(upbeat music) >> Narrator: From theCUBE studios in Palo Alto in Boston, connecting with thought leaders all around the world, this is theCUBE conversation. >> Hey, welcome back, everybody Jeff Frick here with theCUBE coming to you from our Palo Alto studios today for a cube conversation, you know we're like six, seven, eight months into this COVID thing. We're going to be dealing with it for a while. And one of the themes we've heard about over and over as kind of a result of COVID is an increased in the attack surfaces. More people are working from home or work from anywhere. And security has only been increasing in importance. And we're excited to have somebody from the alumni group who's been on before she is Sandra Wheatley the SVP marketing threat intelligence and influencer communications at Fortinet. Sandra great to see you. >> Thank you Jeff, I'm happy to be here. >> Yeah, I think actually I misspoke. We've had a ton of great Fortinet people on we've talked to John and Ken and Phil and Tony, but actually I'm not sure that we've had you on before, so great to have you. >> No, this is my first time. >> Awesome, so let's jump into it but we're going to take a slightly different tack today and we're not going to talk about the technology as much as this other pesky little problem, which is people. And, you know we know there's a huge skills gap in tech in general right. There's tons and tons of open recs. If you go into all the big sites and then security it's even a more specific and a more acute problem. I wonder if you can tell us a little bit about kind of your perspective on this problem, being a senior executive you know, at a security company, people is a big issue. How do you guys kind of look at the problem? How should people think about it and what are we going to do about it? >> Well, Jeff, you were completely right. The Cyber security skills gap. It's one of the biggest challenges that's facing organizations today. I mean if you look at the larger landscape, cyber crime is one of the fastest growing crimes in the world, in fact by 2021, it'll cost the world about 6 trillion in total. And so tackling this issue continues to be a big problem. And it's exasperated by this the skills gap we recently did a study of Fortinet and 73% of respondents acknowledged that at least one intrusion could be attributed to the lack of skilled professionals. So it's a huge problem. We know that it would take about 4 million professionals to close that gap. And in particular with COVID, it's become even more increased. We've seen a big uptick in attacks from cyber criminals, really targeting remote workers. It's a way into the enterprise network. We've seen a resurgence of ransomware and phishing targeting that workforce. And so as this threat landscape continues to increase it's definitely a problem that cybersecurity organizations public and private partnerships really need to tackle. >> It's interesting because we talk a lot about automation and we talk about the scale of the attacks and the scale of data and you know, everything is just going so up until the right that without automation, you know you have no hope and you need some help to basically separate signal from noise. That said you still need people. And really that automation is going to hopefully get the high visibility the high priority issues to the right people. But ultimately that's an enabler for a person, not a replacement for person, for people. And it doesn't take away this tremendous need for more security professionals. And the other thing that we hear Sandra over and over right, is that security is no longer a bolt on it's no longer, you know, you just build the wall around the outside of everything, right? It's got to be baked in throughout the entire process of the product development and deployment. So the importance and kind of the reach and the breadth of security people in the influence of the building new products and shipping new products has never been greater and yet we've got this huge shortage. >> Exactly and I think you touched on it. You know, what we're hearing from our customers is that they're really using this period during COVID to really take a long-term look at their cybersecurity investments and strategy. And so you're right increasingly organizations are taking more of a platform approach to security, where they have more automation integration and AI that's one help. The other area is organizations need to be making their employees more cyber aware because it impacts everyone even employees working at home organizations. We just released InfoSec training and we offered it we made it available for free, and it really enables organizations to help educate their employees about the risk of cybersecurity and helping them to understand not to hit on the phishing email because, you know, 68% of intrusions happened as a result of careless mistakes by employees. That's a big issue, but also really making sure that we bring more professionals into the industry. I like to say, there's no job security like cybersecurity. So at the beginning of COVID, we made all of our training free and to the public in general. And I believe we had 500,000 registrations in the first six months. So that really underscores the demand for cybersecurity skills. And then organizations can also really be tapping into underrepresented of demographics, like veterans like women who make up only 14% of the workforce overall. So there was a lots of things we can be doing and working together on this problem. >> Yeah, you touched on a whole bunch of things there. So let's unpack a couple of them specifically. One of the cool things about security is that you guys do work together and that there is a big benefit from working together. So it's a great place for kind of coopetition, especially as new threats come in and you guys can share that information. So there is an interesting kind of an ecosystem that there's, you know shared basically resources against the bad guys. But you guys did a really interesting thing with Salesforce, with the world economic forum specifically to go after this problem. So where did that come from, Why Salesforce? Why world economic forum and why take you know, kind of, I guess, out of the industry approach to really addressing getting more people as cybersecurity professionals? >> Well, for dinette as a founding member of the C foresee cybersecurity forum, it was created by the world economic forum about two years ago. And right from the beginning one of the initiatives that we began working on was to reduce the skills gap. And so we started working with the world economic forum Salesforce, which is another founding member and others to tackle this problem. And so we're provide all of our training we provide our training and curriculum on the salesforce Trailhead platform. We've also entered into another partnership with IBM, where we're providing our training on there as cyber skills platform. We're working with local universities like Berkeley and others to make sure that we're getting more of the curriculum into their certifications and degree programs. Interestingly enough, one of the issues with this challenges is that there's not a lot of universities offering degrees in cybersecurity, which is really surprising. And so we're seeing a lot more uptick and interest around awareness around this area. And so it's very encouraging to see the results of some of these partnerships. >> I don't, I mean, you I'm going to tease you kind of buried the lead but so people understand what you just said. You guys basically opened up your training catalog for free, during COVID as a reaction to help basically get more people trained. Am I getting that right? >> That's completely right. We saw that this is something that can really help our customers during this time. It's something we're committed to closing and we felt this was a really impactful way to help with that issue. >> That's amazing. And I saw you in an interview with Rob Rashad I believe is his name from your team. I wonder if you can, again, share with us some of the details in terms of the numbers of people that have gone through this program. Cause he mentioned them, somebody didn't write them down this is pretty significant numbers that you guys are running through this free program. >> Yeah, so we just passed a great big milestone of 500,000 certifications. Half of those have just been this year and that program's been in place for many, many years. So there's no doubt that this is something that's in huge demand. And so we continue to offer those trainings. This was one of the reasons why we just rolled out the InfoSec training for our customers and others to educate their employees. I mean, that's one point I think we had someone registering every seven minutes. And so the response to that was excellent. And that training program has eight different modules and the curriculum in that program actually provides credits for ISC, which is a a big certification in cybersecurity and CIISSP. So, you know, it's just an invaluable training program. >> That's wild, and again, it's free all the way, not just to register for, you know, the one-on-ones, but all the way through the certification process at the end. >> Well at the end, if you want to get the actual certification that's something that you can do separately after you do the training. Although we're working with some nonprofits to help pay for those certifications so that there's no financial burden to people. >> Wow, that's tremendous. And then the other piece that you mentioned but I just want to highlight it is the opportunity to go after underrepresented groups. And you specifically mentioned that you have a program for veterans and again, it seems so logical but some people just don't get it right. Then you've got a skills shortage and you've got a talent shortage. Why not tap into those markets and of those pools of people that are under utilized because, Oh, by the way, they probably have a bunch of good qualified people in there that you can leverage. >> That's exactly right, like vets if you look at take veterans for an example, they already have a lot of the skills that really work well for cybersecurity like situational awareness. They work very well under pressure. And so we started our veterans program about two years ago. And in addition to our training we offer mentoring curriculum, resume building, interviews skills building and now at this point, trained about a thousand veterans many have had jobs on one thing that we do that's different to other programs is that we bridge those candidates to our partners and customers who are looking for talent and really closed that whole loop. So it's not just about the training, but it's also finding them as well at the end of the training once it's been completed. >> Right, that's great. I also want to touch on another thing that you do beyond just training and this comes from you published a blog on July eighth of this year talking about overcoming the cybersecurity gap skills gap. But you talked about other things beyond just the people. And I want to highlight really some attitudinal things that you suggest for people to get over this world view, cyber security as an enabler, right? Not an obstacle recognize cybersecurity is a team effort. It's not just some superstar, get the C-suite involved collaborate on cybersecurity awareness and you know, thinking about these this issue at a little broader and a more kind of macro company-wide scale versus it's just the security people's job over in the security people's corner. And that's really the best way to take care of it. >> Absolutely, and that goes back to my earlier point. I mean the insider threat continues to be the biggest vector for attacks. A lot of times it's, you know, employees hitting on a phishing email I'm sure you've seen the increase in those. And so it's really, you're right. It's more, the responsibility just doesn't lie with the folks who lead the cybersecurity organization. We all have a responsibility to be much more educated and aware. And so I think you know, the board has to get them more involved. Executive management needs to make sure that they're providing the right training and education to their employees, that they're providing mentoring that the really encouraging more employees to move into cybersecurity and become certified. So there's lots of things that organizations need to be doing that include education training. And then also making sure that you're making the right technology investments so that you have an infrastructure in place that's agile and can be flexible enough to meet the increasing demands of the threat landscape. >> Right, I just wonder if you can share some insight on the conversation that happened before you guys opened this up to be free. 'Cause it's clearly, it's a move to do the right thing. It's a move to you know, to respond to the community that's suffering and it's something that you guys could do you had at your disposal, but I'm sure there was some naysayers in there they're saying "No, we can't give this away. This is super valuable stuff." How, you know how did you kind of make that decision to move forward? And I'm curious how it's kind of played out over time now that you've basically, as you said increased your exposure and people that are trained and you know, I'm sure a lot of positive, you know kind of second order benefits that you really didn't plan on when you were just trying to make a decision to help the community. >> Well, this was a decision that came from the top. Our CEO has always been committed to training. I mean, this is why we even started the program which our NSE program is one of the most robust in the industry. And so it's something that the founders have always been committed to. It's something that we've invested in. So there really wasn't any obstacles to doing this. This was something that everyone jumped on board with. The other thing is we really wanted to help our customers during this time. And we felt that this was one really meaningful way. We could help them by providing this training for free. And making sure that they have the talent that they need to really address all of the, you know, the expanding attack surface. But we were surprised by the demand and the response that was outstanding, right from the get-go. And so while we, you know, we've talked about this being offered to the end of the year we haven't really made any plans to change that. And so that it may continue beyond the end of the year because the demand is so great and the results have been so positive. >> Right. And I'm just curious, do you have in the training and I didn't go through exhaustively through the whole list of all the courses, but beyond just the professionals do you have all the basic training just for employees? I just don't click on the link. You know, it's so funny. I was at, I think it was RSA. One of the keynotes was a, a Cisco executive and she said you know, we tell people not to click links but that's what we do all day long. We click links, that's what we do, it's part of our job. And, you know, it's such a a weird behavior to tell people not to do. And I'm still confused how SurveyMonkey gets people to click on SurveyMonkey links but that's a different conversation for another day but I mean, are you offering the whole suite? And I just love to get your perspective as a security executive, when you talk to clients how to think about things beyond just the obvious you know, don't click on phishing emails and, you know, tighten up everything, but you know, more kind of high level how to think about security in this increasingly complex and dangerous world, if you will. >> Yeah, well, the training program has eight modules. It goes from the most basic training to the most advanced training. So our NSE one and two are really more about educating people about the threat landscape the threats out there, what it looks like the most basic emphasis security awareness around what you should do and what you should be looking out for. And all of our employees afforded that take that training. We take up to NSE 4, that's, something that's mandated. And so at the very basic level all organizations should be leveraging those modules for their employees and for individuals who are just interested at large. And then it really advances very quickly after that. And it's the most advanced, you know, it covers, you know cloud, the whole attack surface, AI, threat intelligence. And actually, as I mentioned earlier, provides credits for some of that top cybersecurity certifications in the industry, especially at the level of CSO. So it's very broad, it's extremely robust. And addition to those modules we also have what we call fast track training and that's really utilized by our customers and partners. And that's more focused on specific technology areas. It's very condensed, it may be a day or two days. And the demand for that has been phenomenal. So that's been another program we added about two years ago. That's been very well received. >> Wow, well, good for you guys. Good for you guys for making a proactive move in a very positive way to help your customers and help the community at large. It's just great to see, these are just tough times. They're going to be tough times for a little while longer. So, you know, it's nice that you have resources available that you're able to make to make available to the larger community. And I'm sure it's nothing, but goodness will come from it. So good move by you guys. And I'm sure there's a lot of tangential benefits as well. >> Thank you Jeff. >> Well, thank you Sandra for sharing the story and great to meet you and expand our our community over on the fourth tenet side, we've had a lot of great guests over the year so it was great to great to have you on as well. >> Thank you very much. We really appreciate all the support. >> Absolutely, thank you. All right, so go out and get your free training. Go to fortinet.com and sign up and you too could be a security expert, or at least as far as you want to go all the way up to certification. I'm Jeff, she's Sandra you're watching theCUBE. Thanks for watching, we'll see you next time. (upbeat music)

(upbeat music) >> From theCUBE studios in Palo Alto, in Boston, connecting with thought leaders all around the world. This is a Cube conversation. >> Hi everybody, this is Dave Vellante. And as you know, I've been running a CxO series in this COVID economy. And as we go into the post-isolation world, really want to focus and expand our scope and really look at startups. And of course, we're going to look at startups, let's follow the money. And I want to start with the investor. Mark Roberge is here. He's the managing director at Stage 2 capital. He's a professor at the Harvard Business School, former CRO over at HubSpot. Mark, great to see you. Thanks for coming on. >> Yeah, you bet, Dave. Thanks for having me. >> So I love that, you know... looking at your career a little bit, on your LinkedIn and following some of your videos, I love the fact that you did, and now you teach and you're also applying it with Stage 2 Capital. Tell us a little bit more about both of your career and Stage 2. >> Yeah, I mean, a lot of it's a bit serendipitous, especially last 10 years, but I've always had this learn, do, teach framework in my, in mind as I go through the decades of my career, you know, like you're probably like 80% learning in your twenties, early thirties and you know, 20% doing. Then, you know, I think my thirties was like leading the HubSpot sales team, a lot of doing, a little bit of teaching, you know, kind of hopping into different schools, et cetera, and also doing a lot of, some writing. And now like, I'm teaching it. I think investing kind of falls into that too, you know, where you've got this amazing opportunity to meet, the next generation of, of extraordinary entrepreneurs and engage with them. So yeah, that, that has been my career. You know, Dave, I've been a, passionate entrepreneur since 22 and then, the last one I did was HubSpot and that led to just an opportunity to build out one of the first sales teams in a complete inside environment, which opened up the doors for a data driven mindset and all this innovation that led to a book that led to recruitment on HBS's standpoint, to like come and teach that stuff, which was such a humbling honor to pursue. And that led to me a meeting my co-founder, Jay Po, of Stage 2 Capital, who was a customer to essentially start the first VC fund, running back by sales and marketing leaders, which was his vision. But when he proposed it to me, addressed a pretty sizeable void, that I saw, in the entrepreneur ecosystem that I thought could make a substantial impact to the success rate of startups. >> Great, I want to talk a little bit about how you guys compete and what's different there, but you know, I've read some of your work, looked at some of your videos, and we can bring that into the conversation. But I think you've got some real forward-thinking for example, on the, you know, the best path to the upper right. The upper right, being that, that xy-axis on growth and adoption, you know, do you go for hyper-growth or do you go for adoption? How you align sales and marketing, how you compensate salespeople. I think you've got some, some leading-edge thinking on that, that I'd love for you to bring into the conversation, but let's start with Stage 2. I mean, how do you compete with the big guys? What's different about Stage 2 Capital? >> Yeah, I mean, first and foremost, we're a bunch of sales and marketing and execs. I mean, our backing is, a hundred plus CROs, VPs of marketing, CMOs from, from the public companies. I mean, Dropbox, LinkedIn, Oracle, Salesforce, SurveyMonkey, Lyft, Asana, I mean, just pick a unicorn, we probably have some representation from it. So that's, a big part of how we compete, is most of the time, when a rocket ship startup is about to build a sales team, one of our LPs gets a call. And because of that, we get a call, right. And, and so there's, we're just deep in, in helping... So first off, assess the potential and risks of a startup in their current, go to market design, and then really, you know, stepping in, not just with capital, but a lot of know-how in terms of, you know, how to best develop this go-to-market for their particular context. So that's a big part of our differentiation. I don't think we've ever lost a deal that we tried to get into, you know, for that reason, just because we come in at the right stage, that's right for our value prop. I'd say Dave, the biggest, sort of difference, in our investing theme. And this really comes out of like, post HubSpot. In addition to teaching the HBS, I did parachute into a different startup every quarter, for one day, where you can kind of like assess their go-to-market, looking for, like, what is the underlying consistency of those series A businesses that become unicorns versus those that flatline. And if I, you know, I've now written like 50 pages on it, which I, you know, we can, we can highlight to the crew, but the underlying cliffnotes is really, the avoidance of a premature focus on top line revenue growth, and an acute focus early on, on customer attention. And, I think like, for those of you, who run in that early stage venture community these days, and especially in Silicon Valley, there's this like, triple, triple, double, double notion of, like year one, triple revenue, year two, triple revenue, year three, double revenue, year four, double revenue, it's kind of evolved to be like the holy grail of what your objectives should be. And I do think like there is a fraction of companies that are ready for that and a large amount of them that, should they pursue that path, will lead to failure. And, and so, we take a heavy lens toward world-class customer retention as a prerequisite, to any sort of triple, triple, double, double blitzscaling type model. >> So, let me ask you a couple of questions there. So it sounds like your LPs are heavily, not only heavily and financially invested, but also are very active. I mean, is that a, is that a fears thing? How active are the LPs in reality? I mean, they're busy people. They're they're software operators. >> Yeah. >> Do they really get involved in businesses? >> Absolutely. I mean, half of our deals that we did in fund one came from the LPs. So we get half of our funnel, comes from LPs. Okay. So it's always like source-pick-win-support. That's like, what basically a VC does. And our LPs are involved in every piece of that. Any deal that we do, we'll bring in four or five of our LPs to help us with diligence, where they have particular expertise in. So we did an insuretech company in Q4, one of our LPs runs insurance practice at Workday. And this particular play he's selling it to big insurance companies. He was extremely helpful, to understand that domain. Post investment, we always bring in four or five LPs to go deeper than I can on a particular topic. So one of our plays is about to stand up in account based marketing, you know, capability. So we brought in the CMO, a former CMO at Rapid7 and the CMO at Unisys, both of which have, stood in, stood up like, account based marketing practices, much more deeply, than I could. You know of course, we take the time to get to know our LPs and understand both their skills, and experiences as well as their willingness to help, We have Jay Simons, who's the President of Atlassian. He doesn't have like hours every quarter, he's running a $50 billion company, right? So we have Brian Halligan, the CEO of HubSpot, right? He's running a $10 billion company now. So, we just get deal flow from them and maybe like an event once or twice a year, versus I would say like 10 to 20% of our LPs are like that. I would say 60% of them are active operators who are like, "You know what? I just miss the early days, and if I could be active with one or two companies a quarter, I would love that." And I would say like a quarter of them are like semi-retired and they're like, they're choosing between helping our company and being on the boat or the golf course. >> Is this just kind of a new model? Do you see having a different philosophy where you want to have a higher success rate? I mean, of course everybody wants to have a, you know, bat a thousand. >> Yeah. >> But I wonder if you could address that. >> Yeah. I don't think it, I'm not advocating slower growth, but just healthier growth. And it's just like an extra, it's really not different than sort of the blitzscaling oriented San Francisco VC, okay? So, you know, I would say when we were doing startups in the nineties, early 2000s before The Lean Startup, we would have this idea and build it in a room for a year and then sell it in parallel, basically sell it everywhere and Eric Ries and The Lean Startup changed all that. Like he introduced MVPs and pivots and agile development and we quickly moved to, a model of like, yeah, when you have this idea, it's not like... You're really learning, keep the team small, keep the burn low, pivot, pivot, pivot, stay agile and find product-market fit. And once you do that, scale. I would say even like, West Coast blitzscaling oriented VCs, I agree with that. My only take is... We're not being scientifically rigorous, on that transition point. Go ask like 10 VCs or 10 entrepreneurs, what's product-market fit, and you'll get 10 different answers. And you'll get answers like when you have lots of sales, I just, profoundly disagree with that. I think, revenue in sales has very little to do with product-market fit. That's like, that's like message-market fit. Like selling ice to Eskimos. If I can sell ice to Eskimos, it doesn't mean that product-market fit. The Eskimos didn't need the ice. It just means I was good at like pitching, right? You know, other folks talk about like, having a workable product in a big market. It's just too qualitative. Right? So, that's all I'm advocating is, that, I think almost all entrepreneurs and investors agree, there's this incubation, rapid learning stage. And then there's this thing called product-market fit, where we switch to rapid scale. And all I'm advocating is like more scientist science and rigor, to understanding some sequences that need to be checked off. And a little bit more science and rigor on what is the optimal pace of scale. Because when it comes to scale, like pretty much 50 out of 50 times, when I talk to a series A company, they have like 15 employees, two sales reps, they got to like 2 million in revenue. They raise an 8 million-dollar round in series A, and they hired 12 salespeople the next month. You know, and Dave, you and your brother, who runs a large sales team, can really understand how that's going to failure almost all the time. (Dave mumbles) >> Like it's just... >> Yeah it's a killer. >> To be able to like absorb 10 reps in a month, being a 50, it's just like... Who even does all those interviews? Who onboards them? Who manages them? How do we feed them with demand? Like these are some of the things I just think, warrant more data and science to drive the decisions on when and how fast to scale. >> Mark, what is the key indicator then, of product-market fit? Is it adoption? Is it renewal rates? >> Yeah. It's retention in my opinion. Right? So, so the, the very simple framework that I require is you're ready to scale when you have product-market and go to market-fit. And let's be, extremely precise, and rigorous on the definitions. So, product-market fit for me, the best metric is retention. You know, that essentially means someone not only purchased your offering, but experienced your offering. And, after that experience decided to repurchase. Whether they buy more from you or they renew or whatever it is. Now, the problem with it is, in many, like in the world we live inside's, it's like, the retention rate of the customers we acquire this quarter is not evident for a year. Right, and we don't have a year to learn. We don't have a year to wait and see. So what we have to do is come up with a leading indicator to customer retention. And that's something that I just hope we see more entrepreneurs talking about, in their product market fit journey. And more investors asking about, is what is your lead indicator to customer retention? Cause when that gets checked off, then I believe you have product-market fit, okay? So, there's some documentation on some unicorns that have flirted with this. I think Silicon Valley calls it the aha moment. That's great. Just like what. So like Slack, an example, like, the format I like to use for the lead indicator of customer retention is P percent of customers, do E event, in T time, okay? So, it basically boils it down to those three variables, P E T. So if we bring that to life and humanize it, 70% of the customers, we sign up, this is Slack, 70% of the customers who sign up, send 2000 team messages in 30 days, if that happens, we have product-market fit. I like that a lot more, than getting to a million in revenue or like having a workable product in a big market. Dropbox, 85% of customers, share one file in one hour. HubSpot, I know this was the case, 75% of customers, use five or more of the 25 features in the platform, within 60 days. Okay? P percent, do E event, in T time. So, if we can just format that, and look at that through customer cohorts, we often get visibility into, into true product market-fit within weeks, if not like a month or two. And it's scientifically, data-driven in terms of his foundation. >> Love it. And then of course, you can align sales compensation, you know, with that retention. You've talked a lot about that, in some of your work. I want to get into some of the things that stage two is doing. You invest in SaaS companies. If I understand it correctly, it's not necessarily early stage. You're looking for companies that have sort of achieved some degree of revenue and now need help. It needs some operational help and scaling. Is that correct? >> Yeah. Yeah. So it's a little bit broader in size, as any sort of like B2B software, any software company that's scaling through a sales team. I mean, look at our backers and look at my background. That's, that's what we have experience in. So not really any consumer plays. And yeah, I mean, we're not, we have a couple product LPs. We have a couple of CFO type LPs. We have a couple like talent HR LPs, but most of us are go-to-market. So we don't, you know, there's awesome seed funds out there that help people set up their product and engineering team and go from zero to one in terms of the MVP and find product-market fit. Right? We like to come in right after that. So it's usually like between the seed and the A, usually the revenue is between half a million and 1.5 million. And of course we put an extraordinary premium on customer retention, okay? Whereas I think most of our peers put an extraordinary premium on top line revenue growth. We put an extraordinary premium on retention. So if I find a $700,000 business that, you know, has whatever 50, 70 customers, you know, depending on their ticket size, it has like North of 90% local retention. That's super exciting. Even if they're only growing like 60%, it's super exciting. >> What's a typical size of investments. Do you typically take board seats or not? >> Yeah. We typically put in like between like seven hundred K, one and a half million, in the first check and then have, larger amounts for follow on. So on the A and the B. We try not to take board's seats to be honest with you, but instead the board observers. It's a little bit selfish in terms of our funds scale. Like the general counsel from other venture capitalists is of course, like, the board seat is there for proper governance in terms of like, having some control over expenditures and acquisition conversations, et cetera, or decisions. But a lot of people who have had experience with boards know that they're very like easy and time efficient when the company is going well. And there are a ton of work when the company is not going well. And it really hurts the scale, especially on a smaller fund like us. So we do like to have board observers seats, and we go to most of the board meetings so that our voice is heard. But as long as there's another fund in there that, has, world-class track record in terms of, holding proper governance at the board level, we prefer to defer to them on that. >> All right, so the COVID lock down, hit really in earnest in March, of course, we all saw the Sequoia memo, The Black Swan memo. You were, I think it HubSpot, when, you remember the Rest In Peace Good Times memo, came out very sort of negative, put up all over the industry, you know, stop spending. But there was some other good advice in there. I don't mean to sort of, go too hard on that, but, it was generally a negative sentiment. What was your advice to your portfolio companies, when COVID hit, what were you telling them? >> Yeah, I summarized this in our lead a blog article. We kicked off our blog, which is partially related to COVID in April, which has kind of summarize these tips. So yes, you are correct, Dave. I was running sales at HubSpot in '08 when we had last sort of major economic, destabilization. And I was freaking out, you know (laughs briefly) at the time we were still young, like 20, 30 reps and numbers to chase. And... I was, actually, after that year, looking back, we are very fortunate that we had a value prop that was very recession-proof. We were selling to the small business community, who at the time was cutting everything except new ways to generate sales. And we happen to have the answer to that and it happened to work, right? So it showed me that, there's different levels of being recession proof. And we accelerated the raise of our second fund for stage two with the anticipation that there would be a recession, which, you know, in the venture world, some of the best things you could do is close a fund and then go into a recession, because, there's more deals out there. The valuations are lower and it's much easier to understand, nice to have versus must have value props. So, the common theme I saw in talking to my peers who looked back in the '01 crisis, as well as the '08 crisis, a year later was not making a bolder decision to reorient their company in the current times. And usually on the go-to-market, that's two factors, the ICP who you're selling to, ideal customer profile and the CVP, what your message is, what's your customer value prop. And that was really, in addition to just stabilizing cash positions and putting some plans in there. That was the biggest thing we pushed our portfolio on was, almost like going through the exercise, like it's so hard as a human, to have put like nine months into a significant investment leading up to COVID and now the outcome of that investment is no longer relevant. And it's so hard to let that go. You know what I mean? >> Yeah. >> But you have to, you have to. And now it's everything from like, you spent two years learning how to sell to this one persona. And now that persona is like, gyms, retail and travel companies. Like you've got to let that go. (chuckle simultaneously) You know what I mean? Like, and, you know, it's just like... So that's really what we had to push folks on was just, you know, talking to founders and basically saying this weekend, get into a great headspace and like, pretend like you were parachuted into your company as a fresh CEO today. And look around and appreciate the world and what it is. What is this world? What are the buyers talking about? Which markets are hot, which markets are not, look at the assets that you have, look at your product, look at your staff, look at your partners, look at your customer base, and come up with a strategy from the ground up based on that. And forget about everything you've done in the last year. Right? And so, that's really what we pushed hard on. And in some cases, people just like jumped right on it. It was awesome. We had a residential real estate company that within two weeks, stood up a virtual open house module that sold like hotcakes. >> Yeah. >> That was fantastic execution. And we had other folks that we had to have like three meetings with to push them deep enough, to go more boldly. But that, was really the underlying pattern that I saw in past, recessions and something I pushed the portfolio on, is just being very bold on your pivots. >> Right? So I wanted to ask you how your portfolio companies are doing. I'm imagining you saw some looked at this opportunity as a tailwind. >> Yeah. >> You mentioned the virtual, open house, a saw that maybe were exposed, had, revenue exposure to hard-hit industries and others kind of in the middle. How are your portfolio companies doing? >> Yes, strong. I'm trying to figure out, like, of course I'm going to say that, but I'm trying to figure out like how to provide quant, to just demonstrate that. We were fortunate that we had no one, and this was just dumb luck. I mean, we had no one exclusively selling to like travel, or, restaurants or something. That's just bad luck if you were, and we're fortunate that we got a little lucky there, We put a big premium, obviously we had put a big premium on customer retention. And that, we always looked at that through our recession proof lens at all our investments. So I think that helped, but yeah, I mean, we've had, first off, we made one investment post COVID. That was the last investment on our first fund and that particular company, March, April, May, their results were 20% higher than any month in history. Those are the types of deals we're seeing now is like, you literally find some deals that are accelerating since COVID and you really just have to assess if it's permanent or temporary, but that one was exciting. We have a telemedicine company that's just like, really accelerating post COVID, again, luck, you know, in terms of just their alignment with the new world we're living in. And then, jeez! I mean, we've had, I think four term sheets, for markups in our portfolio since March. So I think that's a good sign. You know, we only made 11 investments and four of them, either have verbal or submitted term sheets on markups. So again, I feel like the portfolio is doing quite well, and I'm just trying to provide some quantitative measures. So it doesn't feel like a political answer. (Mark chuckles) >> Well, thank you for that, but now, how have you, or have you changed your sort of your thesis post COVID? Do you feel like your... >> Sure. >> Your approach was sort of geared towards, you know, this... >> Yeah. >> Post COVID environment? But what changes have you made. >> A little bit, like, I think in any bull market, generally speaking, there's just going to be a lot of like triple, triple, double, double blitzscaling, huge focus on top-line revenue growth. And in any down market, there's going to be a lot of focus on customer retention unit economics. Now we've always invested in the latter, so that doesn't change much. There's a couple of things that have changed. Number one, we do look for acceleration post COVID. Now, that obviously we were not, we weren't... That lens didn't exist pre-COVID, So in addition to like great retention, selling through a sales team, around the half million to a million revenue, we want to see acceleration since COVID and we'll do diligence to understand if that's a permanent, or a temporary advantage. I would say like... Markets like San Francisco, I think become more attractive in post COVID. There's just like, San Francisco has some magic happening there's some VC funds that avoid it, cause it's too expensive. There's some VC funds that only invest in San Francisco, because there's magic happening. We've always just been, you know... we have two portfolio companies there that have done well. Like we look at it and if it's too expensive, we have to avoid it. But we do agree that there's magic happening. I did look at a company last week. (chuckles inaudibly) So Dave, there are 300K in revenue, and their last valuation is 300 million. (both chuckle) >> Okay, so why is San Francisco more attractive, Mark? >> Well, I mean and those happened in Boston too. >> We looked at... (Mark speaks inaudibly) >> I thought you were going to tell me the valuations were down. (Dave speaks inaudibly) >> Here's the deal all right, sometimes they do, sometimes they don't and this is one, but in general, I think like they have come down. And honestly, the other thing that's happened is good entrepreneurs that weren't raising are now raising. Okay? So, a market like that I think becomes more attractive. The other thing that I think that happens is your sort of following strategies different. Okay so, there is some statistical evidence that, you know, obviously we're coming out of a bear market, a bullish market in, in both the public and the private equities. And there's been a lot of talk about valuations in the private sector is just outrageous. And so, you know, we're fortunate that we come in at this like post seed, pre-A, where it's not as impacted. It is, but not as or hasn't been, but because there's so many more multibillion-dollar funds that have to deploy 30 to 50 million per investment, there's a lot of heating up that's happened at that stage. Okay? And so pre COVID, we would have taken advantage of that by taking either all or some of our money off the table, in these following growth rounds. You know, as an example, we had a company that we made an investment with around 30 million evaluation and 18 months later, they had a term sheet for 500. So that's a pretty good return in 18 months. And you know, that's an expensive, you know, so that that's like, wow, you know, we probably, even though we're super bullish on the company, we may want to take off a 2X exposition... >> Yeah. >> And take advantage of the secondaries. And the other thing that happens here, as you pointed out, Dave is like, risk is not, it doesn't become de-risk with later rounds. Like these big billion dollar funds come in, they put pressure on very aggressive strategic moves that sometimes kills companies and completely outside of our control. So it's not that we're not bullish on the company, it's just that there's new sets of risks that are outside of the scope of our work. And so, so that that's probably like a less, a lesser opportunity post COVID and we have to think longer term and have more patient capital, as we navigate the next year or so of the economy. >> Yeah, so we've got to wrap, but I want to better understand the relationship between the public markets and you've seen the NASDAQ up, which is just unbelievable when you look at what's happening in main street, and the relationship between the public markets and the private markets, are you saying, they're sort of tracking, but not really identical. I mean, what's the relationship. >> Okay, there's a hundred, there's thousands of people that are better at that than me. Like the kind of like anecdotal thoughts that I, or the anecdotal narrative that I've heard in past recessions and actually saw too, was the private market, when the public market dropped, it took nine months roughly for the private market to correct. Okay, so there was a lag. And so there's, some arguments that, that would happen here, but this is just a weird situation, right? Of like the market, even though we're going through societal crazy uncertainty, turmoil and, and tremendous tragedy, the markets did drop, but they're pretty hot right now, specifically in tech. And so there's a number of schools of thoughts there that like some people claim that tech is like the utilities companies of the eighties, where it's just a necessity and it's always going to be there regardless of the economy. Some people argue that what's happened with COVID and the remote workplace have made, you know, accelerated the adoption of tech, the inevitable adoption, and others could argue that like, you know, the worst is still the come. >> Yeah. And of course, you've got The Fed injecting so much liquidity into the system, low interest rates, Mark, last question. Give me a pro tip for entrepreneurs. (Mark Sighs) >> I would say, like, we've talked a lot about, this methodology with, you know, customer retention, really focusing there, align everything there as opposed to top line revenue growth initially. I think that the extension I do at this point is, do your diligence on your investors, and what their thoughts are on your future growth plans to see if they're aligned. Cause that, that becomes like, I think a lot of entrepreneurs, when they dig into this work, they do want to operate around it. But that becomes that much harder when you have investors that think a different way. So I would just, you know, just always keep in mind that, you know, I know it's so hard to raise money, but you know, do the diligence on your investors to understand, what they'd like to see in the next two years and how it's aligned with your own vision. >> Mark is really great having you on. I'd love to have you back and as this thing progresses, and see how it all shakes out. It really a pleasure. Thanks for coming on. >> No, thanks, Dave. I appreciate you having me on. >> And thank you everybody for watching. This is Dave Vellante for The Cube. We'll see you next time. (music plays)