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Dec 5, 2020 · 20m · top-founders

RedSeal Sold 50%+ For $60m This Year doing $50m in Revenues in CyberSecurity Space

Ray Rothrock · 10m spoken Nathan Latka · 6m spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

In this interview with Nathan Latka, RedSeal CEO Ray Rothrock discusses scaling the cybersecurity risk modeling company past $50 million in revenue, managing cash burn, and executing a $60 million majority acquisition with Symphony Technology Group while targeting an eventual IPO.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 39.8% of the talking time here. How this is scored →

Nathan as informed peer 5.7 Guest teaching 3.2 Guest disagreement 2.0 Nathan pushing back 4.0
05100:0010:0020:000:17–4:37 · Nathan as informed peer 5/10 Nathan Latka Subscription Pitch and Platform Overview After the standard promo intro, Latka drills into RedSeal's pricing mechanics and converts router tiers into annual contract values. Rothrock explains the router-based monetization model and customer onboarding expansion behavior.4:38–8:21 · Nathan as informed peer 6/10 Scale Metrics and Target Enterprise Profiles Latka checks key SaaS metrics, challenging Rothrock to delineate between brand-new logo revenue and expansion contract growth. Rothrock recaps company origin, early sales to Apple, and the inflection point following the Target breach.8:21–12:04 · Nathan as informed peer 6/10 Organizational Team Structure and Account Expansion Latka presses Rothrock on cohort churn and net revenue retention, clarifying the metric when Rothrock hesitates on the terminology. Latka also challenges why NRR is not reaching top-quartile enterprise benchmarks.12:05–14:22 · Nathan as informed peer 7/10 Majority Acquisition by Symphony Technology Group Latka directly confronts Rothrock regarding the STG majority buyout, arguing that $60 million for over 50% implies a depressed valuation multiple for a $30M+ ARR cybersecurity firm. Rothrock candidly admits the company faced internal financial stress.14:22–16:58 · Nathan as informed peer 5/10 Cash Flow Management, Burn History, and Profitability Path Latka presses Rothrock on the exact burn rate leading up to the transaction, calculating roughly a million-dollar monthly burn. Latka also catches and corrects a discrepancy in historical revenue milestones.16:59–19:44 · Nathan as informed peer 5/10 Customer Acquisition Payback and Long-Term IPO Target Latka clarifies Rothrock's misuse of CAC terms to confirm a sub-12-month payback period before probing for M&A and IPO targets. The segment concludes smoothly with the Famous Five sequence.0:17–4:37 · Guest teaching 4/10 Nathan Latka Subscription Pitch and Platform Overview After the standard promo intro, Latka drills into RedSeal's pricing mechanics and converts router tiers into annual contract values. Rothrock explains the router-based monetization model and customer onboarding expansion behavior.4:38–8:21 · Guest teaching 3/10 Scale Metrics and Target Enterprise Profiles Latka checks key SaaS metrics, challenging Rothrock to delineate between brand-new logo revenue and expansion contract growth. Rothrock recaps company origin, early sales to Apple, and the inflection point following the Target breach.8:21–12:04 · Guest teaching 4/10 Organizational Team Structure and Account Expansion Latka presses Rothrock on cohort churn and net revenue retention, clarifying the metric when Rothrock hesitates on the terminology. Latka also challenges why NRR is not reaching top-quartile enterprise benchmarks.12:05–14:22 · Guest teaching 2/10 Majority Acquisition by Symphony Technology Group Latka directly confronts Rothrock regarding the STG majority buyout, arguing that $60 million for over 50% implies a depressed valuation multiple for a $30M+ ARR cybersecurity firm. Rothrock candidly admits the company faced internal financial stress.14:22–16:58 · Guest teaching 3/10 Cash Flow Management, Burn History, and Profitability Path Latka presses Rothrock on the exact burn rate leading up to the transaction, calculating roughly a million-dollar monthly burn. Latka also catches and corrects a discrepancy in historical revenue milestones.16:59–19:44 · Guest teaching 3/10 Customer Acquisition Payback and Long-Term IPO Target Latka clarifies Rothrock's misuse of CAC terms to confirm a sub-12-month payback period before probing for M&A and IPO targets. The segment concludes smoothly with the Famous Five sequence.0:17–4:37 · Guest disagreement 1/10 Nathan Latka Subscription Pitch and Platform Overview After the standard promo intro, Latka drills into RedSeal's pricing mechanics and converts router tiers into annual contract values. Rothrock explains the router-based monetization model and customer onboarding expansion behavior.4:38–8:21 · Guest disagreement 2/10 Scale Metrics and Target Enterprise Profiles Latka checks key SaaS metrics, challenging Rothrock to delineate between brand-new logo revenue and expansion contract growth. Rothrock recaps company origin, early sales to Apple, and the inflection point following the Target breach.8:21–12:04 · Guest disagreement 2/10 Organizational Team Structure and Account Expansion Latka presses Rothrock on cohort churn and net revenue retention, clarifying the metric when Rothrock hesitates on the terminology. Latka also challenges why NRR is not reaching top-quartile enterprise benchmarks.12:05–14:22 · Guest disagreement 3/10 Majority Acquisition by Symphony Technology Group Latka directly confronts Rothrock regarding the STG majority buyout, arguing that $60 million for over 50% implies a depressed valuation multiple for a $30M+ ARR cybersecurity firm. Rothrock candidly admits the company faced internal financial stress.14:22–16:58 · Guest disagreement 2/10 Cash Flow Management, Burn History, and Profitability Path Latka presses Rothrock on the exact burn rate leading up to the transaction, calculating roughly a million-dollar monthly burn. Latka also catches and corrects a discrepancy in historical revenue milestones.16:59–19:44 · Guest disagreement 2/10 Customer Acquisition Payback and Long-Term IPO Target Latka clarifies Rothrock's misuse of CAC terms to confirm a sub-12-month payback period before probing for M&A and IPO targets. The segment concludes smoothly with the Famous Five sequence.0:17–4:37 · Nathan pushing back 2/10 Nathan Latka Subscription Pitch and Platform Overview After the standard promo intro, Latka drills into RedSeal's pricing mechanics and converts router tiers into annual contract values. Rothrock explains the router-based monetization model and customer onboarding expansion behavior.4:38–8:21 · Nathan pushing back 4/10 Scale Metrics and Target Enterprise Profiles Latka checks key SaaS metrics, challenging Rothrock to delineate between brand-new logo revenue and expansion contract growth. Rothrock recaps company origin, early sales to Apple, and the inflection point following the Target breach.8:21–12:04 · Nathan pushing back 5/10 Organizational Team Structure and Account Expansion Latka presses Rothrock on cohort churn and net revenue retention, clarifying the metric when Rothrock hesitates on the terminology. Latka also challenges why NRR is not reaching top-quartile enterprise benchmarks.12:05–14:22 · Nathan pushing back 6/10 Majority Acquisition by Symphony Technology Group Latka directly confronts Rothrock regarding the STG majority buyout, arguing that $60 million for over 50% implies a depressed valuation multiple for a $30M+ ARR cybersecurity firm. Rothrock candidly admits the company faced internal financial stress.14:22–16:58 · Nathan pushing back 4/10 Cash Flow Management, Burn History, and Profitability Path Latka presses Rothrock on the exact burn rate leading up to the transaction, calculating roughly a million-dollar monthly burn. Latka also catches and corrects a discrepancy in historical revenue milestones.16:59–19:44 · Nathan pushing back 3/10 Customer Acquisition Payback and Long-Term IPO Target Latka clarifies Rothrock's misuse of CAC terms to confirm a sub-12-month payback period before probing for M&A and IPO targets. The segment concludes smoothly with the Famous Five sequence.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 63.5% · guest 36.5%0:00 · Nathan 63.5% · guest 36.5%3:00 · Nathan 21% · guest 79%3:00 · Nathan 21% · guest 79%6:00 · Nathan 23.8% · guest 76.2%6:00 · Nathan 23.8% · guest 76.2%9:00 · Nathan 40.8% · guest 59.2%9:00 · Nathan 40.8% · guest 59.2%12:00 · Nathan 42.8% · guest 57.2%12:00 · Nathan 42.8% · guest 57.2%15:00 · Nathan 43% · guest 57%15:00 · Nathan 43% · guest 57%18:00 · Nathan 45.1% · guest 54.9%18:00 · Nathan 45.1% · guest 54.9%
Sharpest disagreement ▶ 17:49 Dismissing CrowdStrike M&A rumors

Rothrock firmly bats away Latka's persistent questioning about potential buyout discussions, asserting that an acquirer would have to run him down in the parking lot to get his attention.

 Hardest push from Nathan ▶ 12:37 Interrogating discounted takeover price

Latka refuses to treat the Symphony deal as a standard growth round, calculating the implied valuation and directly asserting that it represents a weak multiple for their revenue profile.

 Biggest teaching moment ▶ 10:39 Explaining NRR mechanics to guest

When Rothrock seems unfamiliar with the term net revenue retention, Latka breaks down the exact cohort math combining churn and expansion to extract the right metric.

 Nathan holds their own ▶ 12:37 Instant implied valuation calculation

Latka demonstrates sharp M&A financial acumen by instantly computing the pre- and post-money valuation implied by the 50%+ equity sale for $60 million against underlying ARR.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Nathan Latka Subscription Pitch and Platform Overview 5412 After the standard promo intro, Latka drills into RedSeal's pricing mechanics and converts router tiers into annual contract values. Rothrock explains the router-based monetization model and customer onboarding expansion behavior.
Scale Metrics and Target Enterprise Profiles 6324 Latka checks key SaaS metrics, challenging Rothrock to delineate between brand-new logo revenue and expansion contract growth. Rothrock recaps company origin, early sales to Apple, and the inflection point following the Target breach.
Organizational Team Structure and Account Expansion 6425 Latka presses Rothrock on cohort churn and net revenue retention, clarifying the metric when Rothrock hesitates on the terminology. Latka also challenges why NRR is not reaching top-quartile enterprise benchmarks.
Majority Acquisition by Symphony Technology Group 7236 Latka directly confronts Rothrock regarding the STG majority buyout, arguing that $60 million for over 50% implies a depressed valuation multiple for a $30M+ ARR cybersecurity firm. Rothrock candidly admits the company faced internal financial stress.
Cash Flow Management, Burn History, and Profitability Path 5324 Latka presses Rothrock on the exact burn rate leading up to the transaction, calculating roughly a million-dollar monthly burn. Latka also catches and corrects a discrepancy in historical revenue milestones.
Customer Acquisition Payback and Long-Term IPO Target 5323 Latka clarifies Rothrock's misuse of CAC terms to confirm a sub-12-month payback period before probing for M&A and IPO targets. The segment concludes smoothly with the Famous Five sequence.

Statements from this episode (16)

Disclosure
Rothrock: RedSeal's typical entry contract generates $200,000 to $300,000
“Most people start small and expand over time. So a typical entry point would be 500 routers. And so that'll, you know, that'll generate, I don't know three, two or 300,000 dollars, and then as it expands, it gets bigger, and that's the way it works.”
Ray Rothrock Dec 5, 2020 ▶ 3:16
Assertion Not checkable as stated
Rothrock: RedSeal monitors approximately 1.2 to 1.3 million network devices
“The last time I looked, it was about a 1,000,002 1,000,003.”
Ray Rothrock Dec 5, 2020 ▶ 4:41
Assertion Not checkable as stated
Rothrock: RedSeal serves about 250 distinct enterprise customers
“And of course some customers have installations in different disparate places because they're located different places, but that all ends about 250 distinct customer names.”
Ray Rothrock Dec 5, 2020 ▶ 5:00
Assertion Not checkable as stated
Rothrock: Bleeding-edge tech companies typically do not use RedSeal
“Interestingly, we're not people who have cutting edge capabilities and really are on the hairy bleeding edge of things. They don't typically use this.”
Ray Rothrock Dec 5, 2020 ▶ 5:34
Assertion Not checkable as stated
Rothrock: RedSeal reached $17M-$18M in revenue around 2012-2013
“We got up to about 17, eighteen million dollars in 2012, 2013, and things kind of leveled out.”
Ray Rothrock Dec 5, 2020 ▶ 6:40
Assertion Not checkable as stated
Rothrock: RedSeal has surpassed $50 million in annual revenue
“And now we've grown to about, well, we're over fifty million now.”
Ray Rothrock Dec 5, 2020 ▶ 7:22
Assertion Not checkable as stated
Rothrock: RedSeal generated $39 million in ARR last year
“39.”
Ray Rothrock Dec 5, 2020 ▶ 7:31
Disclosure
Rothrock: RedSeal employs 60 engineers and 30 quota-carrying sales reps
“About 60 engineers, 20 support engineering. Then there's about 80 people in the field. Of the people in the field, there are, I don't know, 30 quote acquiring people, but we all go as a team.”
Ray Rothrock Dec 5, 2020 ▶ 8:38
Assertion Not checkable as stated
Rothrock: RedSeal customer cohorts expand 20% to 30% annually
“Well, some of them doubled. Some of them, on average, probably, I'd say, 20 or 30%.”
Ray Rothrock Dec 5, 2020 ▶ 10:11
Insight
Rothrock: RedSeal faces churn playing catch-up with vendor updates
“Literally, so sometimes configuration information for all the routing equipment, those routing equipment guys, Cisco, Palo Alto, Checkpoint, Fortinet, Juniper, all of them, they change their stuff all the time. And occasionally we get So they upgrade our softw…”
Ray Rothrock Dec 5, 2020 ▶ 11:37
Assertion Supported
Rothrock: RedSeal raised $75 million prior to its Symphony transaction
“Total at that time was about seventy five million.”
Ray Rothrock Dec 5, 2020 ▶ 12:12
Assertion Supported
Rothrock: Symphony Technology Group acquired over 50% of RedSeal
“It's the, they bought more than 50%, yeah.”
Ray Rothrock Dec 5, 2020 ▶ 12:25
Disclosure
Rothrock: RedSeal accepted majority takeover amid cash stress and employee attrition
“The stresses had to do with cash, cash flow we actually grew cash over the last year, but not without a lot of stress on the team. I'd had some attrition that I didn't like cause I couldn't afford things as much as I wanted to. And honestly growth rate was sa…”
Ray Rothrock Dec 5, 2020 ▶ 13:24
Prediction Not checkable as stated
Rothrock: RedSeal will achieve full-year profitability
“It depends on the quarter. We will be profitable this year. Last quarter, we're a little under this quarter. We'll be way up. And then Q four will be about a break even.”
Ray Rothrock Dec 5, 2020 ▶ 14:32
Prediction Didn’t hold up
Rothrock: RedSeal expects to reach $100 million ARR within three years
“That's our goal would be, you know, in that zone, a hundred million. We think we can do that in the next two to three years.”
Ray Rothrock Dec 5, 2020 ▶ 17:34
Disclosure
Rothrock denies being in acquisition talks with CrowdStrike
“No, none. I'm building a company, building a business.”
Ray Rothrock Dec 5, 2020 ▶ 17:54
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