Taking cybersecurity investments to the next level
Recently, the Forgepoint team announced a new alliance with global banking leader Santander to increase cyber investment worldwide, specifically in Europe, Israel, and Latin America. Santander will also be the primary investor in Forgepoint’s next fund, slated for 2023, with a nearly $300 million goal.
This was the perfect reason to connect with Alberto Yépez, the co-founder and Managing Director of Forgepoint Capital. In this Help Net Security interview, the former Trident Capital leader offers insight into innovation in the cybersecurity market, M&A activity, pitching to VCs, and more.
When you look at today’s cybersecurity industry landscape, what drives innovation?
Innovation is always driven by a need. What does the market need right now? What do customers need? How can the ecosystem adapt to serve those needs? Innovation provides solutions that expedite answers to problems, and successful businesses are built when they do this.
Today’s rapidly changing macro environment combined with the demands of an evolving threat landscape makes this the perfect time for company building. Now, businesses that did not satisfy needs will no longer survive, while those that do will thrive.
The cybersecurity market is prone to mergers and acquisitions. How will this impact the future of the market?
While we may see a wave of consolidation, which is expected given the amount of venture financing committed to cybersecurity in the last few years, organizations now face the decision to either raise more funding in a challenging environment as valuations normalize or seek an acquisition, as growth investors shift away due to market conditions.
Public and larger private companies will continue to buy startups that are innovative and leading-edge, filling gaps in their current offerings to offer wider, more integrated solutions. These companies provide new capabilities that address new threats and give them access to high-growth market segments while helping them stay relevant.
Ultimately, M&A activity will have a positive impact on the industry because large enterprise customers benefit from integrated solutions that reduce the total cost of ownership of these solutions. Customers also benefit from these integrated services as they help meet critical enterprise needs and ease the strain caused by the global shortage of cybersecurity professionals.
Company founders spend a lot of time preparing their pitch, but it can take a long time to get VC, even with massively successful products. What advice would you give to those getting ready to talk to VCs?
I advise founders to take a long-term mindset and remember that fundraising is a people-driven industry. While initial timelines may achieve certain funding goals, securing funding means building real relationships and creating a network of trusted partners. Taking the time to do this well will have an immediate impact upon your success.
In a competitive fundraising environment, VCs have to make quick decisions. To do that, we depend on both our own experience, as well as the experiences of our network and our close connections who we can rely on to provide strong counsel. An introduction to a startup from a trusted friend with relevant expertise and background is one of the most productive relationship builders – for both sides.
These trusted relationships will open the right doors for founders, then it’s all about how you tell your story to the VC. The clarity and direction of your thinking can tell a lot about the company’s market position and opportunity you’re out to tackle, as well as your future priorities. Here, introspection and self-awareness shine.
Having a people-driven mindset is helpful because it has multiple natural side benefits. Networking requires us to build relationships with individuals beyond the short-term, casting a net that can include VCs as well as future startup customers or potential hires. Networking with VCs may also suggest you meet with others and while these introductions may not be directly about fundraising, they can help you get exposure to potential customers, team members, and advisors for input on your tech, business, and model. This leads to opportunities to learn and refine your approach from diverse perspectives.
What do you value most in an entrepreneur you want to invest in?
The traits that I find most important in entrepreneurs are subject matter expertise and the know-how to execute. Prior experience as an entrepreneur with a track record of building commercial offerings successfully commercialized and adopted by customers will allow for deep domain knowledge of the sector that they’re working in, which is very important when scaling organizations. In my experience, serial entrepreneurs typically have a leg up compared to first-timers.
That being said, all of this doesn’t matter if an entrepreneur doesn’t know how to lead. The ability to recruit and retain high quality talent, and then continuing to work with them to grow as the organization expands is a very important trait that is paramount to the success of any organization.
What advice would you give to European and Israeli companies trying to get funding in the US?
Forgepoint partners with emerging companies from Croatia to Mexico, Madrid to Tel Aviv, and has been actively tracking thousands of companies worldwide. It is abundantly clear that the cyber ecosystems across Europe, Latin America and Israel have an incredibly rich talent pool, strong demand signal and robust capital accessibility – and that cybersecurity is a growing, global problem.
While the current macro environment is challenging, organizations looking to get funding in the US will succeed if their product and complete offering solve a demonstrated need in the market. When it comes down to it, it’s all about five fundamentals:
- Large market opportunity
- Differentiated offerings that are hard to replicate
- Sound go-to-market strategy
- Ensuring the right team is in place
- Product market fit as demonstrated by early customer traction
Israeli and European companies trying to get funding in the US should be able to clearly speak to these fundamentals, demonstrating how they’ll incorporate the US into their go-to-market and growth plans as they partner with investors, form channel alliances, and further develop their businesses. Thinking this through can be enormously helpful in identifying which VCs to approach – which will bring value and help augment your business.