How does founder stress impact your exit negotiation?

Episode 97 - Ron Reiter Transcript Jason Kirby (03:47.117) You know, tell me about your childhood. It's like when you realize Oracle is about to buy you, like, what were you going through? Why were you selling? What was the decision making going through your head? And that's kind how I usually start. And then we'll start unwinding your background as we go along and kind of your angel investing and other stuff. Ron Reiter (04:09.134) So I think the first thing that happened when we realized that Oracle wants to buy us is that we understood that it's the right time to get a banker. And at the time, the only reason that we knew that it's an option is because people have reached out to us and offered their services. And we were very young at the time. I was only 28, 29. My co-founder was 30. We had another co-founder that was, I think, 35 at the time, 36. And we had a rough time. mean, it was scary, right? We had some close encounters with almost writing out of capital. And we got our main data source shut down at some point. So crosswise, what we basically built as technology to identify people across their devices. And you have to have a lot of data for that. So we had some close near-death experiences there. So we really wanted to sell. We wanted to realize the value of what we've built. And we almost couldn't believe that we built something that has value. We kind of had this notion that if someone you know, we're kind of close to quitting because of the stress. And if we quit, then everything disappears, right? That's what you feel when you're a founder, right? And it's a constant feel. It's just something that, you know, maybe it's some sort of mental disorder, I guess, right? It's like imposter syndrome of some sort. It's like you don't really believe that what you've built is worth it. tens of billions or hundreds of millions of dollars, right? It's kind of hard to believe. And at the same time, you're expected to act like it's worth hundreds of billions of dollars, right? So, and I think all founders have this feeling, right? When there's like this gap between what they're supposed to, what they're expected to behave like across, you know, in front of people, in front of customers, in front of the board, in front of the market versus what they feel internally. Ron Reiter (06:35.712) And it's it's a gap that every founder has to manage and has to control. And sometimes it's, it's a real, right? Sometimes you have to fake it until you make it. Sometimes it's not real. Sometimes it's, you've actually built something that has value. And, and, and what I, and I think what I really kind of missed in the journey is that, you know, if I quit today, I still built something, right? Something. It's not everything about just me, right? And that's the scary part when you a company. And that's why selling a company once you get an offer is so desirable, right? It's a way for you to check out, to exit, right? To reduce the risk, to stop for a second and say, okay, I actually built something. Now I can continue. Whereas when you sell your company, you don't actually continue, right? You end it. Jason Kirby (07:35.823) It's amazing you bring this up in the context that you do when it comes to the exit experience. You're talking about like there's this huge burden on your shoulders. You realize that selling was in your best interest, which I want to go back to in a moment. But then when you sell, so in your case, Oracle ends up acquiring, you spent several years with Oracle after the fact. Did you feel that kind of founder burden? be lift off your shoulders after the acquisition. Ron Reiter (08:07.192) course, I was a free man after the acquisition. I think it's not only about the money. I think it's about the responsibility. You can drop the pen, right? You cannot do it while the company is yours. And I'm a person, I actually like being managed. Right? I mean, it's very, the Your life becomes much easier because there's expectations. You can manage them. When you're a founder of a startup, you manage the expectations in front of the employees and the market, right? Do you have to set the tone? There's no such thing as knowing. Like there's never a day that you wake up and you can tell yourself, okay, I'm doing well because... I am meeting the expectations of my board or my, no, because tomorrow morning a new startup can come up and destroy your company. And it will be your fault because you didn't think it through because you didn't realize that this is something that could happen. Jason Kirby (09:16.014) So painful. I sometimes I do this podcast again, like PTSD of moments where I'm just like, oh, like those moments where you're in the trenches and you got to make a thousand decisions a day. And ultimately it's like only really one decision leads to like the outcomes or like the big shifts, but there's still just people pulling in a million different directions, asking for different things. And it just, it adds up. So I can totally resonate with you on the desire to be managed as opposed to be the one set of expectations. When it comes to Crosswise, you sold the company, think it was in 2016, I believe originally. But you raised about five million. So had some VC expectations. What was, you walked us through why you sold, but walk us through the process. So you started getting inbound from the bankers, and then I imagine you ran a process. So kind of walk us through that experience. Ron Reiter (09:49.699) Yes. Ron Reiter (10:10.958) So I think, and again, mean, the constant feeling that all of the founders had is that we have to sell the company because it's very hard for us mentally, right? So when the Oracle opportunity came, so basically what happened, I mean, I'll give some background. So there was this new business unit that was being built inside of Oracle called Oracle Data Cloud, then became Oracle Advertising. It was adjacent to Oracle Marketing Cloud. And it was very focused on ad tech, advertising technology. And it started out with a big acquisition of a company called Datalogics for, I think, over a billion dollars, and then moved on to another acquisition of a company called Blue Chi for a few hundred million dollars. And then They had basically a strategy of building the largest data provider for advertising. And not only advertising, but it started out this way from a financial perspective. But the strategy was to build this world's best ad tech company. And for doing that, you have to have cross-device technology. There were a few in the market. I think we had the best technology at the time. It was actually proven by Oracle. It was actually proven by DataLogix, which was a company that Oracle acquired and then became Oracle. So they actually POC'd us against other vendors. And we were not only the best, we were also the cheapest. If you think about it, we only raised $5 million at the time. a reasonable amount of time today, it's like what we burn in a month. But it is what it is. So we had good technology. And Oracle basically expressed interest in us. They didn't say, want to buy you tomorrow. They didn't give us a term sheet. They just said, well, we want to buy you. I mean, we don't know exactly when. It's something that is interesting for us. Ron Reiter (12:35.342) I mean, they didn't say it exactly that way, but you know what I mean. And then that was, that was, think September of 2015. So me and my two founders basically sat in the room and then we said, okay, Oracle wants to buy us. What do we do? And by the way, it's actually the second time that we got an offer. The first time we got an offer was another company that also wanted to buy us. I won't mention their name, but they're also in the Atex space and They wanted to buy us for like, I think, $25 million or something of that sort. So we weren't really interested in that option because we thought it was too low. Actually, it was even a bit less than that. So when the Oracle acquisition opportunity came, so we realized Oracle has a lot of money and they have a very strong strategy around that. So what we did is we said, OK, we have this, you know, we're going to sell the company. That was the decision. And to make that decision happen, you can't tell Oracle, you you need to buy us right now, right? Because you have to have some sort of leverage, right? So if you want something to happen, what do you do, right? So the bankers came in and said, we're going to sell you, right? We're going to find competing opportunities. We're going to find more companies that will want to buy you. And maybe there's going to be a bidding war, but eventually at end of the day, you know, we will sell you and we have financial interest to do it. Right. So we signed the bankers and we were also very inexperienced with the process. And we really needed someone to take that off our backs. Right. Especially the fact that a banker actually represents the board and not the founders, right. It actually makes it much easier for the founders and the CEO to negotiate both between the board members and and the founders and the company that wants to acquire it. So that's what we did. It was very fruitful because I think about a month later, they brought in a competitor. We actually took a flight there and we met the team. They were very excited. They actually gave us an offer. And then the bankers basically suggested to take that offer and give it back to Oracle. Ron Reiter (15:00.558) It took Oracle three days to come up with a term sheet. Jason Kirby (15:04.119) Nice. Ron Reiter (15:05.378) And that was very exciting. We realized that we can continue this. had a board meeting and we could have for sure continued this, but we were so afraid that this deal would disappear that we just said yes for the, to the first up, they were low ball, right? They basically gave at the end of the day, it was about 50 million. So it wasn't that, I mean, it's still a lot of money. right, especially when you only raise five. So it was okay. But you know, what I do remember is how and like, we were really in confident with what we built, like we felt that what we built is worth nothing. So if something is worth nothing, why let's just get anything right. I mean, I'm just telling you what Jason Kirby (16:01.752) What did your bankers say in that situation when you kind of just took that first offer for a Ron Reiter (16:06.51) There was disagreement in the board. VCs wanted us to negotiate. And we were afraid. We said, no, we want to take it. And the bankers said, OK. mean, the bankers eventually have to agree with what the board says. And since we're still control the board, then It wasn't even a question. It wasn't. And again, at the end of the day, you know, those VCs, don't want to go against the founders. They never want to go against the founders unless they really, unless they think that the founders need to move. Right. So they really didn't have an option. So we just sold it. Right. It's like, if I look at it, you know, if I go back and would have we done something differently? I don't know. I don't know. I honestly don't know. I don't know because you never know these things usually. I mean, I constantly hear about stories. Just recently I've heard a very sad story around, you know, a CEO being acting with a lot of ego. And that basically broke the deal because the person didn't want to just didn't want to. buy him because of the person, right? Not because of the technology. He ended up buying a different competitor with technology that is by far worse because he just didn't want to talk to the founder anymore. Jason Kirby (17:46.543) Our personalities matter when it comes to deal making. At the end of the day, AI is overtaking the world, deals still happen between humans. So when this was going on, what was that offer if you don't have to share like who, that first, you got a first offer to kind of like, all right, this is the not serious offer, 25 million, whatever. What was that second offer that you got from the competitor? Ron Reiter (17:49.282) very much. Ron Reiter (17:54.434) Yeah. Ron Reiter (18:10.414) It was around 30 plus, 32, 33. Jason Kirby (18:19.552) Okay. So Oracle came in with a serious premium on that. So I can see why you felt, and like you had the relationship. And this is something I love to of point out to the audience. Like this is how a lot of deals get done. It's like POCs with large enterprise companies and they ran a process themselves, Oracle did, with multiple different vendors chose you. And so they were eager to do a deal that just had to be a catalyst. Ron Reiter (18:25.027) Yeah. Jason Kirby (18:47.202) Bankers create catalysts because they're like, gosh, now they're serious. They're breaking it outside out. We gotta try to end this quickly. And yeah, you never know. You go back, push, something changes. You just never know what happens. It happened to us. My first transaction was supposed to be Samsung was supposed to buy my company. And my board got greedy, not us. Our chairman went around our back and tried to renegotiate the deal that we were all very happy about. because we were doing everything under the right and he came back, pushed back and then the time that they had to go back and reconsider, should be about a week or two, Stemson's CEO went to prison. Just like, oh my God, you can't. So. Ron Reiter (19:26.864) wow. Yeah. my God. So in your case, I think it's actually easier because what happened with the board didn't reflect on you, your personality as a founder, right? Because when the acquiring company buys your company, they buy you, but they don't buy the investor, they buy them out, right? So that's actually something, I mean, I would be... I would prefer that would happen to me versus the other way around. But of course, you don't want to have the deal at risk. That's for sure a problem. I think the best, the way you want to have a deal like that happen is like you as a CEO want to come to the acquirer and say, listen, I want this. I'm dying to take this. deal that you gave me, right? I'm truly honored and humbled by it. But my board doesn't, this won't apply with the board, right? Like this is not something I can take to the board. Like you have to understand it's not because of me, it's because of my investors, right? You kind of want to do that regardless of what you think, right? You can do it because, you know, this is what you think or because you want more, but you have to say these words when you want to raise your offer. you can't say, I mean, you can. But you probably shouldn't say something like, dude, I'm worth more than that. I'm sorry. You have to go and give me a better offer. Because if you do that, it doesn't sound good, right? Jason Kirby (21:06.094) It doesn't, it comes off. And then it's like, sometimes that's a final invest and you don't know. if you don't have leverage, again, it all comes down to leverage and deal making. And it sounds like your bankers are just getting started. Maybe there could have been more leverage, there could have been other opportunities to push Oracle up. at that point, it's really kind like you're... Ron Reiter (21:30.424) Yeah. Jason Kirby (21:33.999) There's something I look at founders all the time is the stamina. Like does the founder, founding team have the stamina to put up with what comes with them saying no and having to go through another year or two of grind? And what happens that year or two? mean, the mental load and the stress that comes with that. that's like some founders that have the ego totally have that and they're fine. And then others that are like, you concerned about potential, you horses, maybe like you were feeling like you didn't feel like you had everything perfect, you felt the value is zero. So 50 million sounds great. So it's just dealing with the psychology of the deal making is what makes deal making so unique and all the different structures. Ron Reiter (22:16.334) Yeah. I, and I think, uh, the acquirers know, and they smell blood, right? If they can, if they see that either you're running out of cash or stamina, some, some people call it grit, right? Uh, is they'll, they'll give you an offer, a low offer and they'll know you took it. But like, if you are really confident in what you've built, right. And you get more deals on the table. then obviously, eventually at end of the day, if the deal doesn't go through, then nothing bad happens. If it does go through, then great. You have the deal and everyone's happy. So it's definitely something that when you go into an acquisition, you have to come strong, both mentally and financially. Jason Kirby (23:11.256) So you sold the company. Was there a kind of retention agreement or golden handcuffs that you had to stay for X amount of years? Or were you like, I'll cash, goodbye if you want to, stay if you want to? Ron Reiter (23:26.584) Yeah, so we had a two year hold back and a four year RSU plan. And I stayed the whole four years and quit basically the day after I finished my dusting. So yes, it's usually the case, right? I mean, it's usually between two and four years for kind of R and D type roles. And sometimes for go to market roles, they could be less than that. Because, you know, in most cases, In most acquisitions, I think 90%, I would say. I'm not sure if that's the real number, but if I had to guess that number. In 90 % of the acquisitions, the acquirer buys the people and the technology and the product. They don't buy the business usually. Usually the business comes from the acquirer because if they buy your company, they usually have an existing business and they can capitalize on your existing go to market team to sell your product, right? In some cases, know, Wizz, for example, that's a very good example, because that's a huge acquisition. They bought the whole business, right? They bought the go to market team as well. There's another example, I don't know, in cybersecurity that people might have heard about, which is perimeter. 81 that was acquired by Checkpoint for a half a billion dollars. And in some cases, you actually buy the business, but in most cases, especially with cybersecurity companies that already have a very developed go-to-market, they just want to buy your product and sell it, right? Sometimes even not that, sometimes they just want your technology integrated into an existing product, which they already sell. Jason Kirby (25:18.722) What was Crosswise's revenue when you got sold? Ron Reiter (25:22.86) It was actually pretty high compared to how much we sold. It was $4 million ARR. And the reason it was high is because the deals that we had are enterprise deals. And we had a product that is very rare in the market. So there was only one, basically one competitor that could. provide the same service. And the reason that that was the case is because we actually chose a problem that had a very small market. That was our thesis for why we should sell, by the way. Because if we had a small market, even though we had a lot of revenue, we probably captured like 20, 30 % of the market by then, right? We had to go and find other business. So at the time, our biggest competitor They were named drawbridge They realized that and because they were funded by Sequoia Then Sequoia had high expectations from them. So they basically forced them to become something called a DSP Provider of basically advertising services And that business has way worse margins and it's very it's very hard. It's very hard because you compete with Google and Facebook And they have first party data, right? The whole advertising ecosystem is completely messed up because of Facebook and Google. And by the way, all the limitations and the issues around third party cookies and advertising IDs that have been recently been basically frowned upon. because of that, there's a lot of issues around. GDPR, privacy, right, all those issues kind of made tracking impossible. And that actually created a situation where Google and Facebook are monopolies in that field, right? Jason Kirby (27:28.59) Yeah, I was like 80 % of the entire, you know, ad market or something like that. Ron Reiter (27:32.802) Yeah, even more, think. And so that's, that's kind of a, know, in that sense, I think we did good to the world, but at what happened actually, after the acquisition was that something that I was actually glad in hindsight that we sold the company early because what happened in 2016 is that people started talking about GDPR and in 2018 GDPR basically came into effect and GDPR killed my business completely, right? Because what we did was based on tracking. So it was a very good decision to sell early. we only had the company for two years. We only sold the product for one year. So we got to $4 billion of ARR in one year of sales. Jason Kirby (28:22.029) Well, and that's why you get acquired for 50. Now you, you built something, you capitalized on it and it's a hard decision to sell. But I think you acknowledge it, having the self-reflection of like how you're feeling about business and everything like allowed you to be able to accept an offer early. Or I imagine maybe your VCs are like, look at these numbers, everything's up into the right. Maybe you guys keep going or ask for more. And you're like, there's something at the around the corner we can't see that. given us a bad feeling. Let's pull the trigger now. It was a similar situation when I sold the Liquid Sky to Walmart. We saw kind of like what was coming 12 to 18 months out and we didn't have unlimited cash to fight it. And I was like, yeah, this sounds pretty good. Let's sell. Ron Reiter (29:09.814) Yeah, and I think that in all startups, that happens. If you don't become a market leader in five or six years, you're dead, right? I mean, have to go and either go big or go home. That's something that... And it makes sense because technology becomes commoditized, becomes irrelevant over time. New competitors always rise and the market changes, right? If you don't build a company that's big enough, fast enough, then you won't survive because over time, these companies, build a business and then they start adding more products and they change their strategy. So in companies change, we had to go through the same process in, in central. Right. So we started with a product called DSPM and then we were kind of forced to build a a broad platform because the market has changed and people have more requirements, right? If a company wants to start and to compete with Centra, they cannot compete with us directly on the same RFPs that we have, right? Because we have such a wide product today, then it's very, it's going to be very hard for a competitor to compete against us in that specific world, right? And it's true for everything, right? I mean, you won't start with competitor today because it's, would be extremely hard unless you have a very specific edge, new technology, a very strong why now thesis, right? Something that will make room for you in the market. That's what people mention a lot of times as blue ocean. versus red ocean, right? Blue ocean is the market's wide open. Everyone's new to this product. Everyone wants it. That's a blue ocean. Red ocean is where the markets fall basically with competitors and you have to replace an existing product to make your market, right? In some cases, that's actually easier. Ron Reiter (31:25.838) when you have better technology, because the budget line exists and Blue Oceans, usually the budget line doesn't exist exactly as you want it to be to exist. And then what you want to do is you want to actually build it for the market, build it with the channels and market education. You want to make sure that people understand what you're building. You want to work with analysts. In cybersecurity, Gartner, it's very dominant. So you want to make sure to build maybe a new category in cybersecurity. Do you want to define what goes into this category? Jason Kirby (32:05.697) Let's talk about that. Let's talk about Centra. So to catch the audience up, you sold Oracle, you spent many years at Oracle. And then despite the prefer to be managed and like the Oracle life, you did a bunch of angel investments during that time, what gave you the bug to go back out and start something new again? What was the catalyst for that? Ron Reiter (32:08.078) . Ron Reiter (32:32.332) Well, I mean, I woke up basically asking myself, what do I want to do when I grow up? Right. Like after I quit. And so, and I think what happened was that I quickly got bored. Right. So I started advising and I, and Angela investing more and, and, and then I kind of found myself. I ideating, looking for ideas, you know, building stuff. Cause I'm also a coder, so I like to code myself. So. I was building stuff, I was thinking about ideas. then, naturally, people who want to start companies with me start talking to me. And so I started working with my co-founder, Tlega, here. And he also, I knew him from the military intelligence. We were both in the military intelligence and we were working, we were not working together, but we were very good friends, right? So I really liked him. I one of the things that I realized, I started kind of a lot of thesis, I would say, mean, around what would make me happy. So first of all, I think the most important thing that I've learned during my career is you want to make sure that if you start a company, you do it with your friends. You want to do it with your friends because you want to enjoy. the process, right? You want it and it's, it's fun when you do it with friends. And you also want to be able to resolve conflicts, right? So when you have friendship on the line, then you kind of are forced to resolve conflicts, right? Because a lot of the companies actually fail because of issues with, you know, that people who don't really get along with each other. So I knew that, right? So, then the question became, okay, what would make me happy as a person? It wasn't necessarily starting a company. And I had multiple ideas. One of the ideas that I had, so I do like to create products and I do like to create value. And I had this idea where I might start several companies at once and advise them. And that was an option, right? Ron Reiter (34:58.414) But then, you know, over time, I think what I realized is that what I need to look for is something that would make me happy when I wake up and go to work and say, I am enjoying my work, right? As opposed to what I did with Crosswise, where it was mostly around I was very goal oriented. I wanted to sell my company. I wanted to be this guy who exited his company. You know, everyone talks about, I was really looking for that fame and also the money, like it wasn't, I don't think, I mean, I'm smart enough to understand that this is not the best way to make money, right? I know that there's better, there are better ways to make money on average than to create a company. So. It was mostly around that. so what I realized is that, you know, I need to rethink starting a company because I did want to, and I didn't really know why, right? And then I kind of realized, okay, I need to find something that I genuinely enjoy doing. And so I thought about being a product manager, and I thought about being a CTO, and I thought about being a VP R &D, and I thought about all these things. And at the end of the day, what I realized is that I'm a person who really enjoys technology. I'm a person who really understands how to create value and how to sell. the those, these three things basically mean that I would probably, I would probably enjoy being a CTO, right? And I knew that means giving up the CEO role, which is something I could have done, but it would been basically it's not something I would enjoy doing because it would take me out of my comfort zone. I can explain why, but this is something I did speak about with my therapist, by the way. Like why, why being a CTO for me is much better than being a CEO. So I actually did a lot of thinking around what is my next role going to be regardless of whether or not I'm starting a company. Ron Reiter (37:15.5) So after realizing that being a CTO of a company, it doesn't matter what, right? And product really means a lot what field you're actually working on. enjoying product in cybersecurity is very different than enjoying product in Figma, right? These are two completely different things, right? Whereas being a CTO actually isn't too different than being the CTO of Figma and the CTO, I don't know if it's CTO, but definitely a VPR and D. Right. Because the technology stack, I mean, usually is very, very similar, in most companies nowadays, right. Cloud backend, microservices, queues, Kubernetes. It's all kind of the same, right. Web applications, react, type syrup. Jason Kirby (38:02.157) So I want to touch on one thing. You come to the realization of what role you should play. You have a background. You kind of know where you fit and play into. You start building with your friends. I want to kind of skip ahead a little bit. You guys raised, in my eyes, a monster seed round relatively quickly. did you, well, one, let's start with, why did you decide to raise a monster seed round and how did you guys pull it off? What did you have already lined up? Was it just the right investor relationships? Was it initial traction or contracts or pride? How did you do that? Ron Reiter (38:43.074) That's a great question. So first of all, mean, why is pretty easy? Well, my, my general suggestion to founders, when I advise companies is and raise as much as you can, okay, on the first round, because in the first round, you don't need to prove anything. So you might as well get as much money as you can. And you're probably going to sell your company in evaluation that's greater than your first round. So this is basically a classic market question, right? What is the market for you as founders when you are the product and the VCs are the buyer, right? The person who would pay the most, which means the most valuation, is the person that you should probably go with, right? In the first round, you just need to get as much as you can. Later on, it becomes much more complicated, right? Because the next round, basically, the more you raise money, the harder it is to acquire you. So if you actually want to be acquired, you might not want to go and get too much venture capital because there is, yeah. Jason Kirby (39:53.518) So I normally agree with this, but you raised 23 million in your seed ground shortly after inception, a year or so. That's not just an outlier. That's the far end of the seed. That's less than probably 1 % of seed grounds. was it being thrown at you? Was a bunch of people coming to you and saying, we'll give you five, another guy comes and says, we'll give you 10, another bestseller is like, we'll give you 23? How did that work? Ron Reiter (40:20.526) Great question. Yeah. So first of all, it was 2021. So 2021 is at 30 % to everything, right? So today would be 50 or 20, I don't know. But the reason is because we were at the end of the day, we were four founders, right? And we had a few things that were basically on our side. First of all, I was a second time founder, highly appreciated in the industry, people, all of the investors basically know me in Israel. The second thing is that we had very two senior officials from the army, high ranking commanders. One of them was the head of unit 8200. That is a 10,000 people unit, right? That's the cybersecurity unit in Israel. And then, The other thing that was really for us is that in Israel specifically is a factory for creating startups in cybersecurity, right? So because there is a lot of knowledge on how to create companies in cybersecurity, the risk is actually very low. So the rounds can be actually higher, right? So the combination of a good market second time founder in the mix, high ranking officials in the army and this deep expertise in cybersecurity in Israel made this possible. So we actually got the first offer we got was 20 and then we got it up to 23 because there was more demand and supply. But once you have a demand for you as a product, meaning, know, us four founders going to raise money, once you have demand for that, then you can quickly realize your actual value. And that is true for acquisitions, by the way, as well. Once there's more than one person who wants to invest in you, they will give you and get as much as you can. And it does make sense financially. Our first investors will make money, regardless of what will happen. Jason Kirby (42:36.781) I love the confidence. That's fair. Sounds like a very different mindset in this business than it was with GrassWise. Yeah, I think that's, again, like stacking the deck with the team and then leveraging those relationships to kind of get the max value of pride. So what kind of like, because then it's like, all right, you have a bar, you have an expectation, you raise that kind of money that quickly. Ron Reiter (42:44.406) Yeah, that goes back to my first comment. Remember. Jason Kirby (43:05.165) it's expected that you will continue to assemble the team, traction and whatnot. Like what was the mark for the series A and series B? Like what kind of momentum were you developing to where investors were like, all right, let's double down. Ron Reiter (43:19.63) So for the first round was actually some people call it the FOMO round, right? It was a preemption. We haven't proven anything other than being able to hire people and that is not something that you need to, spending money is not something you need to prove, right? So that's definitely not something. So we haven't proven anything by our A Our A round was very quick. I think it was seven months after the first round. Jason Kirby (43:35.949) Really good at spending money. Ron Reiter (43:46.894) And it was just because we had a lot of interest. And the hype was strong even then with us raising this big round. it's kind of like a self-fulfilling prophecy or a chicken and the egg. It's like, once you see a company that raised a lot of money, you probably want to invest in it more. Makes sense, doesn't it? I don't know. Yeah. Jason Kirby (44:12.173) So lot of easy logic sometimes confuses the rest of the world, but when they're in their bubble, it makes sense. Ron Reiter (44:16.078) Yeah, exactly. And then, so the our last round was actually, we had to have success and we had success. we, we raised it based on ARR, right? And we raised it based on product market fit. So the two things that the market that the investor that did due diligence on us saw and this is that they said that right they proved they checked with customers that acquired Sentra that basically they came to the conclusion that we have the best technology in the market. Again, that's what they told us. Maybe they're saying it because they want me to like them right. But that's what they said. And also, if when you look at our you know what we we we try to achieve in terms of revenue. So we actually overachieve the our revenue numbers and we were at a very good spot. And I think when you see these numbers, what you see is the numbers are still quite low compared to an actual company. We're still at the startup mode. that's startup mode. What you want to do in a B round or I guess that was a B round, right? What do you want to look for in a B round is you want to look for product market fit and you want to look for a healthy company, right? So healthy company is a company that doesn't burn too much cash, but can generate revenue and achieve goals, revenue goals that make sense and would eventually become a profitable company, right? But you also want to make sure that you buy, that you invest in a company that really found pain and could really prove that really proved that they are solving that pain for the market, that there is a product to be sold, right? That's product market fit. And we had these two things. So we sold product market fit, we sold actual revenue and potential. And that's why our company gave our investors gave us $50 million because they want us to get to the next level. Jason Kirby (46:32.939) And is it competitively, like were there bigger competitors spending more or raising more that you did this to outcompete them or you wanted to kind of make sure no one showed up and you raised as much as possible to deter players coming into the market. Ron Reiter (46:50.094) Um, so we are in a tricky market because it's a combination of an old market. Uh, for example, Baroness, uh, they're in the high 600, $700 million of ARR publicly traded company. But then there's also Sarah, uh, which are the new incumbent, uh, which are directly competitor competitors of the Sentra. Uh, and by the time I mean, Jason Kirby (46:50.989) Thank you. Ron Reiter (47:17.472) When we raised the money that our last one, I think they raised up to $600 million. And I think now it's, I think around a billion. so they are being, you know, if you look at the cyber security, ecosystem around our market, they have been kind of, the, the, the amount of investment that have been. done to them was probably around the thesis of, okay, if we will fund a good company with a lot of cash, they will outperform the competitors because they will hire 150, 200 reps and at the same time build technology that would outperform everyone, right? With a lot of capital. So the thesis is already very strong in our market. And I think it's, It's mostly a risk. It is risky for us. But what is for sure happening and we can see it is that no one is able to compete in our market today, right? It's basically set. The market is set. And we would need to basically prove that we can still outperform in some deals, if not all deals, right? Because at the end of the day, You can have more than one company sell a product, right? It's not that every market only has one strong competitor. Usually it's around five or six. Jason Kirby (48:52.107) Yeah. So, you know, I love hearing the story and just kind of how, because like there's just so many different ways of like adventure and, know, summits, everyone's so focused on traction and looking back to look at forward projection. And I think what you guys did was kind of figured out that product market, figured out the narrative, the niche, and really hungered down on that particular problem and got, you created the FOMO too. I capitalizing the day of, you know, the early, early 2021, being able to capture those you know, investors that come in and write a big check that creates a snowball effect that allows more and more to kind of fall in line, get the better talent, get the better deals, get the better name recognition, which kind of forces you and that's like kind of the Sequoia model in lot of ways. It's like once Sequoia backs you with a huge check, it creates a snowball effect that everyone starts paying attention to you, which then affects, you know, your ability to acquire market share. You know, with you kind of like looking back at your Ron Reiter (49:47.459) Yes. Jason Kirby (49:50.638) your experience from Crosswise to Sentra. And you made many, we didn't talk about this, but you made many investments into early stage startups to which, I'm just skimming through your LinkedIn. It's like this company raised 50 million, that one raised 50 million, that one raised 100 million, that one raised 300 million. Now I'm sure that's not all your entire portfolio, they're all awesome hitters, but just kind of for fun to touch on that, walk us through kind of your thought process of Ron Reiter (50:07.907) Yeah. Ron Reiter (50:11.65) Yeah. Jason Kirby (50:19.435) being an exited founder yourself and making bets on other founding teams. Like what are you looking for in founding teams that you've now clearly shown that are, you you pick some good ones that have some legs in our round. Ron Reiter (50:33.102) Thank you. Yeah. And those are only the ones that I can talk about. Those are still the ones that aren't stealth. And I think for me, it's actually easy because it's not that I have this amazing talent of, okay, I do have a good talent of being able to find people that I think will be successful because usually what I do is I notice that I have a way to find people who are smarter than me and who are more talented than me. That's something that it's actually hard to do. But I think when you're very modest and you basically interview hundreds of people because that's what I basically did, then you kind of realize how to really pick up when someone's very, very smart and very, very good at being a founder. So it's definitely something that I've done and I know how to do and I also have friends who help me do that because we kind of co-invest sometimes. So I think experience is definitely something that helps. It's literally a model that you train in your brain, right? It's just like a machine learning model. It doesn't really have a way, I don't really have a way to explain how it works, right? But honestly, What I wanted to say earlier is that I do have an unfair advantage. So let's talk about Eon. Okay. Eon is a good example because to me, Eon is, I would say, you know, the next with in terms of how the Israeli ecosystem looks at it, because Eon was founded by a friend of mine called a fear. a fear is probably is today known to be the best founder in Israel. If you would have to pick a founder, it would be him. Next to Asaf from Wizz, the CEO of Wizz. mean, the second best would be Ofeer. I think that was my point. And when you look at people like Ofeer, mean, Ofeer has a very good name in the ecosystem. He himself met over 500 Jason Kirby (52:40.077) That's it. Ron Reiter (52:57.218) companies, you know, he made more than investment, he made probably around 35. And he's definitely a veteran in the industry and everyone, literally everyone's wish is to invest in it, Because I'm his friend, right? He lets me invest in his company. So obviously, if I know that everyone wants to invest in Ophir, it doesn't really matter. whether or not he'll be successful. although I do believe that he will be extremely successful, the problem becomes whether or not you can invest in his company and not who to invest in. Yeah, you can get in the deal, right? Yeah, it was I remember, mean, you know, as a very good friend of mine from the army, and you know, with the co founder and VP product, he still is co founder and VP product with Jason Kirby (53:35.893) Yeah, you can get in. Ron Reiter (53:53.23) And I basically begged him to let me buy his options when they were worth $1 billion. Right. Because I honestly believe that they were the best market company in the market. And I knew that I had to, you know, be in that deal. But of course, he didn't let me because it's hard to sell stock when you're a founder. Right. But my point is that I have an unfair advantage when some of my friends, my best friends are the best founders in the ecosystem because you know, I'm 40. I'm, I have a lot of experience. I've kind of collected a lot of friends from the industry along my, my years and, and, Ophira was one of them. And definitely being able to invest in this company is what makes me money. Right. And it is kind of like a, a self-fulfilling prophecy in that sense. I mean, everyone wants to invest in them. So my stock is worth more because of that, right? It's not because he actually managed to do something yet, right? Jason Kirby (55:00.269) Once you have that win, imagine if you didn't sell crosswise when you sold it and maybe something didn't work out. How your networks and access would have changed or evolved and the compounding value that you'd then be able to create to have this optionality, this track record to kind of say, go out and do you do at Sentra. And kind getting that early win in your career opened up all of these doors. And you even kind said it on the call, you had the intention to build something to sell to kind of get that. access that notoriety and you made it happen. every, yeah, it's one thing to aspire to it, but to actually deliver on it. That's pretty amazing. So, before we wrap up here, if you just had one kind of takeaway or maybe something we didn't cover today that you want to share to founders out there that are looking at their next transaction, would be, your word still lives into them? Ron Reiter (55:56.024) Well, by transaction you mean &A or by transaction you mean even raising money. Jason Kirby (56:02.24) Those are transactions. This is how you, whatever you want to prioritize. Ron Reiter (56:06.684) wow. So I, okay, I mean, I think what I can really help with two things. First of all, when you raise money as a first timer, but you know, going I have a good good saying, friend of mine also cyber or also an investor in Israel, he said something that I will never forget. He said that when you go and raise the money, like When you go and raise a seed round and you say congrats to someone, it's like telling a chef that just managed to buy his groceries on the store congrats. Because it doesn't mean anything. It literally means nothing. yeah, and you're just going to start and it's very true. And I think when you're a first time founder, don't get excited. Don't think that you've been successful if someone wants to invest in you. Think if this is the right thing for you as a person. Jason Kirby (56:48.396) You're just getting started. Ron Reiter (57:03.566) Don't drive your decision based on how much money you can raise or from, you know, who you can raise or what you want. You need to think of this is right for you. You need to think of the, you know, the, cause you need to understand what you're doing. You're basically getting married with your co-founders and your, your, uh, uh, investors. You want to make sure that you're working on something that you want to work on. You want to make sure that you are. working with the people that you work with, you want to make sure that the people who invest in you can actually help you achieve that goal. And don't worry if you say no to an investor who wants to invest in you, because if he wants to invest, he will still want to invest in you in the future and other people might want to also invest. I wouldn't run and get the first check that I can get just because I'm afraid that I'll lose the opportunity. And for selling a company, think my advice is, companies get bought and not sold, if your dream is to sell your company, you have to understand the market and you have to have some statistical assumption that someone will buy you because he needs you. And you have to really build and base this assumption based on understanding your market. Don't try to just assume that people will buy you. Never build a company in a way that assumes that people will buy you because that will actually create the opposite. They will create a situation where people would realize that, you know, they can buy you for cheap. know, a good example would be not raising another round because you want to keep your valuation low and then getting to a situation where you don't have enough money and then you get bought for nothing. Right. So always think about. that fact and you should build a company that its number one goal is to generate revenue and not to generate a company that is on the shelf for someone to buy. Jason Kirby (59:08.68) his wise and sage advice. Ron, I really appreciate you coming on the show with us today and sharing the story, sharing the kind of intimate moments of the stress that you went through in the first company and how you led a very different outcome for Centro thus far. So, looking forward to sharing this with our audience. Ron Reiter (59:25.614) Thank you very much. It was a pleasure. Jason Kirby (59:28.14) I really appreciate you kind of getting into the weeds and sharing those stories. I think you have a lot of real stories. That's what I like to say is like, got real.