Welcome to the first installment of a new series on the Elsewhere Effect: Operating Advisor Spotlight. Our operating advisors (OAs) are C-level veterans who have spent their careers building software companies, and generally serve as our board representatives, advisors or full-time executives depending on the needs of the business.
Kicking off this series is Dan Schoenbaum, who serves as a go-to-market (GTM) advisor to both ActivTrak and OpsCompass. He got connected to the Elsewhere community through Mike Bennett (another Elsewhere OA and the Executive Chairman of ActivTrak). Read on for his thoughts (edited for length and clarity) on everything from paradigm shifts in cybersecurity to the future of hiring.
I’ve been doing this for almost 25 years, and I've spent time in enterprise software, consumer, freemium, and big data. But the sector to me that is most exciting, most challenging from a customer perspective, is cybersecurity. The need for it will never go away. Threat vectors change by the minute.
Cybersecurity is very dynamic and it’s always changing. And there have been multiple generations of products that have, at one level or another been effective, but no one has ever been completely effective. What I love about cyber is that customers are realizing that they need to go from reactive to proactive. Instead of building a moat and hiding behind a wall, they're going out and they are threat hunting —they’re looking for bad things before they actually rear up and present a threat to the company.
There are companies out there doing really exciting things around threat intelligence. There’s a lot of great innovation there, and from an investment standpoint we’re really in the first inning. There’s so much runway and upside there.
What I love—and how I think it relates to the Elsewhere model—is the market tends to be really smart, technical entrepreneurs that know how to build product but often need help finding the right go-to-market. A firm like Elsewhere can be the glue between the two.
I think people have overused AI and machine learning. It is hot. I’ve written articles on Medium that get many times more views and reads because AI and machine learning are in the headline.
There’s a lot of promise and excitement around it—a lot of companies think that if they slap that into their positioning and messaging it’s a differentiator or adds some allure to the product. It’s becoming a bit tarnished from a product marketing standpoint. It should be technology that’s valuable behind the scenes, but I don't know that it has a lot of marketing value quite frankly.
Raising money can be very difficult. At one company, we had really good metrics, but quite frankly I found the fundraising process to be a huge distraction. I was introduced to a fund that had to deploy capital from one fund in order to unlock a second fund. I realized I could probably close a round pretty quickly without a lengthy, protracted due diligence process. And I didn’t do as much diligence as I probably should have on my end. That’s something that is important—building that relationship.
People joke and say that it’s like a marriage, and I learned from that that it really is. I did close a quick round north of $10 million. Sometimes people use the term quick money or dumb money—I learnd the value of smart money and having a strong relationship with someone who you can trust and work with. This investor did not add a lot of value; they became a distraction and disruptive and ended up really challenging the future of the company. It was a painful lesson to learn—I’m willing to admit that. That personal relationship and trust and references on people and their background is really important. I’m typically a cautious, careful person and in this case I wasn’t.
At the other end of the spectrum I raised money from people like Eric Yuan, the CEO of Zoom. He was one of my angel investors and was humble and smart and always willing to help. He wrote that check when very few people had even heard of Zoom. It’s one of the things I’m really proud of—that I got to work with somebody of his stature early on.
I was at a company where a public company came and tried to buy us. We went through diligence for four months. We kept this process under really, really tight wraps, and we didn’t let it distract anybody in the company. We got all the way down to a press release announcing it, and two days before they pulled the plug and bought another company who was our competitor.
It was the most crushing, devastating moment. Not only that they pulled out of the acquisition, but that they bought a competitor of ours with virtually no diligence. We felt as if the world was kind of over. Had we shared this knowledge and even started to celebrate internally, when this news came, the morale of the company could have imploded and the whole company could have died because of this one event.
As senior execs, we needed a little bit of time to recover emotionally, and we turned that negative energy into positive energy. We poured our energy into figuring out how to dig out of it and ended up growing the company and filed an S-1 to take it public. We were ready to do the IPO roadshow and ended up selling the company for much more money.
The lessons learned along the way are to maintain your focus, don’t let the team get distracted by things. Even at your worst moment if you can turn around the negative energy and almost despair—I felt emotionally crushed—we went on to do much better things.
I see a lot of companies—at least five in the last few months—that are spending a lot on traditional marketing approaches and have very little to show. They have low double digits of leads a month—and even if your conversion rate is 100% you’re not going to achieve the growth you need to survive.
You have to be patient as an entrepreneur, but when something is not working, you have to experiment and try a lot of things and learn. Think of the company as one big brain that constantly has to be experimenting and learning and getting better and optimizing. I don’t see companies doing enough experimentation and trying things, especially around product-led growth.
Rely on product and user experience—if you’re solving a problem for users, you’re going to have groundswell. I just see companies going the traditional route of e-book, white paper, webinar, and hoping that they will achieve the growth they need. The lesson is try things that are unconventional—experiment and learn from them and constantly be getting better. If you’re just bringing playbooks from previous experiences, you’re not going to be successful.
I think this whole unfortunate pandemic is changing the way that companies work and opening up access to talent. I’m working with some companies now that are trying to hire people locally and they’re very limited in the availability of certain skill sets.
Remote work didn’t start in 2020, but it’s becoming more and more common. I left the Bay Area and I’m in Portland now and it hasn’t affected my ability to do what I do. It’s becoming more and more accepted. I think companies should see that as an opportunity to spend less on real estate and more on growth, to find the right talent and get the best possible person you can even if they’re in Helsinki, Finland and you’re in Austin, TX. Get the person who is going to take you to the next level and don't settle. That’s one of the few positives that is coming out of the 2020 pandemic.