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How to Evaluate Security Vendors Like a Venture Capital Firm: Page 2 of 2

The five questions Alberto Yépez (pictured), managing director of Forgepoint Capital, asks about security startups aren’t exactly the same ones channel pros should ask, but they’re similar in instructive ways. By Rich Freeman

“It begins with the customer,” he says. “We always try to get a view of what the customer is looking for and what is not being met by the existing players.” Last month, in fact, the company shared CISO priorities survey data it collected from very small to very large businesses.

2. Who are the players in this market?
Once you’ve found a relatively young, high-growth market with lots of upside potential, the next step is researching vendors poised to conquer it.

“Who has received prior rounds of financing?” Yépez asks. “Who are the investors? Who’s done the seed [funding]? What is the background of the entrepreneur? Are they serial entrepreneurs who have the domain expertise?”

It made an impression on Forgepoint, for example, that Tenable CEO Ron Gula was an angel investor in Huntress. “This is a guy that built a multibillion dollar business and he’s taken it public,” Yépez observes.

Channel pros should scrutinize a potential vendor partner’s credibility the same way, he adds. “Is this company going to succeed?” he asks. “Are the investors proven? Have they scaled businesses?” No one, whether they’re an MSP or a VC, wants to place a big bet on a risky business.

3. Is the IP unique?
The more differentiated a vendor’s technology, the likelier it is to prosper. 

“We look at defensible technology, that it cannot be replicated,” Yépez says. What set Huntress apart for example, he continues, was a platform carefully designed for buyers without a big business’s in-house expertise and budget.

“They said, ‘we’re going to do something different in creating a platform. It’s going to be easy to consume, easy to deploy,’” Yépez explains. “That was defensible technology, uniquely, uniquely differentiated, and hard to replicate.”

4. What’s the go-to-market strategy?
For Forgepoint, what matters most about a startup’s sales model and partner strategy is its scope.

“We always look for businesses that can create leverage and scale,” Yépez says. What channel pros should look for, he continues, is different.

“Are they channel friendly?” he asks. “Will it be easy to do deal registration? Are they going to eventually go around me?”

5. Who runs the business?
Even a company with one-of-a-kind technology, few competitors, a lot of potential customers, heavyweight early backers, and a smart, scalable go-to-market plan can fizzle out quickly if its leadership team isn’t up to the task of realizing all that potential. 

Forgepoint therefore looks closely at an investment candidate’s senior management, Yépez notes, pointing once more as an example to Huntress, a company founded by former NSA cyber operators who spent time working at an MSP before launching the business to learn the market from the inside out.

“We were very impressed with Kyle and his team,” says Yépez of Huntress CEO Kyle Hanslovan. And rightly so, he maintains. “The company is growing almost 100% year over year,” Yépez notes. “Very rare, a little bit like a SentinelOne.” 

Channel pros with the hard-nosed discipline of a VC firm can have equal success spotting rarities.


About the Author

Rich Freeman's picture

Rich Freeman is ChannelPro's Founding Editor

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