite. We kind of hired them and said, “Okay, go sell.”
JON SAKODA: So, it’s funny. At Sentrigo, you never made this mistake because you always assumed it was hard.
SLAVIK MARKOVICH: Yeah.
JON SAKODA: But here, you sort of assumed it was easy, and that’s why maybe you hired the salespeople so quickly.
SLAVIK MARKOVICH: Exactly. It was so easy for us, so why not?
JON SAKODA: Right.
SLAVIK MARKOVICH: I think we actually fixed it pretty quickly. So, we both made the product easier, which is also very important. And we kind of understood, we had this spreadsheet of all the assumptions. So, six months of ramp-up for a sales guy. That was one of the assumptions there. And that kind of dictated your top funnel, like how much can you bring in, what is the expected result, what is the conversion rate. And so, this kind of helped us dictate when to hire more and how to train them, and all of that. And we eventually actually made that year very successful. So, even though the first quarter was $110k, one deal, the entire year ended up with $4.4 million.
JON SAKODA: You caught up very quickly. That sales team got very productive.
SLAVIK MARKOVICH: Yeah, which was very successful, by the way. Based on all the lessons learned and how to hire and when to hire, the next year was even more successful. We ended up with other $21 million in ACV.
JON SAKODA: This is such a great story, and the results speak for themselves. So, you’ve got to be now one of the fastest-growing cybersecurity companies. It’s been a couple of good years now. Things are going great. Tell us the story about how you eventually exited to Palo Alto Networks.
SLAVIK MARKOVICH: Yeah. So, this actually was a much harder discussion, I think, than we had in Sentrigo. So, first of all, the way it came to be is kind of funny, because I got approached by Nikesh, the CEO of Palo Alto Networks. The approach was like, “Hey, do you mind kind of coming in, educating me about what you guys are doing, market and so on?” And I actually did not think about M&A. I didn’t even think about Palo Alto as a potential acquirer, because in my head, Palo Alto was this firewall company, and not necessarily everything else. And so, I said, “Sure, yeah, let’s talk.” I didn’t prepare anything. So, I had my customer presentation, pretty much. And I came in, I said, “Hey, this is what we’re seeing in the market. This is why we’re successful. This is what we’re trying to do, what we’re trying to achieve.”
And the M&A guys are sitting there, and we’re like, “Huh, that’s quite a lot of people for a simple education session.” And then Nikesh goes on the whiteboard and starts drawing, “Here’s where we see you in our strategy, and this is how we should collaborate.” And I’m like looking at him as like, this guy is not a security guy. What is he doing next to the whiteboard? Just show you how smart the guy is. He got up to speed very fast. He could talk security from pretty much after a month of being in Palo Alto Networks.
But anyways, so he’s drawing those things on the whiteboard, and I’m like, “Yeah, sure. We could collaborate.” But I don’t want to talk about anything strategic. I just raised my run, so I just finished a $43 million third round into the company.
JON SAKODA: Right. So you have over $50 million sitting in the bank, and you had just done this successful fundraise.
SLAVIK MARKOVICH: We’re doing great as a business. I’m like, why should I even consider that? So, Nikesh actually asked me in that meeting, “Would you consider anything strategic?” And I said, “No, not at this point. Let’s talk maybe in a year. We’re happy where we are,” and so on. And then Nikesh kind of starting WhatsApping me. So, “Hey, man, let’s talk. Come to my house for breakfast,” and things like that. And eventually, we had another conversation over the phone. It kind of started mentioning numbers. And initially, obviously, the numbers were not something that I would want to do. But once he started mentioning numbers, I actually thought, Oh, this guy’s serious. He’s actually thinking about that. Now I need to involve the board, right? Because at this point, this is now becoming a discussion of what we should do.” And so, I kind of brought in the board.
JON SAKODA: And conventional wisdom at this point is because you’ve just raised a round and business is going so good, conventional wisdom is to not sell, right? And I’m sure there was a lot of consternations and difficult choices at the board level too.
SLAVIK MARKOVICH: So, the board as very supportive. They said, “First, you make up your mind what do you want to discuss or not, or where do you want to take it.” And so, we had an internal discussion, the four co-founders. And it was really, really kind of tough decision. Hard discussion about should we continue? And there’s a good path to actually big success. Or should we even contemplate a conversation? And also, we know they are going to do something. How bad is it for us if they acquire a competitor? A year before, Splunk acquired Phantom.
JON SAKODA: You had seen some consolidation in the industry.
SLAVIK MARKOVICH: Yeah. So, we’ve seen some consolidation. And now, if two very large companies are in that market, how of an impact it’s going to be on us. And then if the price is right, what is that right price for us as founders? And look, we’re not going to lie, there’s personal considerations here. This is life-changing money. So, we made an internal decision that if the price is above half a billion dollars, we will entertain the discussion. We talked with the board, and most of the board members said, “You guys are crazy. You should not even entertain this. You should continue running.” And in hindsight, they were probably right. But we were kind of scared of, oh, is it going to be a downturn? If 2019 is going to be a bad year.
JON SAKODA: Yeah. You were relieving 2009 at this point, right
SLAVIK MARKOVICH: Yeah, exactly. JON SAKODA: Yeah.
SLAVIK MARKOVICH: So, you’re kind of thinking, okay, if it’s a bad year, how will it impact us, and so on?
JON SAKODA: Now, in your defense, there was a widespread feeling that the cycle had been long, right? This was pre-COVID. The bull market had been running for about 10 years now. And I remember a lot of very savvy founders were exiting via M&A just around this point in time.
SLAVIK MARKOVICH: Yeah. And I was pretty sure the market is going to have a downturn. And just shows you how wrong I was. It took three more years after. But yeah, so we kind of decided, okay, there’s a number that we are willing to take the deal. And now we need to kind of understand how to justify that number, and if I’m going to go into the negotiation, I need to come with the right materials prepared. And so, we looked at public market multipliers of companies of top line, and I kind of prepared this argument of, “Look, we are happy where we are. But if you want to acquire us and affect our kind of trajectory and road map, then you need to pay the next year prices already.” And so, into the discussions, I came with this number of, okay, a dime less than $750 million, let’s not even discuss. And eventually, we kind of got closer to where we were. It was $600 million, plus their retention for the employees, which ended up very close to $700 million, so to say. So, I wasn’t that far.
JON SAKODA: Yeah, no. A great exit, by all accounts. So, these are very different acquisition processes, right, your first company versus your second company. Maybe you can try to provide some generalized advice on how people should think about exits?
SLAVIK MARKOVICH: I think that general advice is really true. You have to focus on your business and making it as much a success as possible, and take care of your customers, and then success will come out of it. I have a lot of discussions with founders about what is the right time. And a lot of it is super personal. So, I just want to comment here to the listeners is, don’t be afraid to look at your kind of also personal situation and where you are. And so, sometimes that drives decisions as much as anything else, because in Demisto, I was already after a successful exit, but my other three co-founders were not. And so, it kind of drives some of the discussion.
JON SAKODA: I’m so glad you’re bringing up this point, the decision of who to sell to and when to sell. It’s a really personal decision for every founder. And I also think it’s so great that you guys can remind everybody that even though the Demisto journey is over, you guys as founders are not done in any way. I know you can’t go into a lot of details now, but you guys have now all left Palo Alto and have started another exciting company. So, maybe you could just tell us about the inspiration for the next adventure.
SLAVIK MARKOVICH: One of the things that was really exciting for us to do is kind of make a huge impact across the kind of regular consumers out there, when it’s really early days, we just started. And going to try to build better applications which are more secure without the need of passwords. That’s kind of the very, very top level kind of what we will try to do in the new company.
JON SAKODA: That’s awesome. Well, you’ve been incredibly generous with your time. I just have one last question as we wrap up. So, what advice do you have for founders today? And do you have any lessons for your younger self?
SLAVIK MARKOVICH: Yeah. As advice, I would say, first, be really kind of passionate about what you want to build. It should be important to you. So, that’s one thing. But also, don’t be scared to listen to input from pretty much everyone you’re talking with. So, getting the input, going out there and having as much discussions as possible, I think it’s critical. It will change the trajectory of what you’re building and what you’re kind of trying to do. And don’t be afraid to pivot. Don’t be afraid to change based on that input.
Advice for my younger self, I would actually go back in time and change work/life balance. There’s things that I did miss—twin girls kind of growing up, and me being 18-hour days of work. So, my advice would be, be smarter about how you work, and not necessarily work harder, but be smarter.
JON SAKODA: There is no better way to wrap up than to end with that advice. Slavik, you have been an incredible guest, and you’ve given us all a lot of great advice and some funny stories along the way. Can’t thank you enough for being here.
SLAVIK MARKOVICH: Yeah. Thank you for having me. And happy to share whatever small nuggets of wisdom I have.