Exit Interview with Slavik Markovich
Slavik Markovich (00:01):
We were really excited about the idea, but then at the RSA of 2015, we went and talked with probably 30 CISOs, maybe even more, and we explained what we're doing and we just didn't see the excitement. We took a step back and asked them, what are the big issues that you're seeing? And almost everyone was talking about too many alerts and alert fatigue. All of those problems told us, Hey, maybe what we're thinking is not the right thing, and let's do something else. And this is how the mystery basically came to be.
Ronda Scott (00:35):
Welcome to the DTC podcast, a series of conversations between the investors and operators at Dell Technologies Capital and the people who are building what's next in enterprise technologies. In this exit interview, episode DTC Investor Deepak Jeevankumar talks with Slavik Markovich, co-founder of Sentrigo, Demisto, and Descope Slavik shares lessons learned from all three companies. He goes deep on the process and experience of Demisto being acquired by Palo Alto Networks, and he also shares some highlights on what he's building now with Descope. He finishes by landing some predictions for the 2024 RSA conference. Without further ado, Deepak and Slavik.
Deepak Jeevankumar (01:17):
Hi everybody, welcome to the DTC podcast series. This podcast is titled Exit Interview, and our special honorable guest today is Slavik Markovich, currently the CEO and co-founder of Descope and many times successful founders, a Slavik, welcome to our podcast.
Slavik Markovich (01:35):
Thanks for having me here. Deepak, happy to join you in chat about my adventures.
Deepak Jeevankumar (01:42):
Exactly, I think that is the right word. Adventures. It looks like we have known each other for a decades now, Slavik, so I can count you as an adventure friend for the last decade. So let's talk about you. What made you are?
Slavik Markovich (01:56):
I was born in Belarus, but I grew up and lived all of my life in Israel and I guess I just like technology and building things, so hence my startups. They started in the early days in the Israeli Defense Forces doing some architecture and large system development, and then from there, just jumped right into creating cybersecurity startups. So I guess it's a common Israeli journey.
Deepak Jeevankumar (02:29):
Journey was your first experience in cyber?
Slavik Markovich (02:32):
Oh yeah. I think my first, beyond what I guess everybody technology did, which is hack games and try to go around various restrictions and things like that, it was actually pretty funny because in the Israeli Fed Forces, I was managing a team of DBAs and we always needed access beyond just the database, a route access to systems, and it was like Big U Systems at the time. Since we didn't have root access, we would always try to hack the system to get root access to do stuff in the system. It was pretty funny because it was like internal hacking just for getting things done and that was my first real enterprise environment talking.
Deepak Jeevankumar (03:22):
So what brought you to America? So Belarus, Israel, and then to America, and what was your first experience with America?
Slavik Markovich (03:30):
Yeah, so I started my first startup in this world of database security and we actually, the startup started because we did a large project for Sony in the us, Sony PlayStation, and I actually helped design the first online building solution for Sony. And so I have my name out there on a lot of the early PS two games as one of the developers. That's my personal bragging rights
Deepak Jeevankumar (04:03):
Every time I get to know a new thing about you that I did not before.
Slavik Markovich (04:08):
So it's part of that solution. We designed a large bid database on the backend, and it was always weird to me that everybody could access it and see some sensitive details like credit cards and personal buying history and things like that. So all the developers in DBH had access, and I said, that can't be right. And so I started my first startup around activity monitoring in databases as a part of this startup. After about a year I moved to the US because this is where my customers were and investors and so on. So, in 2008, I came here, and my first experience was actually really bad because I came, and a month later, the entire economy collapsed credit branch, and I had to basically start together without money. We were even contemplating going back to Israel because things weren't looking that great. And eventually we obviously survived, but it was a very stressful six months.
Deepak Jeevankumar (05:17):
Yeah, no, I think that can only happen if you're a very good founding team. So let's talk about your founders, how you picked your founders the first time and what did you see in each other?
Slavik Markovich (05:30):
Yeah, as you know, founders are getting married, right? It's a really dense, close relationship, and so many of the founders I known for many years. So one of them, guy Renat was with me in the army in the same place. And so it's been 28 years that we've known together each other together. And the other as well, actually, so Shri here in also joined me was in the same place with me in the army. Dan was the first employee in that startup in St. Sentrigo that I mentioned before. And they came to us from checkpoints. And so I've known him only for the last 16 years. So Rishi, I guess is the newcomer. And Rishi, actually, it's a funny story because he was the one acquiring us into McAfee. So, as you know, my first startup was acquired by McAfee, and he was the PM for the business unit that acquired us, and his office in my office was next to each other.
(06:36):
And I got him hooked on coffee. I had a small espresso machine in my office, and actually, every morning, we would come into the office to drink coffee with me, and we were chatting about what we should do and how we should leave McAfee and start something until, eventually, we did it. But I really got lucky in that my co-founders are basically really good friends. We have known each other for many years, and they kind of cover for what I'm not that good at. And I think vice versa, I hate anything finance related and guy actually takes care of it, and I don't have to worry about it and go to markets. Rishi is doing everything for me and the product, Dan is doing everything for me. And so that, I think, is the real reason why we go back and just create or do more startups because we enjoy the process so much, and we enjoy working together. So all I have to do is just drink coffee and go to parties. My role is very small
Deepak Jeevankumar (07:47):
And convincing customers
Slavik Markovich (07:49):
And convincing customers obviously.
Deepak Jeevankumar (07:51):
So let's start digging a little deeper into the Demisto experience, and you can feel free to compare it with the Sentrigo experience from behind us. So both were successful exits, different times, different contexts, different parts of cybersecurity.
Slavik Markovich (08:06):
Sure. So first of all, in terms of comparing, I think I was way more mature when we started the Wind. When I started Sentrigo, I really didn't know anything about startups, honestly. I was fairly young and they didn't have a lot of experience. And so in my head I had this image of, oh, a founder just works 24 7 all the time, and this is actually what I did for the first two or three years to the point where I basically burned myself out. I would work 8:00 AM to 1:00 AM every day, and it pretty much killed me. I got to a place where I couldn't think straight. It was very hard. Now, coming to good boundaries, we understood that it's more of a marathon than a sprint, and I think all of us were much more mature and understanding and approached it in a much healthier way. So when we started the Misto, actually as I mentioned, the Rishi and I kind of ideated over coffee for a long time, and both of us being very technical, we kind of thought, Hey, let's do this amazing cross between at the time, what was Carbon Black and Teddy do an endpoint that does recording, but in a very peer to peer-to-peer distributed database way, something really technical.
(09:37):
We read a lot of research in the academia around peer-to-peer databases and how to build them correctly and started implementing really technical stuff. And what happened is that we were really excited about the idea, but then at the sale of 2015, we went and talked with probably 30 CSOs or maybe even more, and we explained what we're doing, and we just didn't see the excitement. They were saying, oh, it's another endpoint, I don't need another endpoint. And then we kind of took a step back and asked them, so what is the problem that you are encountering? What are the big issues that you're seeing? And almost everyone was talking about the shortage of people, too many alerts and alert fatigue, basically not using the existing tools that they have to the full extent; all of those problems told us, Hey, maybe what we're thinking is not the right thing and let's do something else.
(10:45):
And this is how the mystery basically came to be, like the whole automating the alert resolution, automating the tool usage, the management of the SOC from the top all the way to the analyst and all of the things that the MR did. And so the idea really came to be from our conversations, and we completely pivoted away from our initial thoughts around the super technical idea. And this is another thing that I really learned. The first startup was very technical and very hard with its reverse engineering of databases, direct memory access, and things that are super smart. Demisto technically was not rocket science. It was more about what our customer needed and how can we solve it in a delightful, easy way. It's not about the technology, it's more about the needs in the market. So that's, say, one of the learnings that we had. Yeah, I guess, as I said, we just pivoted away from the idea and started executing.
(11:49):
And then it's funny how we actually improved from pitch to pitch from conversations with VCs. And at the time Slack came to be and we kind of played and ideated inside Slack, and we said, oh, it's really good. Why don't we do that in our product as well? So from literally in the car to the way on the way to one of the s, we actually said, oh, it's really great. We added slides and started implementing that there, right there. So the whole concept of a collaboration between security analysts in a war room as a chat like interface. So yeah, that was the idea. That
Deepak Jeevankumar (12:29):
Was an amazing growth. So let's talk about the exit that happened. So here's a trick question. Why not take the company to public? Why did you sell to Palo Alto Networks?
Slavik Markovich (12:41):
Yeah, that's an interesting question. So first of all, as you mentioned, firstly
Deepak Jeevankumar (12:46):
Congratulations. That's an amazing outcome. So don't get me wrong.
Slavik Markovich (12:50):
Yeah, yeah, no, for sure. So as you mentioned, Demisto actually had amazing trajectory and amazing growth. So, the first year that we started selling in Q4 of 2016, we did like 600 something K, just the founders, even without the sales team. And then in 2017, we did 4.4, and then in 2018, we finished here with 21, which is crazy growth. And our plan was we really planned to have 2019 at 50 and 2020 over a hundred and then just go all the way. That was the plan. And we even raised money, we started raising money and we closed the round in October of 2018, so we were kind of growth facing and so on. And we raised money from Greylock, and Greylock is also an investor and still a board member of Palo Alto Networks. And so Nash came to one of the Greylock investors and said, Hey, can you do an intro to Slavik?
(14:06):
I just want to learn about the market. And they did the intro and I went for a meeting. I didn't even think about the acquisition because, at that point, I was really growing fast, and we just finished around; we just raised money. So when we presented what we're doing and so on, and the cash started talking about the whole strategic collaboration and where he see us in the big picture, I eventually said, no, look, I'm good. I going to continue growing. Talk with me like a year or two or something like that. Eventually I left the meeting and eventually Nash started WhatsApping me and we met multiple times and so on. And then we had to make a decision. And I'm still not sure, by the way, if the decision was the correct decision. So the outcome might have been much more interesting if I would've continued growing the company.
(15:04):
But what happened is I'm, I'm pretty transparent about it. For us, we had this internal line in the stand. If the offered amount is above half a billion dollars, we're going to go with it. And then for me, it was not the first exit, but for the other founders was an and for all of us, it was a life-changing in terms of compensation. And so we had this internal conversation, debated it for a long time, and I could tell you being Rishi, we would one day wake up and say, okay, let's do it. And the day after we say no, let's say no and just continue running, running. But division that Palo Alto actually painted was really compelling. The technology was super interesting and just revolutionizing the sock completely into this autonomous self-healing sock, which eventually, now Palo Alto is executing on with the XIM was really interesting to us. And the money, the over a half billion dollars for us, plus the technology told us, Hey, it's time to do it. Now, looking at insight into where the market was in 2020 20 21, we could have probably had a much bigger outcome, but I'm not sorry at all. I enjoyed my time in Palo Alto and the technology landed and it's growing amazingly well inside Palo Alto, so I was happy to do that.
Deepak Jeevankumar (16:44):
Yeah, no, that is a true successful acquisition. Like the technology and the product performs even better after it's gotten acquired and not many acquisitions are that successful. So congratulations on that. So maybe give some advice to other founders on how to think about an m and a process and what are the top two or three things you would negotiate with a potential acquirer? And apart from the purchase price, how do you make sure there's a meeting of the minds and the team is well taken care of? Walk us through a few piece of advice here.
Slavik Markovich (17:17):
I think the first, I guess piece of advice is if you are lucky enough to be in this position, don't think about an m and a process. Just think about growing the company, making the best outcome for your customers and m and a. If it's meant to be, it'll come, right? So, we didn't initiate it; we were surprised by how it started. And I think that's the best scenario if you can get to it. Not chasing after m and a, but actually being in a position of strength. So being in this position of strength where you can continue by yourself and continue executing. I think it kind of determines a lot of the other factors. So things like the price, which honestly is probably the biggest piece of it. Then the technological direction and if there's alignment. So that's super important because then if there's no alignment on where things are going, you are just signing yourself up for a pain, I guess through the m and a process, and then lending the team correctly and keeping some sort of a management oversight of the team.
(18:35):
So it'll be a soft landing that I think is really important. I still remember the Excel sheet with the 172 employees, and for each of them, we actually made sure that we know exactly what the role is going to be, who's the manager, and we continued being the managers and the title and the salary, which are all kind of increasing obviously when you are required. I think that is super important. There are things that founders don't necessarily think about and didn't when we started the midst of things. Those are financial things. They give shares to the net revocable trust, the QSBS, and all the things around it. So you could actually plan a lot of it in a way that the outcome is amplified. But as I think 90% of founders, we didn't think about any of that. We just ran forward. But I guess this is my advice: the first thing is just focus on execution, focus on your customers, and if you execute well, good things will come. don't think, don't aim for the m and a. I think that's
Deepak Jeevankumar (19:54):
It. Yeah, you've got to be bought, not sold,
Slavik Markovich (19:56):
Right? Yes, exactly. Bought not sold. Exactly.
Deepak Jeevankumar (19:58):
Right. And so let's chat about the reaction of customers when they heard you were getting acquired by Palo Alto, and what are some of the first steps you did after the acquisition?
Slavik Markovich (20:10):
Right, right. So I guess from a customer perspective, there were probably two separate reactions, right? Customers who were big Palo Alto shops were happy, okay, oh, we just reduced our vendor or number, and it's good. There was a lot of concern from many of the other customers, especially since it's pretty customer. When you are getting acquired, suddenly prices go up and maybe focus is lost. And so I had many, many conversations. I still remember some of the conversations I had with CSOs calling me and saying, Hey man, we thought you were in it for the long run, and what happened? And I'm like, don't worry, I'm still here. We're still focused and we, we'll make sure that nothing changes. And so the concern is there, and it's real, and it's even justified in the sense that a large company cannot make the same selling decisions as a startup.
(21:23):
You as a startup are very flexible. You can do a lot of things that a large company will not necessarily do, and the large company has big comp plans and they make you have four sales guys in the middle that need to make their commission. So it's not as flexible. So I still, it's funny, literally six months ago I got a call from a CISO shouting at me, why is the price increasing? And I'm like, man, I'm like three years out of Palo Alto already. I have zero control over it. But we had this discussion and it's true prices were increasing. But from my perspective, besides having those conversations with CISOs, I think internally I made every effort to just keep focused, like head down on the product and continue executing on the same kind of path that we were before the acquisition. And so for the first, I guess two years in Palo Alto Networks, we just increased and we did everything that we did before just with a lot more resources.
(22:34):
And so I think the product got much better when we were acquired, and so customers eventually were very happy. And you can see that. So maybe I'll drop some names. I don't know. The former CISO, PayPal and I moved to a different company. He contacted me and asked about my new startup, so he was a happy customer. So he's happy to discuss with me the next thing. Johnson and Johnson, I just had a call yesterday. They're calling me and asking about, Hey, we heard you open a startup, what's next? So that just shows you that we try to make our customers happy before the acquisition, through the acquisition and with Palo Alto forward.
Deepak Jeevankumar (23:18):
Yeah, no, I think that's a good learning. We really have to think about customer communication post m and a and how to keep the customers happy. That's something like founders should keep in mind. Let's talk about the new challenge these. So what is scope? What does it even stand for?
Slavik Markovich (23:38):
So first of all, obviously thank you also Deepak for being part of that journey. Great,
Deepak Jeevankumar (23:48):
Thank you for working with Dell Technology at Capital at Descope. Appreciate it.
Slavik Markovich (23:51):
Yeah, so I think as in Descope, we actually had the privilege of doing what we want in terms of raising money. So we brought a lot of our friends, and we just made the four core engineers of the Misto. We made them co-founders in this scope. So it's a very large team and again, I'm blessed and happy to work with the same team over and over again. So that's amazing. From my perspective, the idea behind this scope and the name first of all is we're trying to get authentication authorization out of scope of developers.
(24:32):
And the idea here is that authentication, authorization and identity generally customer identity is at the core of every product and every business. And getting it right is critical for that business, but it's pretty complex. There's a lot of standards, a lot of protocols, a lot of opportunity to make mistakes, which cost a lot in terms of security. And I had the fun of implementing authentication authorization multiple times in my startups and it was never painless. It's always complex. You have to work with summer and scheme and OIDC and pasties and Magic Links and OTP and TOTP and password complexity. And there's so many integrations that you have to do for onboarding and offboarding and it's just complex. And while identities core to your business, it's not necessarily core to what you do if you are an accounting software, if you are a storage product, what some financial product you don't necessarily are an expert in identity.
(25:50):
And so the scope is exactly trying to remove that out of scope and with a few lines of code, incorporate the capability to define the user journey of authentication and authorization without resorting to a lot of code writing. So I think that is the biggest innovation that we have, and it is focusing around the user journey as a drug and drop flow where you don't necessarily need to write code, but you get all the capabilities and all the flexibility of the right security, the right implementation and the right integrations to all of your internal systems. Again, without having the right code. That's kind of what the scope does. And currently, we have about 200 million identities under management already, around 500 customers in production already, and all that in two years. So we're a
Deepak Jeevankumar (26:54):
Moving fast. That's amazing growth. So what's different this time compared to century ago and Esto in terms of recruiting, fundraising, talking to customers is a completely different part of the organization that deals with identity and most VCs and founders don't want to touch identity if they can get away with it. So tell us more, why did you take the tough problem?
Slavik Markovich (27:17):
First of all, I think I like tough problems. It makes for interesting journeys. So I think generally identity, the term and the challenge is really interesting, but also the capability to touch so many different companies is I think it's amazing. I actually started; I know that this is audio only, and you cannot see the shirts, but all of our shirts are around, making the journey painless and passwordless, so kidding, password, and so on. Even though we obviously support passwords, this is how we started. We wanted to make customer lives better with frictionless solutions. So I guess every journey in my startup life was slightly different. I think the first startup, as I mentioned, I didn't know anything and I overworked myself. And also the solution was super technical, very hard to implement. And so the go-to market was slightly painful. The mystery was very different in the sense that I think we knew what we were doing.
(28:35):
The market was much more ready for a cyber solution like ours. And so raising money was I think easier and the whole journey was just instead of a roller coaster, it was just going up type of journey. I think we didn't have a lot of panic attacks during the journey, so that was again, very different than Sentrigo or my previous startup. And then I think this scope is yet again slightly different in the sense that we were riding part of our success in the me, the 600 million exit and so on. And so raising money was actually almost the opposite. We had to say no to so many people who just wanted to put money in the company in a completely different way from the previous experience. And as you mentioned, our customers now. So, all of my career was in cybersecurity, and suddenly, I was talking with chief product officers instead of the CSOs, and it's a big learning experience from my perspective; how do you approach them?
(29:47):
How do you make it interesting for them? What are the buttons that actually push action versus securities? A lot of about risk management, insurance, a bit of fear and all of those things Here, it's all about outcomes, like product outcomes, which is a very different discussion, but we are learning also, I guess we tried a lot of the PLG motions. We're still have that going and going strong. We're trying different ways to interact and engage the CTOs and CPOs of various companies. And the pain is real. You talk with pretty much any product guy and he will tell you that identity is a problem, silos, complexities, it's not there where they want it. And so the opportunity here for us is huge. I'm super excited.
Deepak Jeevankumar (30:48):
Yeah. There's this place for rifle for disruption, maybe one compare and contrast question and learning question as well. What have you kept the same in the culture from demonstrate Descope and what have you evolved or changed?
Slavik Markovich (31:06):
So I think first of all, it's kind of the same people. So not a lot has changed from that perspective. The culture is the same culture. So we try to operate with extreme transparency and honesty, but also a bit of an Israeli conversation. So in a sense that I will be open with my employees and co-founders and they will be very open and transparent and direct with me. So I get shouted at a lot. People will say, okay, stop writing bugs or stop doing that. You're stupid, CEO, you. And people are really open and transparent, which I think we all like because a open communication and not a lot of errors there. So that's one thing. Culturally, I think both Demisto and Descope are very similar. So we even have the same ping pong table and the coffee machine. Like behaviors, we try to operate very similarly because I think overall the experience of everybody in the midst was great. When we started, we pretty much rehired a lot of the same folks. They basically came no matter where they were, they came back, and they continued to work with us. So our manager of our BDRs, our marketing director, all of those were very senior positions at different companies. They all came back to us.
Deepak Jeevankumar (32:38):
Oh no, that's amazing. Your customers are coming back to you, employees are coming back to you. What else do you need?
Slavik Markovich (32:43):
Yes. No, I'm really happy to just be, again, part of the journey. And you know that for a while there I thought of retiring, but man, it's too boring. It's just much more interesting doing stuff.
Deepak Jeevankumar (33:00):
Yeah. And so what is your final advice to founders?
Slavik Markovich (33:05):
My advice is simple. Solve a problem that matters to your customers and to you. If you are passionate about it, it actually reflects in everything that you do in your conversations. And then customers, you cannot fake it, right?
Deepak Jeevankumar (33:23):
Customer focus, solve a real problem. And on that note, yes, what are your predictions for the RSA conference?
Slavik Markovich (33:30):
Yeah, predictions are hard, but on the other hand, I think these RSA is pretty easy AI everywhere. So it's AI in the usage of cyber for AI like DLP and protection around the various services for ai, model protection for AI and so on. So that, I think we'll see quite a lot. And I'm getting pitched probably five times a week around the AI and cyber. I would say the other thing that we're seeing already, and probably we'll see more is some sort of a consolidation. So there's this, I guess, sinus wave of creating lots of new startups and then consolidating them and lots of new startups, again, consolidating them. So I think we're on the consolidation wave right now, so there's going to be a lot of acquisitions around cloud, around SOC and all of those things. So we'll probably hear about a bunch of announcements of things being acquired.
Deepak Jeevankumar (34:38):
Really appreciate you taking time and talking about your experiences, building and selling startups, and have a great weekend and hope to see you at RSA.
Slavik Markovich (34:49):
Definitely Deepak. Thank you for having me. And we'll definitely see each other at RSA is like a reunion club, right? You see everybody there.
Deepak Jeevankumar (35:00):
Excellent. No, thank you Slavik, and best of luck to the scope journey.
Ronda Scott (35:06):
Thanks for listening to the DTC podcast. If you like what you heard, you know what to do, like, share and subscribe wherever you get your podcasts.
