Forging the future of security with Rey Kirton at Forgepoint Capital

Secure Talk - Reynaldo Kirton

Justin Beals: Hello, everyone, and welcome back to SecureTalk. I'm Justin Beals, your host. As many of you know, I'm the CEO and founder of a venture capital-backed company, StrikeGraph. I've spent most of my career developing new initiatives, new products, and definitely many new companies, usually as a chief technology officer, VP of engineering, or some sort of product lead.

But early on in my career, I actually held the role of a CEO for a number of startups that I was building. Now, most of the time when we talk about founders and startups, we think about the most, celebrated events, which is generally fundraising. With venture capital-backed companies in Silicon Valley, but early in my career, I didn't have access to Capital.

One of the reasons was geography. I founded my early companies from 96 to 2002 in Atlanta, Georgia, and it wasn't as available as we saw in Silicon Valley, Seattle, Los Angeles and New York. Secondly, I have a theater degree, which isn't the most confidence-inspiring degree for business folks to make investments in early-stage startups.

So many of my early-stage startups that I founded were bootstrapped. We built them without capital, and we had some really good success. And there's a certain way of looking at a bootstrapped company and the ownership stake that you're able to carry with it and the freedom of decision making that you have.

But also, it's very hard to build a true technology product enterprise-grade without capital to get it off the ground because it takes a team of engineers, of sales leaders, of customer success and support to really get the engine rolling. Well, about six or seven years ago, I wanted to take the CEO journey again, but I wanted a new experience.

I wanted that experience to be a venture capital-backed experience. I wanted to work with a board and a group of investors that had experience in how to develop these businesses, as it was both a career opportunity for me and an exciting way to build powerful product and bring it to market today on secure talk.

We're going to talk to a venture capitalist that specializes in the security space. And so I'm really glad to introduce Ray Kirton.  Ray Curtin has a diverse work experience, primarily in the fields of venture capital and consulting. He's currently serving as the vice president for Forge Point Capital.

And Forge Point Capital is one of the best venture capital groups that I've met in the security space and they have a deep expertise there. Now, prior to joining ForgePoint, he interned at Harlem Capital, an investor in minority and women-owned startups. And before his time at Harlem Capital, he worked for Altman, Altman, the Landry and Company, a technology-focused strategy consulting firm.

During his tenure at Altman, the Landry and company, he managed over 30 operational and market due diligence efforts for investor and corporate clients across the US, Europe, and Latin America. Ray began his career at Cambridge Associates, where he provided capital markets research and portfolio allocation advice to private and institutional investor  clients with assets ranging from 50 million to 3 billion.

He is a CFA charterholder and holds an MBA from the Wharton School of the University of Pennsylvania, as well as a BA in economics from Harvard University. It's certainly great to talk to Ray. He has a deep perspective on building companies in the security space broadly and also what major trends are affecting our space and the types of companies that we might build.

I hope you all will join me in welcoming Ray to SecureTalk today.

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Justin Beals: Hello, everyone, and welcome back to Secure Talk. This is your host, Justin Beals, glad to be recording another episode for us this week. I have a great guest a little bit of a new perspective on the security industry. Broadly. Um, we have a venture capital investor joining us today. Ray Kirton from Forge Point Capital rate.

Thank you for joining us today. I really appreciate it. 

Reynaldo Kirton: Of course. No problem. 

Justin Beals: Excellent. You know, Ray, we've talked to a lot of folks that do security and certainly some founders that have built companies in the space, folks that have been deep experts on everything from national policy to how to build the best secure operations center.

I think your perspective is going to be a little unique, and certainly, in my journey and building Strike Graph, I've worked a lot with investors in developing the business and build some amazing partnerships and friendships along the way as well. It wasn't the hellscape I was always led to believe.

So really grateful for that. Ray, we always, really kind of love to learn how people came into the career, their expertise that they're in right now, you know, give us a little bit of the origin story. How did you get,  involved in this kind of work? 

Reynaldo Kirton: Yeah. So I actually started my career on the LP side at Cambridge Associates.

So, evaluating asset managers and venture capital firms. They went over to consulting where I was doing due diligence for private equity clients. We're focused on TMT, so broader than cyber,  but I did work in a few cyber deals, and you know, we were kind of like mercenaries. We would go into the weeds, ramp up on a complex topic for four weeks, deliver something to the private equity team and then hand it over and move on to something else.

And I really enjoyed the learning element, like ramping up on technologies. I knew nothing about, and so working on things in TMT, including cybersecurity, it got me a little bit interested there, but I wanted to move over to venture capital. Because I really liked working with those management teams and learning about these sectors.

But I also wanted the relationship to be longer term. So in consulting, the work comes to you, and then you work on it, and you pass it on. In venture, you do a lot of the pre-work. So looking at what sectors are most interesting to you. And then, you work with the company to actually make the investment, but then post investment is when the real work actually begins.

So you're really building these. seven-year to ten-year relationships, which I thought would be a lot more meaningful. So, that's why I decided to transition into venture capital. 

Justin Beals: Oh, that's excellent. So, were you always interested in business? or did you find it in college? You know how, cause this is definitely like, it seems to me you're interested in companies and how they're working and the good ones and the bad ones and everyone in between.

Reynaldo Kirton: In college, I couldn't say, so I was a, I studied economics, but I was probably more focused on playing football in college than I was on exactly what I was going to do post-college. So after graduating with a degree in economics, finance just seemed like a natural progression. But I think my favorite part of working with companies is just problem-solving.

Like it's like constantly solving all these different types of problems. Which I think is really interesting. And so put that together with just kind of a, you know, a basic knowledge of finance. And I think venture capital is pretty interesting. 

Justin Beals: Yeah. I certainly it's a nonstop myriad of different issues.

You know, when, when, trying to build a company when you were doing the, well, actually, before I dig into the next question, can you define TMT for me? I hadn't heard that acronym.

Reynaldo Kirton:  Oh yes. Technology, media, and telecommunications. 

Justin Beals: Okay. So that was the sector of analysis you were doing in the consulting work, right?

Reynaldo Kirton:Exactly. 

Justin Beals:So you got to see all different types of companies, media production companies through to cybersecurity specifically.  

Reynaldo Kirton: And also worked on a lot of like fiber acquisition deals.  Yeah. So it was a, it was a wide gamut. I actually, when I started working in TMT, I thought, Oh, maybe this would be too narrow.

And it was not at all. And then I went even more narrow into cybersecurity and thought, Okay, this will be too narrow. But again, once you dive into it, it's everything's way more broad than you expect. 

Justin Beals: All right, I have to ask one more question because I know I'm going to get asked: where'd you play football?

Reynaldo Kirton: Harvard. Harvard University. 

Justin Beals: Oh, yeah, that's excellent, yeah, that's great, I did a little intramural soccer. So that was about the limit of my, here you go, yeah, good,  Well, Forge Point, especially, I know, is as being deeply interested in security as a theme, right? Was that part of one of things you were excited about and working with the team?

Reynaldo Kirton: Yeah, I think so. So I actually first met the team when I was in business school, and I was working with a group. And we had basically to look at a topic and find startups in the space and kind of pitch the space. So, our topic was the future of mobility. And so we decided to do security for autonomous vehicles.

And so spoke to a bunch of folks in the space, which ends up mostly being, you know, IOT security. Came out here and pitched to a handful of VC firms, one of which was Forgepoint. And so that was the first time I got introduced. Uh, then, um, afterwards, I interned with Forgepoint over the summer dove a little bit into data security, but the thing that really got me interested, in Forge Point was the team.

 I think they're very, just very collaborative. Everything's by consensus. I know there are some teams where you have partners that kind of spearhead the deal, and like they kind of take it upon themselves. Whereas Forgepoint was like, You know, the culture of collaboration was, was pretty important.

And I thought that was more reflective of consulting, which was my background. So, you know, I felt like I fit right in. And I had a little bit of knowledge of cybersecurity, but obviously a lot of room to grow. And the people on the Forge Point team were very happy to teach, so that works well for me as well.

Justin Beals: A lot of different types of venture capital firms. Obviously, it seems like, broadly, their idea is to put a dollar in and get more of those out the other side. It's investment, right?

But I've also noticed that a lot of different VCs have either thematic approaches or different ways that they consider, um, you know, what they're investing in. How does ForgePoint, you know, create a thesis on the investments that you want to do? 

Reynaldo Kirton: That's a good question. I would say it probably varies a little bit amongst our team.

One of the things I was, I've been working on at Forge Point since I started one was to build out a taxonomy of everything that we invested in our space. So, we do cybersecurity. And some software infrastructure. So, kind of the convergence of infrastructure and security. And so mapping out all of the spaces that we actually look in, and then we kind of pinpoint which spaces we think are most interesting.

We also have a database of all the companies that we can look at. So we can kind of filter those down to investments. That were companies that we think are in our sweet spot. So we do series a series B investing. So you can kind of proxy which companies are the right size for us to look at. And so, by taking those two cross-cuts, you end up with a much smaller universe.

And then, when it comes to really diving into specific areas for, for thesis-driven investing, we rely a lot on our network. So, we have a pretty big advisor advisory council of CISOs. That we try to stay pretty engaged with. So by speaking to them, um, one thing we started doing this summer is building reports called Forgepoint Forward, which will start coming out, before some time in Q4 this year.

But essentially, it's like tackling a specific topic that has a lot of buzz and diving into that topic by talking to the entrepreneurs, CISOs and other folks in the space. To really get at like what's interesting and what's not. So we're doing one with ASPM, one with AI governance, one with AI at the edge.

So those will be the first three that we release on one with security log data management. And then lastly, I think,  being in VC, you get access to a lot of entrepreneurs. And so just talking to as many entrepreneurs as possible, I think, is another way to actually. Help you brainstorm and builds a buildup of theses.

Because the entrepreneurs are the, they're like industry experts. So, by talking to a bunch of experts that have unique perspectives of how the market can be disrupted, and then comparing that to what you're hearing from CISOs at major banks or Fortune 500 companies. Um, you know, everything kind of comes together.

And you get some interesting, interesting outcomes. 

Justin Beals: Yeah, it's interesting. You know, my experience as a founder has typically, especially for a venture capital back business has usually been as like a chief technology officer. So I don't do as much. I hadn't done as much of the front-end engagement with investors as a CEO might.

And then prior to that, when I was a CEO, we did bootstrap for all the businesses. So, you know, we didn't necessarily take in outside investment, but my,  I would have been shocked at how much outreach that I have. I have a mini CRM for all y'all, but I also love the conversations. I've just been very open door about, Hey, if we want to chat, let's, let's chat.

Let's see how it's going. 

Reynaldo Kirton: We definitely appreciate that. I mean, I know it can be, the waters can be a little bit muddied from outreach, especially if, you know, you get outreach from somebody that maybe doesn't necessarily know the company, or it doesn't really match with the company they're reaching out to.

But candidly, I think a lot of, a lot of us that are doing that, we appreciate it. That cold outbound. You know, oftentimes it's, you know, with all sincerity, and we're prepared, and the conversations are really interesting. So, 

Justin Beals: I do. You know, I don't think I've had a negative call in my experience, you know, um, 

Reynaldo Kirton: I will say that the, I think the market is getting more, so if you think about the competitive dynamics for venture capital, um, if you think about maybe, you know, 15, 20 years ago where there weren't as many venture capital firms. And so it was all kind of warm relationship-based. And I feel like there was probably less of this, you know, being, uh, being contacted by multiple firms for intro conversations, but really from a venture capital standpoint, As the market gets really efficient, right?

The only way to be, remain competitive is, well, one, obviously, to add a lot of value to your portfolio and having a network to get these warm introductions. But on the flip side, um, if you don't have those warm intros at the moment, being able to know who's out there and reaching out and having these conversations is really a way to stay up to date on the market.

Justin Beals: Yeah, it's interesting. I sat in a CEO summit with, one of our investor teams last week. They talked a lot about verticalization strategies and kind of letting go of the single technology in a completely horizontal play. Seems like y'all have focused on that in some way, that a verticalization strategy has helped y'all in that focus. Maybe from a competitive perspective. 

Reynaldo Kirton: I think so. you know, we, we like to say that we provide a lot of value outside of just capital. At least, that's our goal. 

Justin Beals: Yeah. 

Reynaldo Kirton: And it's really hard to build up the deep, meaningful networks and expertise when you're doing things that are unrelated. So, you know, we like to think that the pattern recognition gives us a bit of a leg up our networks, and the ability to Introduce customers or recruit executives or anything like that adds a little bit more value and just makes us a little bit better of a partner than someone else, but you know; obviously it's always on a case by case basis.

Justin Beals: I have to say that. I do get asked nowadays because I've been through a couple rounds, although I'm not the deepest expert. There are other people that are much, much more experienced than me, But they're like, what do you what do you look for when you talk to an investor? and the one thing that always stands out to me is when they Introduce me to a potential customer I'm like, they get what I'm trying to solve right now, which is as many deals as possible.

Reynaldo Kirton: I mean, hey, I think there's perfect alignment. You know, you want to sell more deals. We want you to sell more deals. So yeah, that's always good. Always good fit. Yes, 

Justin Beals: That's exceptional. Um, so, uh, Let's dig into a little bit of this pattern matching that you guys are seeing certainly like as of as a founder, and I feel a little intrinsically driven these days by this work of building companies. I certainly enjoy it. I'm always Drawn by an analysis the problems that need solving, right?

That's actually how the current business got founded is like I had this problem. I needed to solve it. I saw it in a lot of other people around me going for the same problem. And I said, Hey, this seems like the type of problem that is a venture capital backable business. Like we could build that. You know what?

What are the what's the problem space feel like for you right now, Rey? And and perhaps how Forgepoint is thinking about it? 

Reynaldo Kirton: That's a good question. I mean, I think one of a common theme is just handling volume of alerts of logs of just data, you know, data just continues to grow more and more, which on one hand is a good thing because the more data you have, the better decisions you can make.

You can throw it at AI; you can do a lot of different things. But in reality, a lot of folks, data infrastructure just isn't set up to handle that much data to effectively get information from the data and drive better results. 

And so anything around there, um, partially why we looked at kind of managing, security log data and the spaces like the cribbles of the world and the Sims and everyone else kind of playing in that, that data storage and processing space, I think that's going to be, A pretty important problem and it's pretty ubiquitous.

And then even as you move into some of the adjacent categories like ASPM, um, which, you know, has become a very crowded market, but everyone's trying to tackle the problem of Hey, we're getting all these alerts. We have all this information. How do we triage? How do we make it so that this is all actionable?

And efficient, right? And so I think that's a major problem space that kind of a it kind of touches a lot of subcategories within cyber, but is kind of a common theme. 

Justin Beals: Yeah, you know, I think a lot in our work about, the security posture, right? Like , what's my surface area that I'm trying to protect?

And one of the things that I'm constantly floored by is how big it keeps getting, to your point about the amount of data and alerts that we're getting. And it's like you had a third party risk, you know, situation in and all of a sudden you're worried about the security of your vendors. That's a whole nother company.

And certainly, I worked at British Telecom a long time ago in the network operations center, and it was much more manageable, and we were 24/7 365. But alert would come off, and we'd get a flood of data. But we could pretty easily narrow it down. Like it's it's Frankfurt, London. Something is going on here.

But man, if I were to just take random logs from a web application interface and try and understand what was happening, that would be very difficult. 

Reynaldo Kirton: Yes. Yeah. So I think there's, I mean, it's a problem that's been a lot, been around for a long time. I think there's a lot of there's a lot of solutions that are making it more manageable and companies have done a lot of success. Yeah, but it's almost, you know, it's kind of the symptom versus, like, the disease, and We don't not sure if anyone's really been able to cleanly tackle the disease yet the thing that's causing all of this, but It's a challenging problem, which is, you know, why we're in the business.

Justin Beals: Yeah. And, of course, it's never efficient to just throw bodies over the long term of the problem. And that's what we were doing is just analyst, after analyst, after analyst. But they need help too. They can't handle, and gosh, it's a mind-numbing work to be like; this is another. false positive, false negative, false positive, false negative.

Reynaldo Kirton: Yeah. Which is, you know, anything that's mind-numbing always is a, I feel like is a ripe, uh, opportunity for AI, right? So I think that it's like, ah, geez, I don't want to do this, you know? So we do think that AI will start, You know, starting small because obviously there's the element of trust, for AI that takes a long time to build up.

But by chipping away at the low-hanging fruit, a lot of the mind-numbing tasks, getting comfortable with that and then continually, you know, automating and, uh, you know, pushing away some of this work, hopefully, it makes things just more and more efficient and gets better and better over time. 

Justin Beals: Yeah. AI is obviously a huge, uh, theme. We get a lot of hype around it. Uh, how do you, I mean, you've been in the investor side now for long enough to see a hype and bust cycle, maybe more than once. What, tell us where you're sitting with the, the AI, situation. Yeah. 

Reynaldo Kirton: Yeah. Um, you know, Forgepoint, you know, we'd like to invest more in infrastructure.

So the picks and shovels rather than the application layer. So, We don't really even look at the application side too much. Um, and then from an investor standpoint, it's always like a balance between, you know, how big you think something will be versus like, what's the, what's the price, right? And we do see a lot of money and a lot of hype going into AI.

And so I think it's all about just finding the right people in the right application of AI. AI has obviously been around for a very long time, you know, a bunch of our companies were already using AI before it became a buzzword, and you had to start putting it on your website. However, like now we're taking the approach of, you know, we actually hired somebody, um, from Google to help, you know, lead our AI investment strategy, and so we really like to dive into the tech and, you know, we actually have a checklist of things that we look for, like.

You know, is it solving like a real problem? Is it needed here? Do they have like the data to make it Actually unique proprietary, versus are they just using something that anyone else can build? And so if companies go through that checklist and pass everything, Then we think they're they're more interesting, but we've been taking a somewhat cautious approach we've also split it between AI for security and security for AI.

So, how are security firms leveraging AI? So like automation of alerts, triaging, etcetera, versus AI security. So, actually protecting the AI stack. So we've kind of split that into two buckets. And we're going after each one, I guess, separately. 

Justin Beals: Yeah, I, I have to say that I, um, man, I've seen a couple of these like, hype cycles.

I don't know what, how else to describe it. Maybe hype is good. Um, and, but I, I remember back when we were, it was like algorithmic pro programming. And I think my first natural language processing project was in 2004, you know, a while ago. And, um, And I,  I'll give you my two cents, which is, I think the hype around a company control of some of these tools is where I don't see it.

There are so many open-source options for us. And so many of the really innovative applications that we build are actually. Utilizing readily available tool sets from other developers that I love this, like solving a problem because I hate applying technology without understanding why people are going to use it every day in a way.

Reynaldo Kirton: Exactly. Yeah, I think, um, yeah, one thing that happens with these hype cycles, you know, there's a lot of, uh, one of my partners always says there's a lot of FOMO in the venture capital industry. And when you start seeing people get excited about something, you think you're missing out, and everyone kind of jumps toward it, which drives a lot of, you know, inefficient behavior, both from the investor standpoint and then also from the entrepreneur standpoint as well.

But at the end of the day, it's all about solving real problems. And one other one other hiccup that we see sometimes happening is people will Identify a problem that maybe they had in a very specific role at their job or at a specific enterprise. Think that that problem is ubiquitous, and it's really not.

So the ability to pivot and find out like, Oh, I think I'm solving this problem. Oh, actually, people want this problem to be solved. It's a little bit different, and being able to successfully pivot and adjust, I think is, is pretty important as well. 

Justin Beals: Yeah. I had an investor back in 2020 say, Oh, the market is really frothy right now.

And I was like, what, what do they mean by that? I, you know, it took me a little while, but finally, I figured out is that it looks big, but it's fairly vacuous. 

Reynaldo Kirton: I didn't even put that together. I've heard the frothy terminology, but I just, 

Justin Beals: Yeah, that's really good. I mean, the other thing that you said that I really love is like, do you have the data to build something that is unique?

That is the thing. I think we quit saying data science, and I always liked that term better than AI because it is truly like mining large data sets to create a more efficient prediction or engagement with a human being. Yeah, 

Reynaldo Kirton: right. And so, like, what's going to actually set you apart? You know, obviously, using AI and using data science is great.

But really, if you've built up decades of proprietary data from either interacting with customers, from internal knowledge or whatever, you know, that's, that's like a leg up that you need to be taking advantage of. So we get excited about things like that. 

Justin Beals: I have a colleague that works at Akamai, and I was chatting with him one day, and, uh, I've always respected Akamai.

I think it's, it's pretty brilliant company. And he was saying, yeah, yeah, we built all these security tools, and they're quite powerful because we basically monitor 40 per cent of the world's internet traffic. And so we do, they did, to me like have the unique data set to understand endpoint protection in a way that almost no one else could.

Reynaldo Kirton: Exactly. And a lot of these, a lot of these, Data gold mines are almost like accidental. It seems like, you know, you're, you're doing a specific operation and after a while, you're like, Hey, we actually have something that's pretty unique, proprietary here. So. Go ahead and monetize that. Yeah.

Justin Beals: All right. So I want to talk about a hype cycle that is, suddenly got the air pulled out from it. And maybe you give us a little bit of post facto. I mean, we saw like the blockchain, Web3, crypto thing be everywhere. But then, in six months, I feel lik just evaporated. 

Reynaldo Kirton: Yeah. I mean, yeah, candidly. So I couldn't, I never just, I never understood the blockchain well enough to get personally very excited about a specific opportunity.

So, it was something where, you know, I was on the periphery, I was looking at it, we, we have some folks on our team that understand it much, much better than I do and would get excited about a few concepts. I pere itsonally was always like, Oh, that sounds interesting. I can kind of kind of get it, but just not enough to really have a lot of conviction here.

We ended up not making any investments partially because of just the pricing and getting everybody up to speed. So with a team that invests by consensus, if half the team doesn't understand what the company does, you know, we're just not going to make an investment. So that's kind of where we sat in the blockchain cycle was so fast.

But, you know, we did, we did take a look at a number of watching companies and looked at watching security and smart contracts. And, um, yeah, well, I don't think we got to any term sheets, so nothing got too far, but it was definitely something that we leaned into a lot while I was still here. 

Justin Beals: Yeah, I think I, I actually, as I read more about it fundamental underlying to your point, like the shovels and picks of the infrastructure, is starting to get more interesting to me in a way. 

But, um, we're so used to developing our siloed applications that run in a very lightweight way across, you know, something like the internet that is, is really just kind of made to transact a little bit of data as opposed to any intelligence around it.

 I can see where it could be useful, but I think it's just not in the venture capital modality. You need a like minded set of either individuals or businesses that want to share data in a. In a more rigorous way, to decide to participate.

And I get why finance looks like that, right? Because we want to share data about our coin,

There's a space for it. But I think it's it's a totally different  approach. 

Reynaldo Kirton: Yeah, that's that's interesting. That's an interesting point. And I think, um, Yeah, there has to be. So one, is there a real problem being solved? And then two, are there enough people out there that want to solve that problem in that way?

And when you think about kind of sharing data and, you know, being decentralized, We've also spent some time looking at a lot of the privacy enhancing technologies, the federated learning and secure multi-party compute and things where you actually need multiple parties to want to share data. And I think that, You know, a couple years ago, when we first looked at the space, it was very early, and I think the technology was getting there.

But the attitudes of the customers just was not there yet. We think in that space, customers are starting to get there, so we're starting to see some things, some of the companies that survived actually getting a bit of an uptick, and finding projects that are not just experimental anymore. And then maybe, you know, maybe blockchain will be somewhat similar, right?

You just need, you need the culture of the customer base to catch up with the technology sometimes. 

Justin Beals: Yeah, maybe the theme here is that the hype cycle is not going to drive a true economic outcome, or at least a lasting one. As much as to your point and my point, a problem being solved in a broad marketplace that results in revenue.

Exactly, 

Reynaldo Kirton: Exactly. Somebody, there has to be a problem that people are willing to pay for. And we don't have that, you know, now in venture capital, we have the, uh, we can be a little bit early, but we just can't be that early. So, you know, 

Justin Beals: I, I've put more companies to bed. I'm sad to say then seen a six, a super successful outcome. And one of my  life lessons learned in doing that work is like, is anyone paying to do this today? Cause if no one is paying to solve that problem today, I don't know how I'm going to convince them to pay money. Yeah, 

Reynaldo Kirton: I mean, one thing we like to say is, uh, sometimes you get a, a solution looking for a problem, where the solution is excellent. And, but if no one's to your point, willing to pay money or is already paying money either by doing some kind of workaround or throwing bodies at it, you know, where's the money gonna come from  to drive your own company and it's. Yeah, it's always a it's always a challenge.

Especially on the big stage. 

Justin Beals: Well, what um, you know, I'm a little curious About maybe you could reveal a little bit about how venture capital organizations are built like one of the things that I should have realized but I've learned over time is that Forgepoint has a relationship with other investors, and there are funds that y'all build, and, um, I probably should have known more about it before I got into this work, but perhaps you could tell us a little bit about, you know, y'all's customers and the relationships that you developed there.

Yeah. 

Reynaldo Kirton: Yeah. I mean, So, uh, one thing my partners always harp on is it's really easy to deploy capital, right? To just say, oh yeah, we'll give you a check. That's, that's the fun part of the job. But in reality, our customers are our LPs, the people that gave us the money in the first place. And so we have to go raise those funds.

Then we deploy it, but then we have to get the money back. And  as the market cycles up and down, um, sometimes it's easy to get your money back. Sometimes liquidity is high and companies are selling quickly. And then sometimes the market's slow and it's, it's difficult to get that money back. And so your customers are saying, Hey, we, we gave you all this money a couple of years ago, we haven't seen anything on paper.

You're saying this money has grown this big. So can I get it? Like, where is it? And we have to say, Oh, we can't get it yet. Or we have to go and try to, you know, sell our companies in order to give their money back. So it's really, um, it's like a different side of the coin. So I think VC is obviously very well known for investing and putting capital into startups, but on the flip side, getting money back out and returning it to our actual customers at, you know, multiple of what they gave it to us at is, uh, It's really the name of the game.

It's that motion of giving the money back that makes you a good investor, and everything else is kind of, uh, uh, a means to an end. 

Justin Beals: So, you know, it's your metric, just like the rest of us in a way. 

Reynaldo Kirton: Exactly. You know, the IRR metrics, the  how much money that people gave you, have you paid back so far over time?

And we were actually looking at, we, we did some analysis over the summer. And in venture capital, I think it was between seven to 10 years before folks were getting like one X of their return back. So imagine you give money to somebody to invest, and then you wait seven years before you get just what you gave them first.

And then, you know, you get more returns on top of that, hopefully at a nice multiple, but it's really a long-term game. And so the LPs have to really understand, you know, this is a long-term investment and then venture capitalists have to understand that as well. But at the same time, keep in mind that the money needs to be returned eventually.

And so, you know, one of the hard things to do in venture capital is when you have a portfolio company that's taking a little bit longer than you anticipated,  to get traction or they're pivoting, which is all fine. But you have to keep in mind, you know, how long has this money from our fund, you know, been out in the market?

When will we have to start returning funds? Does it make sense to try to sell the company now, maybe at an exit that's not great? Or wait a couple more years for the chance that the company, um, performs how you expected it to, but then there's still more risk in that, in waiting. And you're delaying the money being returned to your original investors.

All right. So there's a little bit of that at play as well. 

Justin Beals: It's certainly, I've been very lucky with our board team and the people that have joined, they've been amazing colleagues to work with, not all of my peers in my role say that I feel super blessed. And I was, uh, but I was chatting with a colleague the other day and he's like, yeah, great exits don't happen.

But for a decade, it takes a decade to build a good business that resonated with me. I was like, yeah, that's been my experience. It takes a little while. Yeah. 

Reynaldo Kirton: Yeah. And that, that patience is, it's difficult when you have people banging on the door. And so I feel like, you know, I think entrepreneurs, you know, VCs are always banging on entrepreneurs door.

Like, Hey, where are the deals, you know, always trying to drive, but at the same time, LPs are banging on our door, you know, where's the money being returned? When is it being returned? So everyone is always answering to somebody. 

Justin Beals: Yeah. It's a vicious cycle,right? I have to say, I do love it. I mean, look, there's good pressure and motivation to go and succeed.

None of us were; our outcomes are all aligned. We all want a great outcome for the business. Exactly. And even, you know, Both from a customer level. We're solving a problem for them. We were helping them out. I have a passion for that. Um, from an employee perspective, we're giving opportunity for growth.

Usually startups are a place where I grew in my career without them. I wouldn't have been able to take on some of the roles that I have. And certainly,  I  love working with investors that like building great businesses. yeah.

Reynaldo Kirton: Totally agree. And I think, um, I think typically, you know, this isn't always the case, but venture capital tends to draw a lot of people that like working with people.

I think, um, one of the main differences, at least when I was getting into the buy side of finance and choosing between venture versus, you know, bigger private equity LBOs is that you want to work on like more of a personal level. And, yeah, we really get, you, you want to get attached to, you know, what folks in your portfolio company are building.

You want to be able to. Go to dinners and have a good time. After the board meetings, even if things aren't going too well, you know, there's a, there's very much of a human relationship element that I think is, you know, one of the more rewarding parts of the job. And, you know, a majority of investments don't work out as, as you expected, but that's, you know, you have to kind of accept that and not dehumanize it just because things aren't going too well.

You know, working out as well as you had hoped. So yeah, 

Justin Beals: to that, putting companies to bed, I am amazed at the issues that cropped up, you know, that we never could have predicted in a way. But speaking of predictions, um, you know, and 10-year lifespans, as you guys, You know, what do you see changing in technology broadly that may impact where your interests are in investment that 10 years from now, you think are big themes that we're going to deal with?

Reynaldo Kirton: One thing that I think is, is getting more and more traction now is kind of things being pushed more to the edge. And so we've made investments in, Kubernetes companies where folks are getting a little bit. Further out to the customer. One of our more recent investments last year, a big greenfield opportunity for them was enabling people to run complex applications and constrain environments at the edge.

At the edge, I think, is becoming more and more of a thing. And so I think that broadly, the edge market, while it's starting to pick up a little bit of steam, will be A much bigger market 10 years from now than it is today. 

Justin Beals: That's like full circle from the Akamai discussion, right? I had a project in  97 where we used Akamai to push a video that was really hyped It was a 60 minutes thing, and it was really weird.

Anyways, everybody wanted to see it. We couldn't get enough network bandwidth to get it out, and we used Akamai to push it all to the edge. Yeah 

Reynaldo Kirton: There you go. I think that's just going to continue to grow. Like people's opinions of, like, what's acceptable from a latency standpoint, from a personalization standpoint, like just comparing now to 10 years ago of what you would accept as a consumer and customer is drastically different.

And I just think 10 years, 15 years from now, it's going to be hard to imagine like all of the personalization and low latency things that need to happen. Immediately at. Any customer or, any person, personal device, et cetera. It's going to be pretty mind-blowing, and the infrastructure to support that.

Needs to continuously be built out. 

Justin Beals: It's interesting because it's into me It's intention to some of the things that have been discussed about massive data center development as opposed to more ubiquitous computing environment Like should we build another massive data center or should we empower, you know?

Smaller and smaller devices to host these type of things, and there's a security risk in that, right? logical access gets thrown out the door in a way. Yeah, 

Reynaldo Kirton: exactly. Which is, which is kind of where we see that, you know, continuing,  convergence of infrastructure in cyber security. Um, because layering on cyber security in a kind of a more traditional way that you can do, you know, in the cloud at the edge is quite difficult.

So it's a kind of a different paradigm. So we think it'll be. The approach will have to be a little bit different. You have a lot more security by design. Um, so it's gonna be a completely new market than I think, what traditional cyber security companies are covering today. 

Justin Beals: Yeah. Well, um, I couldn't help but also ask, you've talked to a lot of founders.

Most of them are looking for capital. Things have changed a little bit since 2021., The power differential has shifted in a way. Maybe you guys breathed a little. Yeah. What, what are some of your, um, recommendations for founders that are interested in building businesses? 

Reynaldo Kirton: It's a really good question.

Well, one having that flexibility, like in order to have the gumption to start a business, you have to be, you know, pretty stubborn, which I think is a good thing, right? You have to really believe in what you're doing. But then you have to be willing to pivot based on what customers are telling you.

And really willing to listen and get that feedback. So I would say that's one, um, another is, you know, really being able to try to find the right investor.  I think you can probably cut down some of the conversations and some of the heartache if you are more familiar or a little bit selective with what investor you're looking for and why.

So some people want someone that's going to be more hands-on and some people want someone that's going to be a little bit more hands-off. Knowing that if somebody is a series B, series C investor, but you know, you're really a seed stage company, you know, that's, that's helpful knowledge to go in.

I'm not saying not to have these conversations and build these relationships, but you know, these are all things I need to keep in mind. So I would recommend that as well. Uh, and then lastly, um, at least this, this may be a Forgepoint bias, but the customer feedback that you're getting about your product, I think is, you know, we hold that like.

So, super high esteem. Um, and so while you can spend a lot of time saying, oh, the market is this big and describing the problem, describing it the clever way that you're approaching it, which is great. The more feedback that you can get and demonstrate to investors, I think,  the better off you'll be.

So really focusing on that element and prioritizing that over maybe some of the other more market sizing,, pieces that typically end up in pitch decks,  I think is helpful. I'm always asking for customer stories and case studies and, you know, things that can really paint the picture from a customer standpoint.

What's the problem? How was I solving it before? How will I solve it using this new product? Why is that better? It just makes it really easy for venture capitalists that don't have technical backgrounds to really grasp what you're doing and why. 

Justin Beals: Yeah, I certainly think that's the crux point of success or failure in a business, whether you take on investment or not, right?

Do you have a customer? Are they able to talk about the problem that you solved? Are you able to repeat that solution over and over again? And certainly, you all look for That solution being repeated at the highest efficiency. 

Reynaldo Kirton: Yes. And I think the, where we typically invest around Series A, I think is when folks have, you know, they have a handful of customers, they've seen kind of a semblance of repeatability.

But they haven't harnessed it yet. And I think that's where we try to add the most value. And it's really figuring out like, who exactly is your ideal customer profile? What is the exact budget that you're going after? Like, what are the things that you need to see to say, okay, this customer, we're going to knock it out of the park with this customer, and we're going to stamp it and repeat it?

And it's really hard to do,  being an early stage  company. When maybe you're selling through some relationships, maybe you're bending over backwards to get into a company here or there, and you look at your customer base, and you're like, Oh, I'm not really seeing the pattern here that, you know, will enable me to just stamp this out.

But I think it's not until you have that repeatability, until you see that repeatability, investing a lot in sales and marketing a lot of times is, um, it's pretty detrimental to the business. And so things that I've seen is you get a good customer base, you're selling things look like they're going really well.

You get venture capital money; venture capitalists are like, yeah, sell more. And you're like, sure, hire people. And then you realize that there's only three people in the company that can really sell the product. Cause you're each person is selling it, i a slightly different way to a slightly different customer.

And it's not really until you figure out exactly what their repeatable motion is. And that's when you can pour gasoline on the sales and marketing and really accelerate in an efficient way. But easier said than done. Right. So 

Justin Beals: yeah, it's fun to say it, though. 

Reynaldo Kirton: Really fun to say. 

Justin Beals: I had a really good piece of advice provided me once, um, where they were like, Your most average salesperson should be able to close your most average deal on any average day.

And if that's working, then you're, then you're ready. Exactly. 

Reynaldo Kirton: Exactly. You said a guru to have to sell your product. Right. So that's where it's trying to get to, at least. 

Justin Beals: Yeah, absolutely. Well, um, Rey, I think there's been a tremendous conversation, and I'm super grateful. I just, I have to say that, the ForgePoint team, my interactions with y'all have been exceptional.

And one of the ways in which that I've found great investors is, uh, our very first investor and board member was just an amazing person that I really liked. And they made introductions to people that they liked. And I found that in that way, we built a network of. Really like-minded, high collaborative.

I like a high-touch investor. Actually, I like people that like to get their hands dirty with me. I feel like they're emotionally engaged when they spend time. And so you can see how I build teams. And so, um, you know, if I were thinking about this, it's like you can build on top of a win with a great relationship because they will have built a network as well.

Reynaldo Kirton: Yes. Every touch point is always so important because you never know what that touch point will grow into, you know, Whether it be their network or, you know, whatever it may be a lifelong friend, etc. 

Justin Beals: All right. Well, I know you guys hang out at RSA. I see you there once a year, So, uh, hopefully, we'll get a chance to shake hands. But thank you so much for joining the podcast today Rey.

Reynaldo Kirton: of course.Thank you. Have a great time.