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Nick Ellsmore, co-founder of Security Colony (third from right)

Startup stories from San Fran: diary entry two – shifting from very interesting to very useful

Security Colony was one of six cybersecurity companies selected by Austrade & AustCyber to take part in the Federal Government’s Landing Pad program in San Francisco. In this exclusive series for Dynamic Business, Nick Ellsmore, co-founder of Security Colony shares his journey as he builds his second business (the first sold to BAE Systems) and introduces an Australian-built cybersecurity solution into the global market against the backdrop of the Californian startup and investment scene.

Diary Entry two

We’re not even through the first week yet, but it feels like I’ve done about four weeks’ work already. People who’ve been here for a while just look at me knowingly, mentioning that the velocity of San Francisco is noticeably different to pretty much anywhere else in the world. I’m starting to appreciate that.

My favourite book is Microserfs by Douglas Coupland.  The book tells the story of a group of coders who decide to leave their “veal fattening pens” at Microsoft and do something “one point oh” building something genuinely original. Released in 1995 when I was going to school in Tasmania, smart phones were not yet a thing, and the Internet was very much in its infancy, it created almost all the imagery of Silicon Valley that still stays with me to this day.

We made the trip down to Menlo Park, one of the suburbs that makes up Silicon Valley, and for me, one of the fascinating things about the whole area is just that it is so suburban. Wide streets, low-rise buildings, beautiful trees, and very little to give any indication that inside one of the many nondescript buildings you drive by, someone is probably right now creating the next big thing.

We had a meeting and briefing with Silicon Valley Bank who are a very significant influencer of the ecosystem here and around the world, seemingly controlling a massive proportion of the movements of funds between investors and startups. At that meeting we were also introduced to Trident Capital Cybersecurity, the world’s largest venture fund dedicated solely to early stage cyber security investments. Both SVB & Trident had some good advice about the US market and fundraising.  As always, many big numbers were thrown around… 2-2.5 million unfilled cyber security roles in the US here; 4.3 x revenue multiples there; and lots of numbers involving billions

As interesting as those meetings and briefings were, it was a fellow cyber security entrepreneur, Amir Sharif, co-founder of Aporeto who said the one thing that has really stayed with me.

Amir explained that when he first started taking Aporeto to market, there was a lot of really positive feedback. Great, right?

Not necessarily, it turns out.  To paraphrase Amir, much of the feedback was that their product was “very interesting”.  As he pointed out, there is a gap between “very interesting” and “very useful”. And people don’t often get their cheque books out just because something is interesting.

This message really resonated with me because having torched a previous pre-Hivint business in Singapore after exactly this experience almost two years of potential clients saying how happy they were to see us there and how they really liked what we were doing, but then ultimately seeing zero in revenue coming from all this goodwill – I am particularly sensitive to the fact that there is a big gap between potential clients being nice to you, and potential clients becoming actual clients.

Amir’s key point was that it’s not enough to be interesting, you have to be useful.  When engaging with prospects, this requires better questions.  It’s not enough to ask: “What do you think – is this a good solution?” or something similar.  The questions have to flush out the truth.  Some suggestions:

  • “How would you operationalise this solution?”
  • “How much would you pay for it?”
  • “How would you integrate it with your current business processes?”

It’s only with this kind of probing that you’re really going to get to the truth, particularly in an environment where you’re selling to people you know reasonably well and who don’t want to hurt your feelings. People just don’t want to tell you that your baby’s ugly.

It’s simple, but powerful advice. And certainly something I’ll be taking on board when having discussions about Security Colony over here. And of course a lesson I do my best to heed: never stop listening, never stop reading, and never stop learning.

Related: Startup stories from San Fran: diary entry one

About the author

Nick Ellsmore is the co-founder of free-to-join cybersecurity resource Security Colony. He is also the co-founder of cybersecurity consulting firm Hivint, the winner of the 2017 Telstra Business Award “Business of the Year” in Victoria.

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Nick Ellsmore

Nick Ellsmore

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