Milestone Group Quarterly: July 2003
Articles
CEO Hot Seat:
BigFix CEO Steve Larsent
Steve Larsen, CEO at BigFix, recently sat down in the Milestone Group "CEO Hot Seat" and provided an excellent picture of what its currently like to be an early stage tech CEO
Milestone: In this nuclear winter of an economy, what makes you think you can survive as a software company?
Larsen: BigFix obtained funding in September of 2002, one of the most difficult times in recent times to raise money. Even without revenue, which incidentally is already rolling in, we would be funded for the next 24 months.
Milestone: OK, the company survives, then how do you as a CEO survive?
Larsen: First, you have to be okay with the fact that all CEO positions are interim jobs. You serve at the pleasure of the board. Once you understand this, surviving is a matter of consistently doing exactly what you say you'll do and keeping the company on plan. Complete transparency does not hurt either.
Milestone: Why did BigFix recently land a big $8mm round of financing when many VCs are hiding under their desks?
Larsen: BigFix is fortunate to have solid, proven technology that addresses a big, big problem in IT organizations today, vulnerability assessment and remediation. Our VCs understand the market need and see, in BigFix, a company with the potential to become a market leader. It helps that the security space is growing rapidly, and we've got a great team.
Milestone: How can a small sales force realistically compete in this market?
Larsen: You must focus on a very few accounts where you have a reasonable chance of closing...focus on things within your grasp. Then, gain leverage through partners by carefully choosing those that have a vested interest in your product. I am not a fan of indirect distribution unless it’s OEM. My belief is VAR’s respond to demand; they do not create demand.
Milestone: In the last six months, has selling to corporate buyers become any easier?
Larsen: To me it feels about the same. 2002 was tough and 2003 isn't any easier. Candidly, we are trying to shrink our sales cycle to six months. Corporate buyers want proof that things work; they want uncomplicated, verifiable ROI projections and they demand to evaluate and test, often repeatedly, before you get the order.
Milestone: Given an IPO is as likely as Bill Gates going broke, how do you build for an M&A exit?
Larsen: My focus is 100% on building a great company that really could IPO some day. I give very little thought to making us pretty for someone else.
Milestone: The problem is an IPO cannot happen until you are $100mm in sales. Subsequent rounds by most estimations will get tougher this year, (see Martin Gagen interview below) and the smart money does not see public exits for all but a select few? We like your technology but M&A is a more likely outcome.
Larsen: I agree M&A is more likely. The most positive M&A outcome, however, comes from building a valued, self-sustaining company. I’m not keen on doing things that are specific to an acquirer; people see through this. If you know your potential is M&A, you don’t do dumb business development deals that rule out entire segments of acquirers.
Milestone: What keeps you up at night besides Microsoft and David Letterman?
Larsen: Typically, I sleep pretty well. Sometimes I worry about particular prospect or customer situations. We'll be working on a deal and I'll wake up in the middle of the night wondering if we made sure to do this or that. The idea that Microsoft and other vendors will begin producing bug-free software is somewhat unsettling, but given the massive number of patches that are released each year, I think we're pretty safe.
Milestone: Cash is king, so how could you stretch your runway by 30%? In this vein, have you considered offshore development?
Larsen: I'm not sure offshore development is the right thing for us right now. However, it very well could be in the future.
Milestone: BigFix has an innovative security patch solution that stops viruses and security holes before they happen. Clear solution, no doubt, but are corporate buyers willing to invest in this?
Larsen: Yes, some are. There is growing awareness of the critical issue of ensuring your systems all have the very latest patch installed. We're seeing the best traction in the financial, technology and government markets.
About BigFix, Inc.
BigFix, Inc. was founded in 1997 to address a world where thousands of computers interact with thousands of software products to produce an endless number of conflicts, bugs and security holes. The BigFix® solution - patented, implemented and in use worldwide - is a secure technical support and desktop management technology that is revolutionizing the industry by solving computer problems before they cause failures. Headquartered in Emeryville, California, BigFix, Inc. is privately held and venture funded.
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