How do specialist VCs evaluate early-stage cybersecurity and AI startups before traction?

Jason Kirby (00:02.973) Everyone, welcome back to $100 million exits, the podcast where I interview founders and investors who have achieved $100 million-plus outcomes. Today I have Dan Nguyen-Huu on the show with us, partner at Decibel Ventures, an $825 million AUM fund with their most recent fund three out of $315 million deploying into C or pre-seed C seed in Series A. Dan, I'm excited to have you on the show today. Dan (00:30.072) Thank you. Thanks for having me. Jason Kirby (00:31.869) So I want to cut straight into it. You know, before Decibel, you were at Battery Ventures, and you backed the very well-known Databricks. And I would like for you to tell the audience, like, how did you get in on that deal? How did you know that that was going to be what is effectively a Centacorn at this point now? Walk us through that story. Dan (00:52.504) Yeah, one of the things that I've always really appreciated about working at Battery Ventures is that the firm was very thematically driven, and that has very much shaped the way I invest even today. One of the core theses that we had coming into the space was really around the evolution of Spark and how data was being processed, in particular in the cloud. and in that same context, one of the core theses that we had in conjunction with that was really around open source and the proliferation of how software was being consumed by developers and data engineers. And as the market space had developed around Other public companies like Hadoop, basically other data formats like Hadoop, had birthed a lot of really interesting companies like Hortonworks and Cloudera, which were multi-billion-dollar outcomes. There was really a conversation to be had on what would happen to data as we processed more of it in the cloud itself. And Spark just had a better Performance level than Hadoop did. And so one of the core thesis that we have was like, hey, if the world is moving more towards the cloud, then Spark is gonna be a much, much more bigger opportunity than what Hadoop was in this current iteration. And so as a team, and I have to give a lot of credit to the entire battery team here working with Darmesh and Max Shearson and the folks there, really tried to figure out exactly who are gonna be the huge winners. And data. was at the forefront of that. They were the leaders in Spark. And we were really excited to invest in the round when it came together because of that thesis. Jason Kirby (02:42.173) And so how did they like were they already at the table? Did you guys approach them? Did you have like how did you navigate the opportunity to get into the cap table? Was it they begged for you know they begged you to come to the table or did you kinda like beg them to take your money? Dan (02:58.604) I would not I would not say so. I I I would certainly say that you know, we tried our best and put our best foot forward in in these deal dynamics. Of course it's a couple of years ago now. the company was already doing extremely well and had proven out that even in partnership with Microsoft, the company started to, you know, perform extremely well on the financial side. certainly not at the same scale as it is today. I think it's crossing close to six six, or six and a half billion or something like that now, as Ali presented yesterday at the data and AI summit. But at the time, you know, it was still sub Yeah, I want to say 30 million or something like that. But you could kind of see the writing on the wall. You kind of see how the world was moving, and if you forward-project it on that basis, you know, we were really, really bullish on the company itself. On the deal dynamics front, it was a competitive round, un unsurprisingly. It was extremely competitive, and we ended up getting a chance to invest at the, I wanna say, $950 million round. And obviously it's done extremely well since then. Jason Kirby (04:06.675) Yeah, sounds like a pretty solid return at the end of the day, but what I always find funny is, like, the VC competitive nature. Like, there are founders out there all day long, like begging for money and like that's me, but like really there's so much emphasis for VCs to try to get into like the hardest-to-get deals. And from your perspective and all your experience in backing, you know, high-growth companies, like Databricks, like what's the edge that you've kind of created to kind of get yourself into those deals and when it, like, kind of works, and then what's sometimes when it hasn't worked? Dan (04:42.931) yeah, look, I think as I mentioned before Battery early on shaped my perspective on how to invest in general, and it is thematically driven. Having a point of view on where you believe the technical roadmap will go is one of the most important things when you're investing in early stage. So understanding the secular movements, whether it's, you know, on-prem to cloud or, you know, data to AI, like those are some of the big shifts that are occurring in the market space, and then finding the right teams to ride those shifts, you know, start. Are generally extracted out of the market by the customers, and founders have to navigate exactly what kind of product to build, but still have their own opinions in them. But it is really kind of a mix mash between the founder really wanting to understand the product landscape and the competitive landscape in conjunction with the customers telling him, hey, actually, you know, maybe nudge you a little bit here to the left, and that makes a little bit more sense for us in particular. And then if you see a pattern, that's how you can capitalize on it. Jason Kirby (05:47.082) Hutchin. Like when it comes to these competitive rounds, like how many people are at the party? Like, do you have visibility into it from your side? Like, are founders kind of holding information back and you're having to, like, make some blind bets and kind of you know, or is it pretty transparent and you're doing really timely analysis? Like, how does it really feel like for you in that hot seat of like, man, this is the thing that we gotta get into. How are we going to do it? And how fast do you have to act? Dan (06:11.243) Yeah. Dan (06:16.437) Yeah, you definitely don't have full transparency. It's actually that you almost never know who's really at the table. You might have some inklings here and there on who it might be based on extrapolation of, you know, some of the intel that you might or might not have gotten from the founders. But it's usually very, very, very tough to know who's on the other side. Which really just means you have to play your game. There is really not an opportunity for you to try to you know, navigate it differently, and that's generally how we've approached it: we have a point of view on the market space, we try to pursue it, and we try to play our game to convince founders to work with us. And the truth is, the best founders have options, right? they they can always work with many people, and we try to be as collaborative as we can be as we work with them. Jason Kirby (07:07.753) So you had some success making some big bets at Battery, but you decided to start your own fund and partner at Decibel. Walk me through that decision as an individual, like, you know, hey, you have these big bets you've made at a very well-known firm, you know, let's go leave that behind and try something new. Kind of like what was going through. Dan (07:32.832) Yeah. It's a fantastic question and one that I really try to, you know, internalize a lot myself. I think the biggest thing that I really realized was that my passion was in the early stage. know, I was really fortunate at Battery, where I got the chance to do basically, you know, stage-agnostic investing, certainly in a certain vertical, but it was stage-agnostic, meaning I did a couple of seed deals there. You know, at some point I kind of joked that I had done a deal at almost every letter of the alphabet, you know, like, you know, pre-seed, seed A, B, C, D, and you know, and so on and so forth. Back then the letters didn't go as high as they do today, but Certainly, it was a really phenomenal experience on that front just to kinda see what the multi-stage investing strategy looked like. But I really enjoy that, you know, super early-stage part of investing. It's one of the funnest and most impactful things you can do as a venture investor is to, you know, sit, so to speak, in the proverbial garage together with the founder, thinking through the market, finding them their first customer, finding them their first hire, and really, you know, having a big impact. And that to me was where my passion was. So just Opportunity came up to join my partner John Dakota in helping him build out Decibel. he was just starting out at the time himself, coming out of NEA, and he Dan (09:03.549) I wanted to build a truly early-stage practice that was focused on technical founders. So really, you know, cybersecurity, data engineering, developer tools, those were like the focus areas of what we wanted to do. And I just couldn't say no. I think it was an opportunity for me to be entrepreneurial; it was a chance for me to exercise my passion in early-stage investing, and it was also a chance for me to maybe shape the firm materially beyond even shaping, you know. companies at the early stage. Jason Kirby (09:36.096) And so I take it at Battery, you probably weren't responsible for procuring, like, the LP capital. When it came to kind of going out on your own with John and launching Decibel, what's it like kind of being in that seat of the capital allocator to the capital raiser? And like your existence depends on your ability to raise, and you know, you're kind of flipping the tables a little bit. Dan (10:03.883) Yeah, it's a great question, and quite honestly, every fundraise that we have gone through has been a really, really phenomenal experience. Not just from the fact that we've met some really incredible LPs who ended up investing in us, but also because it is a reflection on ourselves. You know, one of the things that I've learned observing founders is that every fundraise they get a little bit better. You know, at the seed stage they raise a certain amount of money, they tell a story; at the A stage they get a little bit better; at the B stage they get a little bit better. And one of the things that, you know, that everybody talks about is that, you know, in the moment when you actually do it, you dread it. Right. It's hard. You know, nobody wants to get rejected. Nobody wants to go through, you know, hundreds of meetings and hopefully get like a low number of conversions. That's never a pleasant experience because naturally we don't, you know, appreciate being rejected or being told that our baby's ugly or whatever it is, right? Those are all things that are tough to process. But one of the things that I really noticed for ourselves and for some of the founders that I work with is that afterwards you really appreciate it. Because it gave you a chance to kind of take a step back and look at your own business at the 10,000-foot view and see, hey, like, who are the competitors? Who are the people that we know we're competing against? How do they evaluate us? How's our performance? Do people respect what we do? Are the wedges and capabilities that we've built- the product, so to speak- truly differentiated? Those are like all the questions that founders ask themselves every single day, and they're more pronounced in the fundraise, and it's the same for us as a VC firm. You know, when you go out there and you raise capital, they have, you know, the option to invest in all the major funds, you know, Sequoia, Lightspeed, whatever it is, and you have to make you have to convince them that, hey, like, as a firm, we are different, and here's why, and here are the proof points. And the interesting thing is, as we have progressed in Dan (12:05.471) In our own in our own in our own firm, you know, obviously our capabilities as a firm have matured. You know, some of our capabilities are in talent, our capabilities around business development and early design partnerships, our capabilities around research and content that we produce, our capabilities around distribution when it comes to podcasting and things like that through Latent Space, or our partnerships with other firms like Risky Biz on the security side; they all have matured, and the story becomes more comprehensive and more wealth. Thought out, same as a startup, right? So as the funds mature and you sit on the other side of the table and you have more to talk about, it gets a little bit easier. But on the other hand, you also maybe talk to a different set of LPs at that point. Jason Kirby (12:50.323) Yeah. Now it's, you know, what fund one versus what fund two and fund three; you know, it could be radically different, especially as the fund sizes change and the, you know, track record changes and everything like that, 'cause often you can't really get the institutional money until, like, fund three, and you know, it changes the whole dynamic. Yeah, I appreciate you being candid and sharing that experience. And I think from you know here, it'd be great to give the audience a little bit of context on Decibel, what you guys do, kind of what your thesis is. So they can have contextual awareness because I want to kind of start talking about some of the bets you made, why you made them, you know, what makes these companies backable. So go ahead and tell us about Decibel. Dan (13:31.906) Yeah, absolutely. We are what you would consider an early-stage specialist fund, meaning we focus on technical founders in very technical domains that usually revolve around technical buyers of software. That usually means areas like AI engineering, developer tools, data AI engineering, as well as cybersecurity. All domains that certainly are powering the infrastructure of the next generation of companies. We primarily write checks anywhere from one to twenty million at the pre-seed, seed, and Series A stage. And one of our focus areas is to try to get you up the product-market fit curve as quickly as humanly possible. That can mean a lot of different things, you know. We think about, like, you know, how do you kind of catalyze something in a startup? That can be, hey, like we find you your first five to six really early-stage design partners who can really help you develop the product and get feedback faster. That might be helping you find the first, like, core engineering folks that are gonna join your team or the first kind of go-to-market folks that can s help scale some of the early signs of product-market fit. That could also mean, you know, distribution and other things like that. But those are really the things we think about the most. It's kind of the really kind of grindy early-stage work. Sometimes we joke we're really gluttons for punishment in the sense that, like, you know, we enjoy that part of the process of really digging in and trying to help founders more as an extension of their own team rather than just, you know, maybe investing and sitting on the sidelines waiting for the financials to show up. Jason Kirby (15:10.741) And so, well, quick pause for the editors. You're touching the table. Or touching something, yeah, it's picking up the mic. I don't know if your chair is touching the table, but there's a little bit of rubbing noise. It was kept having a little bit, but now it's happening more often. So I just wanna make you aware of it because it'll be a little distracting in the recording. My team tries to cut that stuff out, but that's pretty hard to do in the middle of a conversation. So just Dan (15:18.153) sorry about that. Dan (15:23.789) Okay. Dan (15:28.321) Thank you. Dan (15:34.83) good. Jason Kirby (15:38.283) Sorry, keep an eye on that. Coming back in. So when it comes to check size, it seems like you guys have some flexibility given your structure. Like, what do you typically look at when it comes to check size? Do you guys, you know, prioritize a percentage of ownership, or is it like just to get into the right deals? Like, how do guys think about that check size and kind of portfolio construction? Dan (16:05.355) Yeah, we are definitely con a concentrated fund. We don't necessarily spray and pray. doesn't mean that we won't break the norms for, like, a really special, you know, special team, but tr traditionally speaking, we are a firm that focuses on being meaningful owners. In the companies, primarily because the type of work that we do with these founders is quite hands-on, and it does not scale if you have too many companies. So we really try to be focused on, you know, finding the best 20 to 30 teams in a fund, and you know own material of the company so that we can actually help them scale up over time. Our font size allows us to be flexible. You're absolutely right on that front, but that flexibility is largely geared towards helping founders have enough time and enough velocity on the hiring front to try to get the product-market fit. That's really what we focus on the most. Jason Kirby (17:08.552) And Tell me what you're seeing when it comes to some of the deals that you backed. So, like, I think one company you mentioned was Sublime Security. You know, they've gone on to raise a sizable Series C, but you got in at the seed round. You know, walk us through from the point of, like, how did you come across them? How did you discover them? Was it a cold email pitch from the founders, or did you guys hunt them and find them? And then walk us through the journey of that relationship as you've sat on the board of that company. Dan (17:39.179) Yeah, absolutely. Sublime is a phenomenal story, and both Josh and Ian, who founded the company, are near and dear to my heart. We were introduced to the company through another security founder, actually somebody who had exited before and had been a successful founder and he was like, Hey, you should pay attention to these guys. They're working on something very, very interesting. And when we first met them, we kinda knew right away that this was kind of different. For maybe context, Sublime Security is an email security platform. It's fully agentically based. it has some really, really interesting capabilities, but the core thesis that Josh had who's a CEO had always pursued is that the world of email and the the rat the the the world of email security has always been approached quite wrong. And what he really was trying to figure out was, you know, he was someone who had actually come out of the government, out of DOD, and had, for the better part of his life before he started the company, been on the other side of this. He had basically circumvented a lot of email security protocols, and it circumvented a lot of systems, and he basically knew exactly how people were doing it. Right. And he really figured out, hey, actually the way that most of these systems that exist today, like Proofpoint and the like, is actually kind of backwards because it's actually quite easy for people to circumvent those systems, primarily because the defenders actually on the other side can't see what the system is doing, meaning they're kind of a black box. Think of it as like, you know, having a protection system sit in front of your inbox and, you know, what comes in or comes out- there's a lot of frustration, like, you know, maybe the email gets quarantined but really shouldn't be. You know, sometimes it goes through, but it really shouldn't go through. And security teams are sitting on the other side of this and whenever they wanted to when they they knew their they know their own their own house the best. But they literally couldn't make changes to the system 'cause it's a black box. It's it's it's weights based. Dan (19:52.457) So you actually have to call Proofpoint support and say, hey, listen, this is the CEO, like this is an email from, you know, the CEO. Please do not block this email. Like, I need to see it. And the reality is, like, yeah, you know, most of the time support will get back to them whenever they can, right? It's not a very transparent or, like, you know, very pleasant experience. And quite honestly, every email system or every email correspondence and the business intent that is captured is different. Jason Kirby (20:00.777) Yeah. Dan (20:22.346) from company to company. The way that people communicate inside Walmart is very different than how people communicate in other enterprises. And so you don't want to have like a standard layer that just kind of touches everybody in the same way because it just kinda doesn't give you the chance to really customize the solution in a material way. And so Josh really focused on that. The fact that, you know, all the attackers and the adversaries are basically changing the way they write phishing emails. And you know, before you know this, the phishing emails were really easy to spot. But with the arrival of AI, it's actually incredibly hard to spot. They're getting more and more customized, and it's scalable. It's scalable customization of email threads that you're getting. so yeah, the company basically built a system that they call the distributed detection model. Which really allows an agent to look at the emails in a particular way, write the correct detections, and have it sent to the security team. The security can actually evaluate it, transparently see what goes on inside the box, make adjustments if they want to, so they can customize it to their own environment. And that then leads to much, much higher efficacy than any other solution that's in the market today. and that's been one of the really key insights that Josh had early on before it was ever obvious. and agents really kind of I would say, unlocked that performance even higher. And so that's been one of the really, really exciting stories. we seeded the company early on at like a six million dollar seed round, and last year they raised a hundred and fifty million dollar Series C. so in you know there was a few rounds in between. there was a twenty million dollar Series A from Index and I believe a sixty million dollar Series B by IVP. and then the latest round was led by Georgian. So it's been a really exciting story for us and you know they have customers all over the world that are all Fortune one thousands including Netflix and and everybody else. So it's a it's a really exciting story for us. Jason Kirby (22:30.9) No, that's awesome. And you know, when you look at one, I I just have to acknowledge your level of understanding of that product and that technology. And I think that's something I've noticed different from how you communicate about your portfolio companies versus maybe some other VCs I know who are like, this person was investing, so we invested. yeah, so the fact that you're like so intimately aware of kind of like the unique advantage point, how it works. Dan (22:52.053) Ha ha. Jason Kirby (23:00.05) and like the problem they're solving, you know, I think is a testament to kind of how you guys approach differently. And I think that's the advantage of being a specialist is you can get into those weeds and you know hold your own. You know, I can't tell you like I you know when I built Liquid Sky, cloud gaming technology trying to explain to people GPU edge compute and you know why it mattered and you know why the evolution of 5G coming out was so important for this inflection point. And everyone's like Dan (23:17.428) Mm. Dan (23:26.636) Mm-hmm. Jason Kirby (23:28.392) So who who's on the cap table? Like you don't understand, like you come out. Dan (23:29.982) Yeah. Dan (23:34.965) Yeah, I think I think Alfred had Alfred Lynn had posted this great post yesterday from Sequoia that talked about, you know, the real outcomes are when you're contrarian and you're right. Right? and you know he's totally right on that. I think one of the ways to really to really be contrarian is to like, you know, invest when it's not obvious. and that's it's it's one of the great pleasures in life is to kind of work Jason Kirby (23:48.586) Yeah. Dan (24:02.95) and in proving people wrong. and I think early stage is really is really full of people, investors alike that are that enjoy that type of work and we are certainly one of those groups. Jason Kirby (24:15.062) So it's often a founder thinks that they are they are the contrarian bet. And they struggle to communicate to maybe generalist or you other VCs that this is the contrarian bet and here's why. And you know VCs aren't leaning in, they're like chewing it up or whatever, you know, diving into it. Like what's your advice to to founders to when it comes to that communication in that pitch? Like how how should they conduct themselves? How should they go about these these meetings? And maybe share an example of like a founder that where it worked on you where it's like, you know where that founder materially changed your perspective of something and allowed you to kind of see that play. Like what what's kind of the playbook for a founder there? Dan (25:06.456) I think the first thing that I generally advise founders who are kind of at that stage who believe they're contrarian is they should highly qualify who are they meeting with. Almost every VC has a social presence. They usually have a Substack or some type of content out. And it's quite obvious how they think about the world. And not everybody agrees, you shouldn't, right? Nobody can really predict the future. certainly we try, but it's hard. And I think doing research on you know what Core fundamental thesis people believe in is actually a great way to kind of set yourself up for success and not waste time with people who clearly like either do not agree with your view worldview or do not have an opinion because they have not spent the time in the space. so I am a huge proponent, especially in the earlier stage of the market, of talking to folks who really understand domains deeply, because the person, you know, the founder who is in this space usually focuses heavily on a certain domain. I'll give you maybe an example just to bring this to light a little bit. One of the founders I work with is his name is Damien Luke. He's the founder of Nebulock. it is a cybersecurity company and he originally was the director of product at Arctic Wolf. before that he did his masters at MIT on on on systems engineering and AI at C C L and prior to that he was at CrowdStrike. He's clearly a very deep domain expert, has always been. Dan (26:51.942) And I think early on he definitely spent time you know just generally pitching people the idea. But most people didn't really understand what he was trying to do, you know, how he thought about the landscape. and he spent a lot of time with us. You know, we got to know him over the course of many months before he even really started the company. But eventually he came to the conclusion that you know maybe working with us would be a good fit because we kind of aligned on the vision of where the company was going. A startup generally goes through a lot of ups and downs, but if you Have an aligned vision with your investor base, a lot of times those ups and downs don't feel quite as bad, so to speak. So that's one of the things that I really recommend is like qualify who you talk to. Don't waste your time with people who you know don't agree with your view necessarily and and you know maybe don't even have an opinion. That's arguably worse. I think like you know, having a point of view is better than you know having having someone look at your world and not understand it. That's a very, very tough place to start. Jason Kirby (27:51.472) I I appreciate sharing that when It comes to like underwriting these deals. So you're coming in early. See, it's a you have the the thesis alignment, you might kind of see where the market's growing and small market today, bigger tomorrow, you know. But when it comes to thinking about like cybersecurity in particular, where it's either like they go all the way to IPO or they kind of cash out in like the hundred to five hundred million range. But anything between like five hundred million to like five billion, there's not a lot of liquidity until there's like an IPO. So like how do you think about that as VC as you try to model out the the exit and kind of coach or advise the founders you invest in to maximize the return for the fund? Dan (28:36.788) Yeah. one of my favorite phrases that my partner John uses is companies don't run out of money, they run out of being not relevant anymore. And one of the things that I think about is like if you are relevant, there will be money or there will be an exit at the end of the line. you know, one big example of this is you know, whether it's security or not, is this kind of major pivot into AI over the last few years. And you've obviously seen the MA market actually has been quite hot. a lot of software companies have struggled during the SaaS apocalypse to you know, basically make themselves visible as a, you know, forward leaning AI company and the market has not rewarded that, right? They have certainly, you know, almost punished them for it. And so there is a lot of companies that are being acquired to basically bring the AI talent in house or bring the the capabilities of the product in house to kind of set yourself up for For success on that front. A couple examples of obviously Salesforce buying Fin yesterday for three and a half billion. One of our companies was acquired, Scrunch was acquired by Sidecore for 225 million. And you know, these teams are special. So I think when you are a founder, one of the things that I always recommend is like, you know, you want to be part of the wave as much as you can. If there is a wave, like you're, you know, people wait, wait for a secular movement for years to Really, you know, to ride it. And that's one of the things that you really have to, you know, recognize right away and build around it. So give your chance, give yourself the chance to look as modern as possible. And if you're thinking about exiting the company, you know, one of the things to really think about is like how do you fit into how do you fit into the broader, broader landscape and how do you fit into maybe the Dan (30:32.212) the the larger companies priorities. and one of the things in MA, you know this quite well, of course, running Thunder, is personalities matter, right? you know, the personal side of how founders, you know you know, pair up against GMs or CEOs of major corporations. You know, is this somebody that we can trust to run the BU? Is this somebody that we can trust to run a huge team? You know, you know, it it on the other side of this, if you're the acquirer like the GM, and I experienced this when I was at VMware, you know, you kind of have to actually look at the founder and say, well, I'm willing to stake my career on this acquisition, because that's what it is. Right? If you're making a billion dollar plus acquisition or even a three hundred to five hundred million dollar acquisition and it doesn't go well, I mean, this these are real careers at stake. so I think that's always something that I think a founder should keep in mind. So building longstanding relationships with those people is really, really important. but also kind of like understanding how and in what shape or form the acquisition de-risks you i i it the risk you in in in for the for the larger company, that's those are like very, very important aspects to think about. Dan (31:51.03) Jason, I can't hear you. Can you hear me? Dan (32:06.252) Ca I can't hear you. Can you hear me? Jason Kirby (32:10.837) What's going on here? how about now? Dan (32:12.79) I can hear you now. Jason Kirby (32:14.615) must have touch my cable or something. Yeah. so I'm so glad you brought up this point about MA. Like I talked to so many founders that are like Dan (32:17.414) Your turn to touch the table. Jason Kirby (32:26.347) I want to sell this to a strategic and get this ridiculously high multiple. But it's like, who are you talking to in that strategic who's betting their career on you? That's something I say to founders all the time. It's like, there's a a like a high up executive or manager that's making, you know, 250 to 750 a year that's gonna make a decision to give you five hundred million dollars. Like, and their their livelihood is contingent on this working out and they Dan (32:29.228) Yeah. Jason Kirby (32:56.291) want to look good. Like they're just humans and they're employees. They have a wildly different mindset. are they chasing a signing object or they have like real pull power in the organization? That's so many things like, we're talking to this person and blah blah blah. It's like, well that guy doesn't have any actual authority. Like, they're probably blowing all kinds of smoke up your ass and trying to get a deal done, but they actually probably can't even actually get a deal done. So who's the person above them that you have to really convince? And that's just something that people don't r truly realize about strategic acquisitions is like are they actually talking to the right person? And so I'm glad you mentioned that point of like, you it's really the psychology of that one individual of how how you're going to make or break their career and your chemistry with them to to trust each other, because that person who's going to write you a substantially meaningful check that's going to completely revolution your life, your friends, you know, your employees, your investors, like it really hinges on like one really committed individual who has decision power. Dan (33:55.436) Yeah. I w I would actually even say that I kinda compare it to an enterprise sale. In enterprise in an enterprise sale you never want to be single threaded, right? you never wanna just be at the practitioner level because they they maybe don't have budget power, but you don't necessarily just wanna be at the executive level because maybe they don't have the buy-in from the team to say, Hey like we want to buy this product. And I feel that way about MA as well. Jason Kirby (34:12.077) Mm-hmm. Dan (34:21.78) Right? It's good to be multi-threaded in MA just as much. Meaning, hey, you should have executive sponsorship. You should have, you know, what you described, somebody pounding the table saying, like, we need this product in house and that person can execute. But I think you also need the practitioner level, right? The people on the ground who, you know, you work with well, that have a good you have a good reputation with and good rapport with. it's okay to start at one level or another level, but I at the end of the day, I think for a good MA process to work out well, I It's good to be multi threaded on that on that point. Jason Kirby (34:54.795) Yeah, 190. I I love how you mentioned the the the term multi threaded. So from one thing you talked about earlier was like relevancy. So as long you don't run out of money, you no longer are relevant. You know, like that's the real issue. And I wanna talk about that because as VCs are required to bet on the future and kind of make these contrarian bets of what's gonna happen in ten years and why this company would be worth X. Well, sometimes those don't work out. Yeah, you make a bet on the market, it's not matured yet, and then maybe it never matures. What like from your personal experience, what have you recognized from the bets that didn't work, where the market basically didn't turn out to be the way it was? Like what what's gonna of experience where you've had like with that. Dan (35:41.486) there's many experiences. I think if you're working in early stage and you don't have that, I think people are lying to you. I think that's half the game. as a matter of fact, a good You know, this is a little bit of a side piece of of a founder advice I will give, which is when you are about to, you know, decide to work with a venture capitalist, ask ask them about the ones that didn't work out. Ask them for the references because I think it it tells you a lot about who that venture capitalist is when things do not go well. So they're gonna give you the star references, but also ask for the ones where it didn't work out because it will give you a really good view on who they are as a person. In the context of early stage investing, this is part of the game, right? You're shooting for the home runs, but a lot of times it's maybe a single or double and that's all right. Maybe it's nothing at all. The most important thing that I think about a lot is really how the founder feels. Do they still have the energy to pursue a different idea? Do they want to pivot the company in a completely different direction? You know, do they have the energy to do that, the the the willpower to do it? so that's one of the things I think about the most. sometimes, you know, we've been at this for a couple of years and we've been banging our head against the wall and we just have to decide like this does not work. and you know. it's there's no there's no shame in it. Like it's totally fine. We tried something incredibly difficult, right? And hey if if a larger company wants to acquire you and you want to return the capital I will never hold that against anybody. because this journey is difficult and I have all the empathy in the world for founders who want to do something impossible. Dan (37:26.685) So, you know, as far as it comes to the ex actual experience of dealing with that or when to decide, I generally want to be less of a a thought partner with the founder that says do this or do y or do X or do Y. It's more about trying to be a clarifying agent to them in what they wanna do. Cause at the end of the day, their intention and their their motivation is really what drives the business one way or the other. Jason Kirby (37:56.866) No, I I completely agree and albeit I think you are saying the right things. So many VCs run into the like, no, you better find another way and like find another moonshot and you know, it's like I've had some conversations with founders all the time where it's like they have a prep stack Dan (38:15.987) Mm. Jason Kirby (38:16.405) Yeah, they may or may not clear that prep stack in an aqua hire or a small acquisition. They basically will get nothing, you know, from it. Or better yet, they might get like two million bucks, three million bucks in a transaction that could be very meaningful for them. But the VC is like, No, I'd rather not sell and you better find a way to ten X or bust, you know? And that's essentially what happened to w when we sold before we sold at Walmart, one of our VCs was like, This isn't big enough. You were supposed to be my billion dollar ticket, like, you know, I yeah, I wanna veto this deal, blah, blah, blah, blah, blah. And it ended up it cost me seven figures because that delayed our our deal closing, which led to Dan (38:57.962) Yeah. Jason Kirby (39:00.403) Originally Samsung was to buy us and that deal fell through because we lost three weeks as our our VC retraced the deal behind our back to try to squeeze out more money for themselves. And we were like, deal's done, like we're happy. And he ended up blowing it up and delaying the deal. Samsung came back like we still want to do the deal, but at the original terms. But we lost three weeks. And guess happened to those three weeks? CEO of Samsung went to prison. Dan (39:24.875) Mm. Mm. Jason Kirby (39:30.231) So deal's dead. We had a do like a ridiculous down round that just like completely bent us over backwards despite us kinda still continuing to grow to the right up and to the right. And you know, Walmart bought us is roughly the same valuation, but a year later with the prep stack, that was like exponentially worse than what it was. Dan (39:37.949) Yeah. Jason Kirby (39:51.254) And it just like all because of EC just couldn't get behind the fact that we had a good deal. Like it was a money hungry business. Like we weren't gonna raise 150 million back then with our model. And that's what we needed. And so it's like Walmart's got infinite money. Let's go there. same with so yeah. Dan (39:56.777) Yeah. Dan (40:07.541) Yeah. Yeah. I think there's a lot of stories like that. and it really goes to show it matters who you decide to partner with and you know it really goes to show that you know for every success story there is on Twitter or on X there's certainly stories where you know people maybe acted in in in in bad faith and and hurt founders in the process. And you know this is easy for me to say sitting here, but you know I really believe that this is a very long-term game. So you know when you act like this and founders talk, I think long term you're just kinda hurting your own brand and your own self in in the process. Sorry you sorry you went through that, man. I mean that's that's tough. Yeah. Jason Kirby (40:55.659) No, I completely agree. No. It's in the past. It is what it is. so we talked about kind of the the bets that don't work. But what I know, you're a specialist and being a specialist PC, you're actively researching markets, opportunities, and I think it'd be great for the audience to kind of understand like where do you see the puck going? Like where do you see market, like what markets are you most excited about, and provide some like specifics that you know people can kind of sink their teeth into. Dan (41:30.469) yeah, so I mean you we can cover maybe a free f a f a few domains at a high level. on the security side, we have been more and more interested in the agentic world, I think for obvious reasons. I think we're incredibly interested in seeing how the threat landscape is gonna change with the development of Mythos whenever it gets back released. w we'll see. But I you know I think the capabilities of the frontier models are really Exposing a level of vulnerabilities across the entire enterprise that we've never seen before and at a scale that we've never seen before. And I think that really allows for new startups to come into the market space and take advantage and kind of help customers up the curve on, you know, basically building a much more modern, what we call autonomous defense. The autonomous defense, you know, traditionally speaking, most security systems have been pretty siloed. Right? Everything was kind of disjointed from each other. And if there was some type of attack, like it would take days to get all the data together and figure out in a war room what actually happened. and so that world is kind of falling to the wayside because if you're doing that, you're just way too slow. Like you're just not gonna You're not gonna be able to keep pace with the adversaries itself. there used to be this, you know, there's this term called dwell time, which is like how long it takes for somebody to detect an adversary inside your system. so like, you know, the amount of time it takes to Dan (43:06.271) you know, be detected. And it used to be, you know, quite a long time. but it's very clear that the time that adversaries are inside your system trying to learn your environment, figuring out where like your crown jewels are, where's your PII data that I can exploit and exfiltrate? that's that's all happening in a matter of seconds now. That's all happening in a matter of minutes now using agents, right? So they're not hanging out there, they're not sleeping anymore, they're not like eating, they're just Letting agents run this process. And so you have to catch them much, much faster than you had before. So in that context, most of the detection engineering work, a lot of the threat hunting capabilities that people are providing, a lot of kind of alert investigation capabilities that are people using like Drop Zone and Nebulog and ENT, those are all like new technologies that can really elevate as we enter this new era, what we call kind of the post mythos world. That's kind of cybersecurity in a high-level nutshell. The other side of this is really one of our core theses around thinking about how the buyer of software is maybe changing. And what I mean by that is traditionally almost every single software purchase was run through like a committee and a human and and whatnot. But over time, you know, the more I'm sure you're running cowork on your computer or you're running cloud on your computer, the more you kind of run agents on your own and in your own stack, the more it becomes a question of like what does it mean to be a software vendor in this new era? And one of the things that you really are trying to figure out is how do I make sure Jason Kirby (44:33.921) Right now. Dan (44:49.595) that You know, whenever I build something in the in in in the ecosystem, it doesn't just immediately get replaced by me, you know, by Claude Cowork or Clock code generating it using a bunch of tokens. Right? If it's easily replicated, it's actually quite difficult to build a sustainable business because you're always in a build versus buy decision against Claude. Right? and that's one of the things that I've been, you know, that we've been trying to figure out is like, hey, like what are the primitives that Claude would still choose, the agent at your endpoint still. choose in order to get the job done. You know, you might tell Claude, hey, I want you to go do this thing for me and figure out like how to get there. I don't care how it gets done, I'll come back after lunch and I'll look at the results, right? That's that's kind of how we interact with it now. We run multiple tabs and we run like a bunch of agents. You know, hey, you know, reach out to these LPs, build me this thing, and then come back and you you check it. Right? and so the question really is if you're a software vendor in this new world, how do you kind of stay relevant? how do you not get basically disintermediated? and there's a couple of really interesting companies in this space that have successfully done this, right? we have a company called E2B in the code sandbox space. with every agent that gets spun up, they spin up an E2B instance on the on the code sandbox to kind of run the code inside. It's kind of the computer for the computer, right? so those are like kind of interesting tools that are you know able to scale quickly because if you think about price times quantity equals revenue it's not necessarily price that drives it you know like it used to be but it's really quantity right like the agents are scaling vertically and exponentially so you can really scale the businesses much faster than you used to be able to which is why you're also seeing a lot of these businesses do so well in this new AI era Jason Kirby (46:41.612) Now you can just pick up traction so fast it's it's insane. Dan (46:45.481) Yeah. It's exciting. I I think it's never been more exciting to to be honest, to to invest in the space, on both ends. On the on protecting the the enterprise estate as well as building the new estate. So it's it's just an incredible time. Jason Kirby (47:01.64) It it's exploding, it's taking off. so Dan, you know, it it's been absolutely amazing having you on the show, sharing your genuine insights and your experiences, you know, deploying capital. If a founder wants to talk to you or learn more about Decibel, what's the best way for them to do so? Dan (47:18.889) Yeah, reach out to me. My DMs are open both on LinkedIn and and X. you can find me pretty easily. come come and chat with us. Come, you know, hang out with us at some of our events that we're throwing on. If you're a security founder, come meet us at Black Hat or RSA. If you are an AI founder, you'll find us pretty easily in a lot of the AI events here in San Francisco. so yeah, we're we're easy to find and easy to get to know. And yeah, it's been an absolute pleasure to be on the show, Jason. I really appreciate you inviting me. Jason Kirby (47:47.619) No, I'm excited to get the show out and share with the audience and kind of help them see these trends. And we'll look back in you know six to twelve months and be like, are these the right trends? Were they not? And so that's what's fun about this game. So thanks for coming on and we'll get this out to our audience soon. Cheers. So we'll cut there. I'll go ahead and stop the the recording. That was great. I really appreciate Dan (47:57.074) Perfect.