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Feb 17, 2018 · 21m · top-founders

938 Will 28 Year King of Malware IPO with $130m in ARR in Next 12 months?

Marcin Kleczynski · 12m 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 episode of The Top Entrepreneurs Podcast, host Nathan Latka interviews Malwarebytes founder Marcin Kleczynski on how the company bootstrapped past $100 million in ARR, executed a bottom-up enterprise sales model, and weighed the strategic tradeoffs of going public.

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 36.3% of the talking time here. How this is scored →

Nathan as informed peer 6.2 Guest teaching 3.2 Guest disagreement 1.6 Nathan pushing back 4.0
05100:0010:0020:000:49–5:16 · Nathan as informed peer 6/10 Marcin Kleczynski's Origins and Malwarebytes' Genesis Nathan drills into Malwarebytes' bootstrapping history, revenue milestones, and capital strategy, correcting Marcin on 'triple digits' versus 'nine figures' and accurately predicting the 10% employee equity pool condition imposed by venture investors.5:16–7:28 · Nathan as informed peer 5/10 Distributed Team Strategy and Bottom-Up Business Expansion Nathan probes the operational distribution of Malwarebytes' 650 employees and the bottom-up product-led growth model transitioning into B2B.7:28–9:49 · Nathan as informed peer 7/10 Grandfathered Pricing Strategy and Macro Growth Drivers Nathan challenges Marcin's top-line numbers by calculating that 3M users at $40/year should equal $120M in consumer revenue alone. Marcin schools him on historical lifetime licenses and grandfathered cohort pricing.9:51–17:00 · Nathan as informed peer 7/10 Sponsor Message: ProsperWorks CRM Platform Overview Following the mid-episode sponsor read, Nathan dives deep into unit economics, net negative churn, CAC calculations, and unpacks the unusual 18-month average contract duration.17:00–18:48 · Nathan as informed peer 6/10 Evaluating the Strategic Pros and Cons of an IPO Nathan presses Marcin on whether the company plans to file for an IPO immediately upon crossing the $100M ARR threshold, leading to a thoughtful breakdown of market predictability challenges.0:49–5:16 · Guest teaching 2/10 Marcin Kleczynski's Origins and Malwarebytes' Genesis Nathan drills into Malwarebytes' bootstrapping history, revenue milestones, and capital strategy, correcting Marcin on 'triple digits' versus 'nine figures' and accurately predicting the 10% employee equity pool condition imposed by venture investors.5:16–7:28 · Guest teaching 2/10 Distributed Team Strategy and Bottom-Up Business Expansion Nathan probes the operational distribution of Malwarebytes' 650 employees and the bottom-up product-led growth model transitioning into B2B.7:28–9:49 · Guest teaching 5/10 Grandfathered Pricing Strategy and Macro Growth Drivers Nathan challenges Marcin's top-line numbers by calculating that 3M users at $40/year should equal $120M in consumer revenue alone. Marcin schools him on historical lifetime licenses and grandfathered cohort pricing.9:51–17:00 · Guest teaching 4/10 Sponsor Message: ProsperWorks CRM Platform Overview Following the mid-episode sponsor read, Nathan dives deep into unit economics, net negative churn, CAC calculations, and unpacks the unusual 18-month average contract duration.17:00–18:48 · Guest teaching 3/10 Evaluating the Strategic Pros and Cons of an IPO Nathan presses Marcin on whether the company plans to file for an IPO immediately upon crossing the $100M ARR threshold, leading to a thoughtful breakdown of market predictability challenges.0:49–5:16 · Guest disagreement 1/10 Marcin Kleczynski's Origins and Malwarebytes' Genesis Nathan drills into Malwarebytes' bootstrapping history, revenue milestones, and capital strategy, correcting Marcin on 'triple digits' versus 'nine figures' and accurately predicting the 10% employee equity pool condition imposed by venture investors.5:16–7:28 · Guest disagreement 1/10 Distributed Team Strategy and Bottom-Up Business Expansion Nathan probes the operational distribution of Malwarebytes' 650 employees and the bottom-up product-led growth model transitioning into B2B.7:28–9:49 · Guest disagreement 2/10 Grandfathered Pricing Strategy and Macro Growth Drivers Nathan challenges Marcin's top-line numbers by calculating that 3M users at $40/year should equal $120M in consumer revenue alone. Marcin schools him on historical lifetime licenses and grandfathered cohort pricing.9:51–17:00 · Guest disagreement 2/10 Sponsor Message: ProsperWorks CRM Platform Overview Following the mid-episode sponsor read, Nathan dives deep into unit economics, net negative churn, CAC calculations, and unpacks the unusual 18-month average contract duration.17:00–18:48 · Guest disagreement 2/10 Evaluating the Strategic Pros and Cons of an IPO Nathan presses Marcin on whether the company plans to file for an IPO immediately upon crossing the $100M ARR threshold, leading to a thoughtful breakdown of market predictability challenges.0:49–5:16 · Nathan pushing back 3/10 Marcin Kleczynski's Origins and Malwarebytes' Genesis Nathan drills into Malwarebytes' bootstrapping history, revenue milestones, and capital strategy, correcting Marcin on 'triple digits' versus 'nine figures' and accurately predicting the 10% employee equity pool condition imposed by venture investors.5:16–7:28 · Nathan pushing back 2/10 Distributed Team Strategy and Bottom-Up Business Expansion Nathan probes the operational distribution of Malwarebytes' 650 employees and the bottom-up product-led growth model transitioning into B2B.7:28–9:49 · Nathan pushing back 6/10 Grandfathered Pricing Strategy and Macro Growth Drivers Nathan challenges Marcin's top-line numbers by calculating that 3M users at $40/year should equal $120M in consumer revenue alone. Marcin schools him on historical lifetime licenses and grandfathered cohort pricing.9:51–17:00 · Nathan pushing back 5/10 Sponsor Message: ProsperWorks CRM Platform Overview Following the mid-episode sponsor read, Nathan dives deep into unit economics, net negative churn, CAC calculations, and unpacks the unusual 18-month average contract duration.17:00–18:48 · Nathan pushing back 4/10 Evaluating the Strategic Pros and Cons of an IPO Nathan presses Marcin on whether the company plans to file for an IPO immediately upon crossing the $100M ARR threshold, leading to a thoughtful breakdown of market predictability challenges.

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

0:00 · Nathan 51.9% · guest 48.1%0:00 · Nathan 51.9% · guest 48.1%3:00 · Nathan 21.1% · guest 78.9%3:00 · Nathan 21.1% · guest 78.9%6:00 · Nathan 26.2% · guest 73.8%6:00 · Nathan 26.2% · guest 73.8%9:00 · Nathan 70.1% · guest 29.9%9:00 · Nathan 70.1% · guest 29.9%12:00 · Nathan 23.2% · guest 76.8%12:00 · Nathan 23.2% · guest 76.8%15:00 · Nathan 31.5% · guest 68.5%15:00 · Nathan 31.5% · guest 68.5%18:00 · Nathan 29.9% · guest 70.1%18:00 · Nathan 29.9% · guest 70.1%21:00 · Nathan 81.3% · guest 18.7%21:00 · Nathan 81.3% · guest 18.7%
Sharpest disagreement ▶ 9:10 Marcin refuses geopolitical speculation

Marcin shuts down Nathan's attempt to tie consumer growth directly to Russian political events with 'I'm not touching that one' before reframing to industry-wide breach news.

 Hardest push from Nathan ▶ 7:28 Nathan flags revenue discrepancy

Nathan calculates that 3 million paying consumers at $40 each implies $120 million, which contradicts Marcin's stated 50/50 revenue split at a $100M+ run rate, demanding to know where his math is wrong.

 Biggest teaching moment ▶ 7:46 Marcin explains the DFTC pricing philosophy

Marcin explains how grandfathering lifetime licenses and lower subscription tiers under the 'Don't fuck the customer' policy causes the average realized price per consumer to be significantly below headline pricing.

 Nathan holds their own ▶ 15:15 Nathan breaks down multi-year ACV and CAC mechanics

Nathan immediately dissects the unusual 18-month average term into annualized contract value ($2,700 ARR) and calculates implied blended CAC relative to first-year payback.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Marcin Kleczynski's Origins and Malwarebytes' Genesis 6213 Nathan drills into Malwarebytes' bootstrapping history, revenue milestones, and capital strategy, correcting Marcin on 'triple digits' versus 'nine figures' and accurately predicting the 10% employee equity pool condition imposed by venture investors.
Distributed Team Strategy and Bottom-Up Business Expansion 5212 Nathan probes the operational distribution of Malwarebytes' 650 employees and the bottom-up product-led growth model transitioning into B2B.
Grandfathered Pricing Strategy and Macro Growth Drivers 7526 Nathan challenges Marcin's top-line numbers by calculating that 3M users at $40/year should equal $120M in consumer revenue alone. Marcin schools him on historical lifetime licenses and grandfathered cohort pricing.
Sponsor Message: ProsperWorks CRM Platform Overview 7425 Following the mid-episode sponsor read, Nathan dives deep into unit economics, net negative churn, CAC calculations, and unpacks the unusual 18-month average contract duration.
Evaluating the Strategic Pros and Cons of an IPO 6324 Nathan presses Marcin on whether the company plans to file for an IPO immediately upon crossing the $100M ARR threshold, leading to a thoughtful breakdown of market predictability challenges.

Statements from this episode (19)

Assertion Not checkable as stated
Kleczynski: B2B products now generate half of Malwarebytes' revenue
“We didn't start building business products until I'd say 2010, 2011. And now it's half of our revenue.”
Marcin Kleczynski Feb 17, 2018 ▶ 3:04
Assertion Not checkable as stated
Kleczynski: Malwarebytes passed $100M ARR in 2017 and remains profitable
“We did. We did just last year actually. And again, it's been a rollercoaster of a ride. You know, we started the company with a different thesis in mind. Although we're in the Bay area, I'm a good old Chicago and Midwest boy. We don't start companies that lose…”
Marcin Kleczynski Feb 17, 2018 ▶ 3:48
Assertion Not checkable as stated
Kleczynski: Malwarebytes bootstrapped to $25M in revenue
“I think it was 25 around there. Twenty five million bootstrapped.”
Marcin Kleczynski Feb 17, 2018 ▶ 4:54
Disclosure
Kleczynski: Malwarebytes has raised $80 million to date
“Eighty million. So Fidelity came in last January.”
Marcin Kleczynski Feb 17, 2018 ▶ 5:01
Assertion Not checkable as stated
Kleczynski: Malwarebytes has surpassed 650 total employees
“So six 50 actually is what we just cranked over.”
Marcin Kleczynski Feb 17, 2018 ▶ 5:19
Assertion Not checkable as stated
Kleczynski: Malwarebytes has 3M paying consumers and 50k business customers
“So we've got about three million paying consumer subscribers and about 50,000 businesses.”
Marcin Kleczynski Feb 17, 2018 ▶ 6:03
Assertion Not checkable as stated
Kleczynski: Half of enterprise expansions start from consumer product usage
“Half the time, when we actually expand into an account, they're using a consumer product at work.”
Marcin Kleczynski Feb 17, 2018 ▶ 7:23
Disclosure
Kleczynski: Malwarebytes grandfathered all legacy pricing cohorts
“About halfway through the company's life, we transitioned to from perpetual to subscription. So we sold the product for 25 dollars lifetime. And then we sold it for 25 dollars a year, and now we're selling it for 40 dollars a year. But every time we've made th…”
Marcin Kleczynski Feb 17, 2018 ▶ 7:56
Prediction Partly held up
Kleczynski: Malwarebytes will surpass $130M ARR this year
“I think this year we'll go north of one 30.”
Marcin Kleczynski Feb 17, 2018 ▶ 8:55
Assertion Not checkable as stated
Kleczynski: Malwarebytes consumer payback is immediate and profitable per sale
“The consumer stuff is incredibly profitable. Our payback period is immediate. We are profitable on every sale on the B to B side.”
Marcin Kleczynski Feb 17, 2018 ▶ 12:02
Assertion Not checkable as stated
Kleczynski: Malwarebytes achieves 90% B2B gross renewal vs 70% consumer
“Renewal rates are much higher. We're talking 90% versus 70 on the consumer side. And again, roughly speaking.”
Marcin Kleczynski Feb 17, 2018 ▶ 12:23
Assertion Not checkable as stated
Kleczynski: Malwarebytes B2B net revenue retention exceeds 100%
“On the B to B side, that's gross. So if you with upsell, it's actually greater than a hundred percent.”
Marcin Kleczynski Feb 17, 2018 ▶ 12:38
Assertion Not checkable as stated
Kleczynski: Malwarebytes pulls 33,000 inbound leads per quarter
“We have 33,000 inbound leads a quarter.”
Marcin Kleczynski Feb 17, 2018 ▶ 12:58
Assertion Not checkable as stated
Kleczynski: Malwarebytes mid-market CAC pays back in 1 year, enterprise 2-3 years
“In the first year, we pay back on, on, on a typical customer, especially on the on the mid-market and below. On the enterprise side, that is still a massive investment for us. That's something that's a two-, three-year payback period for us.”
Marcin Kleczynski Feb 17, 2018 ▶ 14:40
Assertion Not checkable as stated
Kleczynski: Malwarebytes B2B ASP is $3,500 over an 18-month average term
“Our average, our ASP is about 3500 dollars on the B-to-B side. So again, lots of small customers. Per year per 18 months. So our average term is 18 months and the ASP is 3500 dollars.”
Marcin Kleczynski Feb 17, 2018 ▶ 15:00
Assertion Not checkable as stated
Kleczynski: Malwarebytes spent $300,000 on Google ads in one month
“Just in Google, for example, we spent six figures, 300 K on Google. Just in one month.”
Marcin Kleczynski Feb 17, 2018 ▶ 16:33
Insight
Kleczynski recommends replacing marketing agencies every one to two years
“Something that I actually would recommend is just bringing a new agency in house every, every year or two.”
Marcin Kleczynski Feb 17, 2018 ▶ 16:56
Assertion Not checkable as stated
Kleczynski: Raising from Fidelity drove millions in Malwarebytes sales
“When we raised from Fidelity, that alone drove business. I mean, to the millions of dollars because we were credible at that time, right?”
Marcin Kleczynski Feb 17, 2018 ▶ 17:55
Assertion Not checkable as stated
Kleczynski: Two ransomware attacks added millions to Malwarebytes' top line
“We had two ransomware attacks this year that drove millions of dollars to the top line.”
Marcin Kleczynski Feb 17, 2018 ▶ 18:17
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