Rami Essaid CEO of Distil Networks Interviewed on BizTalkRadio’s “The Big Biz Show”
Interview Aired on BizTalkRadio’s “The Big Biz Show" hosted by Bob “Sully” Sullivan.
Sully: We have... Can you, by the way, pull up Distil Networks, the website, by the way?
Sully: Yeah, distilnetworks.com. Look at this. I spent some time on this website today. This is a fantastic website.
Russ: I'm kind of scared by the visuals on this.
Sully: Well, you want to know what it's about?
Sully: Here on the phone with us, Rami Essaid. Is Rami on Skype or on phone today?
Sully: Okay. Because they never tell me.
Russ: There he is.
Sully: Rami, how are you, sir?
Rami: I'm doing well. How are you guys?
Sully: Good to talk to you, man. First of all, I have to tell you that I drilled down on your website today, before we got on the air today. You got a pretty cool deal going. But I'm gonna let you explain it because if I try to explain this, I'm gonna screw your whole company up in 70 million TV homes, so...
Russ: And when you're done, I have to say, "Oh, I get it," or you have to do it again.
Sully: Yeah, if Russ doesn't understand it, you're gone, mister. This is like "The Gong Show," okay?
Rami: All right. I'll try to distill it down for you guys.
Russ: Thank you.
Sully: Very good.
Russ: Distill it.
Sully: All right, Mr. Essaid, the CEO of Distil Networks, talk to us about this thing because this is a pretty cool deal you got going here.
Rami: So, with Distil, we help companies identify the difference between bots and real people across their web infrastructure. You know those little squiggly lines that you have to fill out, the CAPTCHAs?
Sully: God, I hate that because...
Sully: ... God, I can never see what the hell it is.
Russ: Some I can't even make out. Like, "Is that an F or a B?"
Sully: I act like I'm blind and they read it to ya.
Sully: And then you can just type it in. Right, is that how you trick that thing?
Rami: I mean, well, you could do it. But here's the trick about that, it doesn't work. The captchas, they're trying to eliminate bots pretending to be real people, but all they do is disrupt actual users from using your website. The bots can actually get around it. So, what we came up with is a completely transparent way to identify the difference between a bot and a real person so you don't have to fill out those captchas anymore. We've taken them away, we've made it easier, and we've made your website more secure.
Russ: So I kinda understand.
Sully: Yeah. So I have a question, though. What does a bot do? I mean, I don't really...I've never understood why...what they're trying to protect themselves from or me from by me having to fill out those little numbers. What is a bot and what does it do?
Rami: So, a bot is just any kind of a computer program that's trying to pretend to be a real person, and sometimes it's used for good reason, like Google indexes the web with bots. But, other times, it's malicious. And people use bots to break into websites. People use bots to exploit advertising. There is a hundred different ways that you can use bots to do a lot of nefarious things online. At the end of the day, you're making...you as a company are making websites for people, not for bots.
Sully: So it's like...
Rami: So you wanna be able to filter down to just the real people and eliminate all that unwanted end traffic.
Russ: So a bot's like an auto hacker?
Sully: It is an auto hacker, right? Yeah, that's good.
Rami: It is. I mean, hackers now, they don't do one-on-one hacks anymore. What they do is they write a bot and they distribute that bot. And instead of one hacker attacking your website, now you have an army of bots that's controlled by a hacker that's attacking your website. So it amplifies everything they can do.
Sully: Okay, so, here's my question for you. You are...can we consider you in the cybersecurity space?
Rami: Absolutely, that's the place that we're in.
Sully: Okay so, and we have...there's a show coming on Biz TV called, "Cyber Nation", which talks...it's kind of...it talks about kind of how cyber security's so prevalent. In your opinion, is cybersecurity a bigger danger to us financially right now than almost anything? In other words, when I say financially, I'm talking about individual ripping me off, stealing my ID and taking my credit card.
Russ: And some of my pictures I don't want anyone...
Sully: Is this as bad as we're hearing?
Rami: I think it's worse.
Sully: Oh, great. Perfect. Good news.
Rami: The problem is we're moving towards technology at a faster rate than catching up to the bad guys exploiting it. Right? So, you know, it sounds bad, but it's...I think it's getting worse and I think we're only at the tip of the iceberg of how bad it's gonna really get. It's the "Wild Wild West" out there.
Sully: Okay, but hold on, though. But guys like you, you guys are ahead of the curve, right? I mean, you're ahead of this story. This is the whole reason that you're doing what you're doing, because you're in front of this. Please, God, tell me you're in front of this.
Sully: Right. Is that what's happening here?
Rami: So, I'm ahead of this one problem in cyber.
Sully: Yeah, there's a lot of problems.
Rami: There are hundreds of problems in cyber, and I only have hundreds, maybe thousands of customers. So there's a lot of people out there on the web that aren't using me, that aren't protected. And so you multiply thousands of problems by thousands of people or tens of thousands of people that aren't using me, and this is how bad it's really getting. It's a really crazy matrix out there.
Sully: Rami, are you guys a privately held company or publicly traded?
Rami: No. So, we're privately held. We're venture-backed. We raised, like, about $44 million in venture financing.
Sully: Okay, let's talk about that because I come from a venture background. I still consult with companies about that. And I think what people don't realize is it's not an easy task, but it is a necessary task if you wanna grow your business. And $40 million seems like a lot of money, but your burn rate with respect to your technology and your management and such, I'm assuming, took that in little stages. In other words, you can go raise $40 million your first day, correct?
Rami: No, no. We raised it over time. Every year, we kind of level up, so the first year we raised $1 million, the next year...or, it was actually $2 million. The next year, we raised $10 million, and then recently, we've raised $30-something million.
Russ: Was that because...
Sully: Hold on. Wait. Listen. I'm gonna keep him over. I'm gonna keep you longer than you've anticipated because we have to go take a break real quick.
Russ: I'm just wondering if that's because you get $2 million, now I can build it, even here.
Sully: Yes, that's exactly right.
Russ: And then you say, "Now look at the company," and they go, "Boy. Oh, we'll give you $4 million."
Sully: And, you know, he's in Silicon Valley, talk about a competitive job market.
Sully: We'll talk about that as well. It is "The Big Biz Show." Bigbiz.com is our website. You can follow us on Twitter @bigbizradio. 70 million TV homes strong, 150 radio stations, 175 countries, more "Big Biz" coming up.
Sully: I think we should be brought to you by Distil Networks. They just raised 40 million bucks. They can afford it.
Russ: Heck yeah.
Russ: Two million the first year, that's what I was wondering about, does it get any easier once you're up and running? Like "I got $2 mil, now I can really develop my widget."
Sully: Well, that's right.
Russ: And then you go to people, "Look how much better it is because I had $2 million. Give me $8 million."
Sully: Right. Rami Essaid's the CEO. Rami, is that how it works in venture capital? You get your first $2 million, you get your traction going. And then once you decide you've hit a home run, you need more money to fix the...to get the next step, right?
Rami: Yes, but there's a big caveat, a, "but."
Rami: If you miss a step, right, if you don't get your traction, then you're hung out to dry. And it's easier said than done, to kinda get that traction and get that next proof point. You have to not show incremental growth, you have to double. You have to show something monumental each step of the way. And if you miss that, then you run out of money.
Sully: Now, Rami, let's say you get a $30 million round. I mean, what's the last...series C, how much did you raise?
Rami: Series B, we raised $31 million total.
Sully: Okay, now, they don't cut you a check for $31 million. You have to hit milestones, right?
Rami: Nope, they cut me a check.
Sully: They cut you a check. So, let me see if...
Rami: It moved into our bank account.
Russ:: Yeah, you're tossing in some lingo here. Series A is the first, series B is the second time they ask for cash.
Sully: Well, actually, there's seed capital, then there's usually a series A round, then a series B. And each time, the share price should be increasing. Am I right, Rami?
Rami: Exactly, exactly. So the value of the company is increasing each time.
Sully: Now, let's talk about that. So let's say Rami comes to me and says, "Hey Sully, I have this great idea. It's called ice cream on a donut." Okay? Or even better, like, the gun-dromat, a laundromat, and gun cleaning. Rami and Sully, and he says, "I've got this fantastic idea." So, Rami, and let's say we do the pro forma, we do the income projection, we got a great management team, we have a proprietary advantage, we've got a great barrier to entry, market size is through the roof, and we go out there and raise some capital. How do you do evaluation on a company that doesn't exist yet? Now, let me tell you what my guess would be. My guess would be that you would take the market size, which is quantifiable, okay?
Russ: Okay, right.
Sully: So let's look at the laundromat and gun cleaning market size, it's an $8 billion...
Russ: Worth billions. Billion dollars.
Sully: And then, Rami, what do you do? You decide, "Okay, we can capture .001% of that, and that's going to be our revenue," and we're, what, three times revenue? Give me an idea of how you value those things.
Rami: I mean, you're very close, I mean, that's really spot-on in how they value the upside of the opportunity. And then on the other side of it, they have to say, "Okay, how much risk is there? Has this team done it before? Do they have a good idea? How hard is this to execute?" And then they weigh those two things out and they say, "You know what? There's this much risk, but this much opportunity on the other end of it. And we're gonna say that the equation means, you know, X amount of money...you know, that this company is worth X amount right now." That's the hardest one. It's really like...I mean, it's an art. It's not a science.
Sully: Well, I believe I just showed everyone that I'm an artist.
Russ: And are you talking to people that know what you're talking about or just, like, "Well, you know, you're my brother, you're a good guy"?
Sully: I mean, I would assume if you go to the venture community, you're going to criteria-specific investors that understand this business, correct?
Rami: Well, so...I mean, I should have talked to you before I raised my round.
Sully: I'm doing pretty good, huh? How am I doing?
Rami: I mean, you're doing better than I did because I talked to every investor. Right? I didn't know that, hey, you know what? If I talked to investor Bob, then he doesn't understand my space, that he's not gonna get it.
Rami: And so I talked to a hundred people that told me no before I found the ones that actually understood what the heck I was saying.
Sully: No, that's exactly right. So Rami, I guess...first of all, we'd love to have you back, first of all, not just to talk about your company but to talk about, you know, the entrepreneurial sort of idea. One last question. So you were a serial entrepreneur. You started your first company as a kid. Let's say you weren't the CEO but you had this great idea. You'd have to go out and find somebody to run that thing before somebody would take you seriously, or at least an investor would say, "Look it, I'm gonna give you this money but I'm gonna bring in Rusty Nails to run it because he's run these types of things before." Is that accurate?
Rami: You know, actually, numbers show that first-time entrepreneurs are actually doing better than repeat entrepreneurs.
Sully: No kidding. But are they investing in first-time entrepreneurs, though, is my question.
Rami: People are, people are. They want somebody that's young and hungry. There's actually this weird opposite culture right now in San Francisco, where people want that really young, bright-eyed, bushy-tailed entrepreneur that wants to just eat up the world because they know that they're going to work 180 hours a week.
Sully: And by older, he means 33, Russ.
Russ: I know it, yeah.
Sully: By older people, he means 33 years old.
Rami: Older people are doing, like, plastic surgery and stuff to just look younger. It's crazy.
Sully: All right, here's the deal. You have now created.... We've been on the air for almost 19 years.
Sully: We're at 150 radio stations, we're 70 million... You've created a...you are now the serial entrepreneur on the show. I'm gonna have you on every other week. He is....this guy, you've learned more from this guy than you have from me in 18 years.
Russ: And vice versa. I think he took a little away from us.
Sully: Yeah, exactly. By the way, I want some equity in that deal since I taught you something, pal.
Rami: We're gonna have to talk offline.
Russ: We are.
Sully: Thanks, Rami Essaid, of course, the... Can I see the website one more time?
Russ: See that, kids? If you're watching...
Russ: ...lead your parents out of the room, and keep cooking that idea.
Sully: Yeah. He started his first company as a kid, which was basically Thursday if I'm not mistaken.