A Product Market Fit Show | Startup Podcast for Founders
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A Product Market Fit Show | Startup Podcast for Founders
He exited for $335M—& felt "emptiness". So he quit, gave up millions in earnout, & grew to $1M ARR in 6 months. | Alon Arvatz, Founder of IntSights & PointFive
Alon was a hacker for the Israeli Defence Forces' cyber department. There he saw the most advanced methods used in cyber warfare. So when he left, he started IntSights-- a company that helped enterprises defend themselves from cyber attacks.
He was a first-time founder who didn't even know the word 'unicorn'. He made all the mistakes you could make. But he had real, undeniable pull. He grew to $1M ARR in a year and to $4M a year later. By the end of it, he was doing $30M in revenue and exited for $335M.
But when I asked him what it felt like to sell for hundreds of millions, he said it 'felt like emptiness'. Alon is a builder—that's all he wants to do. So he quit post-acqusition and left millions of dollars on the table. Moeny he was guaranteed to make if he just stayed in his role.
Instead, he started PointFive to help enterprises reduce wasted spend on cloud infrastructure. He know nothing about the space. One year in, he's raised $36M and grown to millions in ARR—it's even faster than IntSights.
Here's the story.
Why you should listen
- Why Alon felt empty after exiting for $335M.
- Why he left millions of dollars on the table to start a new startup.
- Why the mistakes he made in his first startup helped his second one grow way faster.
- Why he raised $36M in under a year.
- Why true customer pull comes from solving top of mind problems.
Keywords
LinkedIn, video content, cloud cost optimization, engineering responsibilities, startup funding, second-time founders, product market fit, customer traction, entrepreneurship
Pablo Srugo (00:00):
Once that money comes in and it hits the bank account and the thing is closed, and you're like, wow. Like, what's that like?
Alon Arvatz (00:05)
So I'll give you a counterintuitive answer. It feels like emptiness. The minute we sold the company, it was a complete anti-climax experience. Yeah. So we had golden handcuffs, but we gave away most of the gold. We actually had like a two and a half tension period. Okay. I mean, we gave most of the holdback. to go and start PointFive.
Pablo Srugo (00:31)
talking millions, I have to assume.
Alon Arvatz (00:33)
Yes. But I have to say like, I'm not, I don't feel sorry for this decision for a second. And another six in safe a few months later. And then we just closed another 20 million round a few months ago.
Previous Guests (00:48):
That's product market fit, product market fit, Product market fit. I call that the product market fit question, Product market fit, product market fit, product market fit, product market fit. I mean, the name of the show is Product Market Fit.
Pablo Srugo (01:00):
Think back to the last few months, the last few years as you've been running the startup, how many different founders have helped you out? The reality is, founders help each other out. That's just who founders are. They pay it forward. So help a founder out, take literally five seconds, take your phone outta your pocket and hit five stars. Alan, welcome to the show, man.
Alon Arvatz (1:19)
Hey, good to be here.
Pablo Srugo (1:20)
dude. So, I mean, your latest startup PointFive, I mean, you guys raised right out of the gate, like 16 million and then like what, five months later, another 20, which is just <laugh>. It's insane. This is not like ‘21, ‘22. This is last year. Obviously a lot of things are going right. But we know, as we were talking, I think a lot of that has to do with you and the team and that belief and the credibility you've built in your first venture, which was acquired for $350 million.
Pablo Srugo (01:45):
And so we'll spend most of this time talking about PointFive. But let's start at the beginning, what was that first startup? What were insights about, and, and let's go through that story a little bit and then we can kind of contrast and compare how you handled you know, starting both, both different ventures.
Alon Arvatz (2:02)
Absolutely. So first of all, insights was a cybersecurity startup. It was really about giving visibility to organizations about threats that can be identified out there in the wild, on the internet. So we're monitoring the dark web, cyber crime forms, social media and other places on the internet and essentially servicing enterprises with different risks and threats we identified. Like people planning to attack their company, vulnerability of their websites, leaked credentials, basically. Anything you can find out there. Now, we came to that I'd say by mistake, you know, I think Gal, my co-founder and I were thinking about an idea for over a year until we finally settled.
Pablo Srugo (02:46):
And you were what? Like where were you at at that time? Like what were you, what were you doing? What was, what was your full-time role?
Alon Arvatz (2:51)
Yeah, so back then I was in university. So actually it was kind of funny. I finished my military service, I did another year in Yeshiva, and then I knew I wanted to be an entrepreneur, but I had no idea how you become an entrepreneur. Like, what's the first step you take? And I was thinking, okay, what can I do? And I had no idea. So I went to university to get a degree like everyone else, and I started actually studying law and accounting. Okay. Who would've imagined I started Law and accounting and I think like in the second, third month, I realized this whole studying, university, is not really for me. In the first couple of months, I founded a nonprofit for financial literacy for teenagers.
Alon Arvatz (03:33):
And then I started thinking about, okay, what business I wanna build? And Gal, my co-founder, and I thought for a year about what we wanna do until we settled for a cybersecurity training company for teenagers, it was called cyber school.
Pablo Srugo (3:51)
how, how does your mind- you know, just to contrast it, compare between us, <laugh>, I also went to university thinking I wanted to be a lawyer, quickly decided I wanted to be an entrepreneur, and I was studying economics, so not that far off, right. From the law and accounting world. And except that when I decided I wanted to start something, my mind was like, in my world, a university student, what are we doing? Like, we're studying or we're partying, you know? And so my first business was around partying and alcohol, and then it was like tutoring, like things were really close. But you went to like cybersecurity. Do you know what I mean? Like how, how does your brain end up there?
Alon Arvatz (4:26)
Yeah. So to be fair, I had a cybersecurity background from my military service. Which is also an interesting story for itself because I actually started in infantry in a commander unit in the IDF. And after a couple months of training, I hurt my hearing during training. Okay. Some hearing loss, some beeping, not too pleasant. And they just, they kicked me out of infantry and they moved me to the intelligence corps. And this is where I actually got my cybersecurity background. Now in high school, I wanted nothing to do with computer science. It was like the last thing I would do in high school, although my-
Pablo Srugo (5:01)
Oh so you were pissed then when you got pulled off? I have to assume from infantry and had to go kind of to the back room, say.
Alon Arvatz (5:07)
I was devastated. I was devastated. Like the day they let me know I'm kicked out. It was probably the hardest day of my life. in retrospective, it built my career. My success was probably one of the most amazing things-
Pablo Srugo (5:19)
Yes. Huge inflection point Yeah, yeah. <Laugh>
Alon Arvatz (5:22)
that ever happened to me. Like at that time, you know, I remember like that day when they announced it to me, I went back to my team for training and they told me alone, okay, go training. I just couldn't, you know, I just went to my room, I started crying. It was horrible. It was horrible. But in retrospect, it was the best thing that ever happened to me because then I moved to the intelligence corps. I learned, you know, cybersecurity, understood how cyber attacks work, and that's what eventually led me to found cyber school. And then later on insights as well.
Pablo Srugo (05:54):
And what sort of things by the way? like, this is fascinating. I had a few people, like from the defense industry that became entrepreneurs on the podcast, one of them founder of ID.me and then the other one, the founder of Huntress . And I'm just fascinated by the huntress guy. He was in the NSA before. I'm just fascinated, like what sort of things are you doing to the extent you can share you, but like what sort of things were you doing in terms of cybersecurity when you're working in the kind of IDF unit, but on the cyber side?
Alon Arvatz (6:18)
Yeah, for sure. I actually wrote a book about it, you see right above me. So I wrote a book about it. It's about the Israeli cybersecurity industry. It's what makes it so successful. It's called the Battle for your Computer. And actually one of the main points of the book is how the Israeli defense forces drive the cybersecurity industry ahead. So, I did the research about it, you know, I wrote about it, you know, so I can definitely talk about it. And I, I think you know the main point is that one, Israel as a state has a mandatory military service. So basically it gets to pick and choose the best and the brightest and the most talented in technology in Israel in high school. And then they put 'em all together in one place and give them cyber challenges to collect information with cyber technologies to get into computers and phones of our enemies and get intelligence from there. So you put so many talented people in technology and you tell them how to do cyber together, and that one brings together a lot of talented people. they become co-founders. So one of my co-founders in insights and now PointFive, is Gal who we worked together at 8200 and now in PointFive, our third co-founder is Amir, who also was with us in the same unit. And you build your network there, but also it kind of gives you the basis you need to do cybersecurity. So when you go out and you wanna be an entrepreneur and ask, okay, what I wanna do, hey, I have this edge in cybersecurity, that becomes the default of managed well entrepreneurs. Okay? Now one more point that you need to understand is that over time the intelligence units and 8,200 in specific they become, these places where, you know, that we'll create a lot of entrepreneurs. So if you have a direction, a desire to become an entrepreneur, and you get to 8200, you're starting to think, okay, maybe I can be an entrepreneur like many other 8,200 alumni.
Alon Arvatz (08:36):
And at some point you work with someone and, and he finished his service and he starts a startup, he is like, Hey, this moron worked with me like two days ago in the same room. If he can do a startup, I can also do a startup. Okay. And it becomes this place where it creates a lot of people. It builds confidence and plants the idea that, hey, you can also be a successful entrepreneur. And just to help you understand the vibe, imagine the food court in our base, a typical military food court. You know, you go with your tray and someone pours something unrecognized in your plate, et cetera. It's the same in every place in the Israel defense forces. But in the intelligence units, 8200, for example, you take the same tray, you take the same food, you see down with your friends and you talk about the latest technologies and what startup you're going to found when you finish your military service.
Alon Arvatz (09:40):
That can be a typical discussion topic over lunch. And that's what builds the dreams and the confidence in people to become entrepreneurs right after.
Pablo Srugo (9:51)
It's pretty incredible. I mean, obviously there's a YC kind of accelerator type nature to that- almost pre Y. 'cause You know, people come in there with no idea of what they want to build, and they're just kind of networking. But that networking piece and the sharing of ideas obviously is critical. And that's part of what makes Silicon Valley so successful. And obviously Israel, I think as well. The other thing though, that strikes me is that cybersecurity itself is one of the- oftentimes governments are like laggards or not, certainly not at the edge, you know, of many industries. But if you think about it, cybersecurity is probably the industry where governments are actually at the frontier, need the absolute latest, best willing to take risks on new stuff. And so if you wanna learn about cyber, like there's, there's few better places to be than in, in that unit with those people. And so then, that starts to make sense, like why all these cybersecurity companies come out of Israel as well.
Alon Arvatz (10:49)
Yeah, and let me double click on that because it's not that governments are on the cutting edge of doing cybersecurity. They typically aren't. why? they don't need to, because they're not connected to the internet. So the risks are very different from the risks of the average company. So it's not that you get the cybersecurity experience in the government necessarily. The special experiment experience that you get in government is getting the attacker perspective. Because basically as an individual, let's say I wanna be a hacker, I wanna get into other people's computers, steal their data, whatever. For me as a person, it'll be very, very hard because it's illegal. And if I'm caught,
Pablo Srugo (11:37)
right. So just to be clear, like the government is not cybersecurity, it's cyber attack. Like that's really what they're doing, interesting.
Alon Arvatz (11:42)
Exactly. And what you can do as part of the government, is something that you probably will never be able to do as a person or one man show hacker, because one, you get tools and budgets you won't find anywhere else. And two, you're not doing anything illegal. So you can basically do, you know, almost whatever you want with certain limitations of human rights, et cetera. But, you know, besides the human rights limitation, you're not afraid you'll be caught by anyone. So you can do the craziest things, run tests on the crazy cyber attacks, and you have all the tools and support to do that, and you're not afraid to get caught.
Pablo Srugo (12:19)
So you like, you get to push the envelope on the weapons, and then you come out and you're like, well, these are the latest weapons. Like, how about this as defense? Right? Like, let's build this shield
Alon Arvatz (12:27)
exactly. So you know, we like to say in Israel, like, you know, the average pitch of the ex- intelligence corps person is, Hey, hey, dear chief information security officer, let me help you against people like me, <laugh>.
Pablo Srugo (12:44)
Right, exactly. Well, it's the same with Huntress. It was exactly that. Like he was like, I was the NSA, I was doing these attacks, you know what I mean? And then I come out, I'm like, maybe I'll do the other side now. So that totally foots. Okay. So then from there, then the idea- so now we're back to like the original story, right? So, you have this idea and that makes sense now that it's in cyber security. So what was that original idea then for insights? It was a school you said, right?
Alon Arvatz (13:10)
Yeah. So back then, actually my co-founder Gal, he had a sidekick job of consulting to cybersecurity professionals and practitioners in different financial organizations. And back then he noticed that when it comes to intelligence to understanding what threats you have outside your organization, not in your computers, not in your cloud infrastructure, what happens outside, what hackers are planning, what hackers are doing, what type of stolen data they took from you, and how they sell on the dark web. This process was very, very manual. Like you had to get a manual service to go through all these forums, all these places, and find these indications. And because it was manual, the coverage was lacking. You were always getting everything like a month or two after it already happened. So it wasn't real time and it wasn't really scalable.
Alon Arvatz (14:07):
So our idea was very, very simple. It was just automating this process, automatically collecting the data from these sources and also implementing AI to actually map all the data into threats and threats that are targeting our customers in specific, so we can surface to them what is relevant to them, the credentials, vulnerabilities to their websites, hackers planning to do something against, against their websites, et cetera, et cetera. So that was the idea. I can tell we were really, really naive. Like we did not really understand the competition, you know, we weren't a hundred percent sure what is our edge, you know, today I talk to entrepreneurs, they’re so much mature than we were back then. Like it's a completely different world today.
Pablo Srugo (14:54)
I find the same thing, 100$, I don't know if it's- I dunno what it is, I dunno if it's the amount of content that's out there, like podcasts, like these and others, or the YC stuff, Paul Graham, like, I don't know what it is, but founders are much smarter today. The way I see it for what it's worth is like the idea of bootstrapping or being lean or mining. Like for me it was like, I just wanna build a unicorn. Like that's how I thought about it, you know, 10 years ago and like, whatever, go over, go or bust. And I think now, like founders are like, you know, let's be small. Let's hit product market fit. Like let's do it this way, et at least for the first one. So I don't know how you see it, but I totally agree.
Alon Arvatz (15:30)
Yeah. So we didn't know what a unicorn is. When we started <laughs>. we didn't know there was a word like that. And we were also naive to the extent that we didn't really know what's going on in the industry. We just met with a few customers, we thought it was a huge pain. And we went for it. That's it. Today, like you said, there are a lot of content podcasts, a lot of posts on LinkedIn, a lot of blog posts that people are following, and they're building themselves a framework to work with that actually can generate success. And that's amazing. That's absolutely amazing. But for us, it was just like figuring out things as we go. Just so you'd understand. We came up with the idea, we started developing the software and selling it, and we had no idea we wanted to raise capital. At that point, we were like, okay, let's just build a business, right? You know, build a product, start selling it and see what happens. That was how we thought about it. Until one day one of our partners was like, Hey, why don't you raise capital? You have a great idea. You have a great team. And we're like, you know what? That can actually be a good idea. He's like, you know, I know this VC that might be interested. And he connected us to, Glilot Capital, and we came with no presentation, no idea about the competition, the market. We just had our own experience with our idea. We had some mockups of what we do, and this is how we came for the first meeting. And only after that, they told us, Hey, we want you to come with answers about 1, 2, 3, 4. We started putting together some data points and some more thought-into how to plan to go to market, for example, what will be our strategy, et cetera. But before that, we had nothing. We really literally had nothing. And we were lucky that they clearly knew a lot of specifics about our space and they almost made an investment in our space a few months earlier. So they knew the space very well. We didn't have to convince them about the space, and that's what made it possible.
Pablo Srugo (17:31)
And where was the company, did you have customers already or you were just kind of in that build mode?
Alon Arvatz (17:36)
So it was very interesting because we were entrepreneurs that were engaged with customers from day one. Like we never waited for something to be perfect. We didn't even wait for something to work, honestly. Like we started with building the UI and started selling. And we said, okay, if a customer closes, we'll do things manually behind the scenes until it'll work and we'll figure it out as we go. So it was kind of interesting because when we got to investors or fundraising, we also already had some active process with potential customers. Again, UI and me as the backend. Doing everything manually,
Pablo Srugo (18:16)
as in doing -'cause the whole point was automating these processes, but you're basically actually just doing the processes, the the search, is that it?
Alon Arvatz (18:25)
In the first few months? Yeah, that's what we did, because we said, okay, we wanna start an engagement, we wanna start selling. It'll take us time to build the software. Let's, in the meantime, build a ui. We'll do it mainly behind the scenes. We'll learn how to do it right through the manual work and we'll automate it over time. That was the idea, which by the way, was a very good idea.
Pablo Srugo (18:44)
A very good idea. Which by the way, to the point that you were naive and like you didn't know what to do, you, you basically like, did the Lean startup playbook <laugh> without reading about it.
Alon Arvatz (18:53)
Exactly. Because we had good business instincts, okay. And we wanted business. And that's how, like, it got to a point where one day my co-founder Gal, he was on a meeting with a partner, and we were very soon going to develop the automation. And so he didn't wanna tell him that we're still doing some of the things manually. Okay. And this partner on display, he said, you know what? Run your platform on one of my customers, okay. And he was like, okay, everything is manual behind the scenes, what I'm gonna do. And he was like, you know, calling me, Hey, Alon, and now I was sitting with this partner, can you turn on the platform for this customer? And I'm, yeah, I'm in the garage fixing my car. Something. I was like, okay, what am I gonna do now? And I just open my computer hotspot and, you know, started, you know, showing some stuff. That's how we operate until a few months later we raised the funds and we automated this stuff.
Pablo Srugo (19:51)
But, you know, it's funny. Like I think somebody who's been through it kind of would get it. I think from the outside looking in, it always looks so haphazard and almost like so messy in a bad way. But it's actually really good because to the extent you're not doing that, especially as a first time founder, I think second time founder, it's different, especially if you understand your industry and you can kind of go forward, but you know, you overbuild otherwise, right? Like that's the danger is, is a first time founder who's trying to figure it out. If you're not hacking it along the way, then the risk is you overbuild infrastructure, you overbuild product, you overbuild marketing, or whatever piece you wanna like, get right, get polished. And then you realize your core assumptions were wrong anyways. So it was all complete waste, and, and you gotta start again. And so, like, by doing it like piece by piece, piece by piece, you're always just right there. And if you realize that something's not useful, you just don't build it, right? Or, or you can kind of make these changes faster. So I find it's, yeah, it's, it's kind of, it's, it's weird like that. Like, you, you kind of hear it and you're like, man, that's so insane. But it's actually quite rational.
Alon Arvatz (20:54)
I will tell you the way we did it at Insights, it's a lot better than the more common problem of people overbuilding before they meet customers. But it wasn't ideal, honestly. Not because we shouldn't have engaged with customers, but we had to do it a lot more managed. And we need to put more thought into that, because what happened at some point is that every customer that asked for a specific use case, we started doing it manually. And that created more expectations to automate more stuff. And it was hard to catch up. It took us a significant amount of time to catch up on all the manual stuff that we did. And I think retrospectively, one, I would only do something manually if I know I can automate within three, four months, I wouldn't do something manually that I know it'll take me at least a year to automate, which is something we do insights and eventually it slowed us down
Pablo Srugo (21:57)
because you're stuck doing manual processes that you can't automate out.
Alon Arvatz (22:01)
Yeah. Because we raise expectations from our customers to get that as part of the platform, and now we have to deliver it consistently. And until it's automated, we have to deliver it manually. So that actually creates a bit of, a hurdle or delay in our growth because of that, you know? So I think as you build your startup, you always need to think, you need to create like this hockey stick, okay?
And if you wanna create this hockey stick I'm talking from a product perspective, let's leave, go to market aside for a second. But just from a product perspective, you have to make sure that yeah, you hit the customer use case, but within a very short time, you automate it so you can start replicating it very fast. Now, if you do what every customer needs immediately, even if you cannot automate within like, you know, three months, then very quickly. So in the beginning, you will see more business because you'll close. this customer, they're getting to you, and you'll convince them that yeah, you can deliver it. But if you fast forward a year later, you're being slowed down because a lot of the work is still manual. And, and this is where you'll see the, the, the slow slowness in your business. This is where it'll hit you later on. So I'm all for engaging fast with customers, doing things manual for proof of concept and showing that it's actually working and, and can be delivered, but only do things that you can automate very quickly afterwards.
Pablo Srugo (23:31)
I get that. Yeah. It becomes a drag because you have so many people, so much time, energy spent on delivering things that are manual that you can't, you can't scale out. And so you can't kind of just rinse and repeat. Right. And you kind of suck in the old versus moving to the new. So I get that. So question for you. Like, so how much did you end up raising in that, that original seed round?
Alon Arvatz (23:51)
You mean for insights?
Pablo Srugo (23:52)
Yes. Yes.
Alon Arvatz (23:54)
So insights, our first one was $2 million. Okay. Very far from the 10 that I did with PointFive. And I can tell you like, you know, that was a standard back then, you know, you right? The seed round was two. and today, seed round for a cybersecurity company is no less than 6 million bucks. Okay. <laugh> things have really, really changed
Pablo Srugo (24:15)
because what year are we talking about right now?
Alon Arvatz (24:17)
We're talking about 2015.
Pablo Srugo (24:20)
Okay.
Alon Arvatz (24:21)
Yeah, we're talking about 2015. And, you know, back then that was a stunt, , we didn't even dream about like 6, 7, 8. That was insane. Our A round was seven. Okay. So it was a different world. You had to be a lot more scrappy. You had to work a lot, you know, smarter, you know, you didn't have a lot of money to waste, but I think it created, you know, a pretty solid company, at least for us, it worked.
Pablo Srugo (24:45)
And how quickly did kind of revenue ramp up through that, that early period? Like, was it one to three to 10, that kind of trajectory?
Alon Arvatz (34:54)
So we did, we actually started very fast. Like in the first year I told you we didn't really have a product and we hit like $1 million ARR, the second year was already four.
Pablo Srugo (25:04)
Wow. that's a big year.
Alon Arvatz (25:07)
yeah. Yeah. We were- Quadruple. Yeah, we quadrupled it. So yeah, the growth was very, very fast. Like, we hit a real, you know, a pain point. There wasn't really an integration to the product. So the POC took us like, you know, two weeks including the integration. So everything went very quickly.
Pablo Srugo (25:25)
And at exit, I assume you were doing tens of millions of ARR at that point?
Alon Arvatz (25:28)
Yeah, we were at 30 plus.
Pablo Srugo (25:30)
30 plus. That's awesome. And so, walk me through this. I know, I wanna move to PointFive. We just got pulled in a bunch of different interesting threads. So, you ended up exiting for 350 million. what year?
Alon Arvatz (25:44)
it was 2021.
Pablo Srugo (25:45)
What did that feel like? I ask that, and I mean it purely from the emotional perspective of a founder who really goes from starting something fulfilling. Like, there's the point where you turn your idea into reality and you're seeing it. And I think that's an amazing feeling as a founder. And then there's the next point, which is where you actually get that “success”, right? Because sometimes people build a company to never sell it, and I get that, but I think in many cases, you know, you do imagine at one point there'll be an exit event, whether it's an IPO or, or an acquisition or whatever. So what does it feel like, honestly, like maybe walk me through that process, but, but more than anything, like, once that money come in and it hits the bank account and the thing is closed and you're like, wow, <laugh>, like, what's that like?
Alon Arvatz (26:31)
So I'll give you a counterintuitive answer. Okay? it feels like emptiness. Wow. Honestly, yeah, because I'm very much driven by building and creating. That's what drives me. That's what gets me excited in the morning. That's what energizes me through the day. And that's what eventually fills my day. The minute we sold the company, it was a complete anti-climax experience because for me, it's suddenly, okay, it's not yours anymore. You don't have the responsibility anymore of making the company work. And just like, you know, the motivation energy goes a bit lower. Okay. I can tell that I did come, like very motivated to learn from Rapid seven and do amazing things in Rapid seven. But also there is, I realize things go very slow and the bureaucracy, et cetera, it also took me you know, down a bit at some point. So actually the feeling was a complete anticlimax.
Pablo Srugo (27:36)
That's crazy.
Alon Arvatz (27:36)
And it felt, I don't know, I think it's like a kid, you know, growing up, leaving home, you're proud of him, you're happy, he, he's your kid, you're happy, you invest in him. You want to see him succeed. You wanna see him take off. But you know, there is something hard with it. You know, something you know in your heart that's like, oh my God, I have to say goodbye now and it's not the responsibility anymore, and I have to let go. And that was my overall feeling. So, you know, the money in the bank is nice, you know, I can do more things now in the world. I know, I know. Buy a better house, okay, basically. But beyond that, my life remained the same, only with less fulfillment with what I do.
Pablo Srugo (28:21)
I'm gonna ask you for a small favor, a tiny little favor. In fact, it's not even now that I think about it, it's not even really a favor for me. I'm actually trying to help you do a favor for you. Just hit the follow button you won't miss out on the next episode, you'll see everything that we release. If you don't wanna listen to an episode, you just skip it, but at least you don't miss out.
And so then how do you, like, how do you shift from there? Like, do you stay at, at the acquirer for a while? Or like, how does the idea of you like PointFive of starting over kind of come to you?
Alon Arvatz (28:50)
So honestly, I've always known I'm gonna start over. Like, it was something that was obvious to me more or less from the time I sold insights. I told you about my feelings after I sold insights. So it was pretty obvious. And actually our new startup, PointFive is not in cybersecurity. That wasn't obvious at all. That was actually the result of our personal experience at Rapid seven. So it became part of Rapid seven, a global enterprise managing a lot of cloud. Okay. Also a lot of spend in the cloud. We became part of their ongoing cloud cost optimization efforts, and really felt the challenges around that. So how do you map, where do you have inefficiencies and inefficient use of your infrastructure? How you give the engineers the right context, how you make it easy for them to take action. All that didn't exist. And our ability at rapid seven to actually drive the efficiency of the infrastructure and reduced cost was very, very difficult, especially when you have different engineering groups across the globe. So we really felt this pain on the personal level as we were at Rapid seven. And that also drove us to actually go and, and fix it by ourselves.
Pablo Srugo (30:05)
But this is what exactly? this is like, like the productivity of engineers or, or something else around managing, managing developers?
Alon Arvatz (30:13)
So the core business value is around putting cloud costs under control and making sure you make efficient use of the infrastructure so you'll spend less. But essentially the main gap in making it happen today is how you create this engineer experience that gets them engaged and leads to action. Because at the end of the day, the finance team, they cannot make changes to the cloud infrastructure. They don't have the knowledge, they don't have the access, they don't have the capability to do that. At the end of the day, it has to be an engineering job. And how you make this transition from financial problem to an engineering problem and enable the engineers to do that is exactly the problem that we tackle.
Pablo Srugo (30:55)
And is it getting- 'cause I know engineers will spin up instances and, and kind of, especially in a big org, like, you know, to do a project and maybe they'll leave it 'cause like why not, and they're paying for it. Is that, is it kind of like getting them to think more rationally about it somehow? Or is it something else about kind of setting these instances up more efficiently kind of in the first place?
Alon Arvatz (31:15)
So basically we talk about deep waste. So our thesis is that they have the basics but left, something turned on and I forgot about it, which exists, it has to be taken care of. We also take care of that. But basically there is a whole concept of hidden waste that people are not even aware of. Why? Because it's very deep on the architectural level, on the way you configure your managed services. Things that you really have to read, like the cloud providers manual to understand how they work and how to do it better. And people don't have this knowledge, especially when you have, think about AWS they have like a hundred different services. No one can, you know, can master all of them. So we develop this technology where we can connect your environment and actually map where you have this deep waste and essentially provide engineers with the findings, with the context, and with tools that can automate the remediation.
Pablo Srugo (32:11)
So you are like helping them re-architect kind of the DevOps part, like a lot of the infrastructure DevOps things that they're doing.
Alon Arvatz (32:16)
Exactly, exactly. So we help them make better use of their infrastructure.
Pablo Srugo (32:21)
It's one thing to see a problem, another thing to decide, yeah, I'm the right person to solve it, especially given the success. Like I think the easiest, simplest, most obvious thing for you to do would be like, listen, I already sold one for 300 in cyber, like I've been in cyber for a long time. Like, let's do it again, <laugh>, you know, let's go for a billion this time, sort of thing. So what, what really pulls you enough for you to say, yeah, you know what this is, it's still technical, so it's not like it's so far from left field, but it's different enough. And, and, and you still kind of went forward and, and did that.
Alon Arvatz (32:51)
So obviously cybersecurity was my default. I have my network there, I have my experience there. I wrote a book about cybersecurity, so that was the obvious. Absolutely. But I, I have to say one, this is a problem we came across unintentionally and we really got excited about it. Why? My first criterion for a new startup, a new idea is, is the market big enough? And the answer here was absolutely yes. Like we talked to dozens of customers and the value, the big enterprise will pay high six figures for a solution like that. And even seven figures for the bigger enterprises-
Pablo Srugo (33:31)
'cause of the savings, right? It's like, I'm gonna pay 20% or 10% of whatever you save me. That kind of back envelope-
Alon Arvatz (33:36)
The savings, the pain, and also the operational burden. think that today, like the centralized function, the organization, they're, they're chasing engineers all day long. They're wasting tons of time on making these types of things happen. So it's also a huge operational burden, but they also you have huge cloud savings as well. So it was a big market. Two, we got really excited about, you know, the idea behind it because we felt that one, it's a real cultural change. Cloud efficiency is the engineering responsibility and they needed tools to make it happen. And really from day one we said that our vision is that engineers will say cost efficiency is part of my job and if my infrastructure is not efficient, I probably did a bad engineering job. So if you have bugs in your software, everyone knows that you did a bad engineering job. That's obvious. Okay. I think today people, you know, are starting to realize that if you have security issues in your code, it's also about engineering. So we wanted to lead the revolution of engineers, understanding that if my infrastructure is not cost efficient, I'm not as good as an engineer as I could have been.
Pablo Srugo (34:48):
How do you do that? Like, how do you get people to care about something they haven't historically cared about, needed to care about?
Alon Arvatz (34:54)
Yeah. So there isn't a silver bullet here. There is a bunch of stuff. One, you have to go top down. Like you have to make sure that like, the CFO, the CTO, that their agenda and they're starting to push it down. We also give them tools to push it down, to measure each team to surface to each team, where are the issues, et cetera. In parallel, you have to also go bottom up. So you have to make sure that you give engineers the findings that they would find interesting and be intrigued by them. So the fact that we give like this deep waste and deep findings that gets engineers very interested. A, I wasn't aware of that. Like I didn't have any idea that setting this configuration would create these types of costs and suddenly our platform becomes something that they learn from. So their ability to learn new things and become better engineers with PointFive is something that gets them engaged and interested. So basically you wanna go top down and bottom up in parallel and also give tools that would make it very, very easy for them to take action. I think very often people fall in, you know, focusing on delivering the right message, which is important, which is great. and I told you what is the messages we're delivering, but if you don't make it easy for them on the day to day, it won't work. Like the, the best idea in the world, right? The most revolutionary idea in the world won't work if you don't have the tools to make it work. Right? I always like to give the example of feminism amazing movement. Okay. Extremely important. It made a huge change. But also part of its ability to make change was technology that supported it. Okay. The fact that, you know, dishwasher and all the technology in the kitchen allowed women to become a lot more independent, which is amazing. So it always has to be an idea with the tools to make it happen. And that's what we're trying to do at PointFive.
Pablo Srugo (37:05)
Well, and I think what you're doing is you're, you kind of the top down makes sure that at the organizational level, cost efficiency and engineering is something that's cared about and rewarded. And then the tools at the bottom up are, hey, you wanna, you wanna move up, you wanna be seen as successful, which you know, who doesn't. These are things you can actually do and all of a sudden they'll be considered a big win because your organization cares about this. So that makes sense. So I guess then let's move through the narrative. You have this problem, you start talking to people. When do you make that decision and you're like, okay, we're gonna, we're gonna quit. Do you have golden handcuffs you have to wait for, or like what's the kind of, what's the timing like?
Alon Arvatz (37:39)
Yeah, so we had golden handcuffs, but we gave away most of the gold. yes. We actually had like two and a half , like a retention period.. and we gave most of the holdback Okay to go and start PointFive.
Pablo Srugo (38:01)
Incredible. you’re talking millions, I have to assume.
Alon Arvatz (38:04)
Yes. But I have to say like I'm not, I don't feel sorry for this decision for a second. You know, we were really excited about this opportunity and we decided to go for it. And so far it's very, very successful.
Pablo Srugo (38:17)
So when was this, by the way?When did you start PointFive officially?
Alon Arvatz (38:20)
We started two years ago. Exactly two years ago, like February 1st, 2023.
Pablo Srugo (38:27)
The difference, I would imagine one of the differences between PointFive and insights is I think the funding, I assume you kind of raised money right outta the gate.
Alon Arvatz (38:35)
Yeah. So the funding was very different there. It was two here, it was 10, two months later, 16.
Pablo Srugo (38:42)
It was hard here, it was easy. I mean, it's funny when you exit for 350 million, it will be easier <laugh>, it'll be easy.
Alon Arvatz (38:47)
I have to say that the market also is a lot bigger. So that's also a major part of it. Like when we went for insights, I have an idea, I said, okay, let's do it. I have, I had no idea about the market whatsoever. For me, Hey, I wanted to be an entrepreneur, had an idea, let's give it a shot, what can happen? And for PointFive, it was a lot harder to choose an idea because you wanted to make sure that it's the right market and you have big enough potential. And we didn't make the move before we did this validation. Also, you're a second time founder, you had success, you wanna make sure the second one is a lot bigger success, otherwise, you know, you won't go for it raises the bar. Yeah, yeah. So it was a lot harder to actually make a decision to go for it. It's funny, I think maybe from a lot of people it's a lot harder to make the decision to go for the first one. For me it was a lot harder to make a decision to go for the second one because for the first one, hell yeah, why not? Worst case, we'll fail whatever, who knows me, you know, <laugh> on the second startup, I already have reputation.
Pablo Srugo (39:42)
You have a reputation. Yeah, exactly. We've got something to save. You've got something to lose. I'll say the other thing, like to the extent that, you know, second time repeat founders, they certainly make a lot less avoidable mistakes 'cause they've learned so much. But the types of mistakes that they do make tend to be different. And what I've noticed is sometimes it's almost over-polished, because at the beginning, like you said, it's one step in front of the other. You're not thinking far ahead, you're just doing whatever you think makes the most sense at that time. And obviously if you're a repeat founder, if you're a repeat founder, you know, then you had some success in the first one. So it kind of worked. A lot of times there's an overcorrection where on the second one you're like, oh, if only we had done, you know, nicer logo and if only we had had a nicer website and if only we had had like nicer this. And you start polishing all these sorts of things and then you forget about the thing that matters, which is delivering value <laugh>, you know, to customers. So it doesn't sound like you did that, but I'm just saying like that, it's just getting into the mindset of a repeat founder. It's so different, you know, the second time around.
Alon Arvatz (40:38)
Absolutely, and I agree with your observation. I think this is the main, I don't know, challenge or problem that second time founders are facing. And we really tried very hard not to do that, I have to say. But like I told you, I think at insights we weren't, I would say, responsible enough to make sure that we're not doing something that we cannot scale very fast. And at PointFive we made sure that we're only doing things that are completely scalable and can be automated within month to month. And the advantage of this approach is that it allows you to create this hockey stick where you can, where we build something, it helps you accelerate because it's now scalable and you, it can be replicable. you can replicate across multiple customers and you can, you know, in POCs you can run it with multiple customers, which really helped you accelerate, create like this hockey stick motion. And yeah, I think there were some places where we should have been more scrappy, I have to say. Okay. there were some places, but overall I think it was done a lot better than the first time.
Pablo Srugo (41:48)
And so you raised 10 outta the gate and then another 16 million how much later?
Alon Arvatz (41:53)
And another six in safe a few months later. And then we just closed another 20 million round a few months ago.
Pablo Srugo (42:01)
Okay. So 36 million raised total, is that right?
Alon Arvatz (42:04)
Yes.
Alon Arvatz (42:05)
And what's, what's driven you to raise such big amounts so fast?
Alon Arvatz (42:10)
I have to say it was opportunistic first of all. So we've been reached out by VCs that showed interest and, and the main offers we decided to consider. But basically you have to decide if you optimize for a dilution or you optimize for capturing the market fast. That's always how I see the trade off between raising fast and delaying it for later. So if you delay for later, you have more ARR, more case studies, more references, you can get higher valuation if you do it earlier than you can just grow faster. For me, we saw that we're able to sell, there is amazing feedback from the market and we really wanted to expand to Azure and GCP, so we can also serve this market. And actually Azure GCP would double our, our potential attempt and more. And I really wanted to capture that fast. We felt there is a good opportunity in the market that we have to capture before we're losing momentum there. And when we got an offer that was on the right terms, that was more or less where we wanted to see our A round, we just decided to go for it and accelerate.
Pablo Srugo (43:22)
I think that's one thing that first time founders sometimes get wrong and it's, you know, it's, you have to, it's a privileged position to be in, to get inbound, to get offers to, to kind of get solicited. But a lot of times people will look and say, why would they raise so much money so fast, especially money that they didn't really need. Like this happened. Like I post a lot about, you know, different founder stories and sometimes I'm like, you know, they were profitable but then they raised like $20 million. Like people are like, why would you ever do that? And it's like, first of all, you don't say like when you have a great deal in front of you that you don't have to do any work for where you think about maybe in six months if we did a lot of work, maybe we'd get a bit better deal but not much better. Why wouldn't you take it? Why wouldn't you be opportunistic? And then the other side is like, you don't know what's gonna happen. Like, you know, you've gotta have some sort of optionality baked into your fundraising strategy. Like you can't over-optimize for every single percentage point. Because then when you might need the money for whatever reason, it might be harder to get. And I think these are things that you learn, you kind of live and you learn and you realize, wait a second, you know, easy money doesn't come that often.
Alon Arvatz (44:22)
Yeah. And I also think there is a huge merit to being number one in your market. I prefer, I dunno, I prefer 8% in a company that is number one in its market, then 15% in a company that is number three or four. And if you wanna be number one, you have to invest a lot of resources in developing the product, building the brand, doing the go-to market. So everyone will hear about you as fast as possible. In today's world, startup ideas are being replicated very, very fast. So it's not about the right idea, it's about how fast you execute. And money is one of the most important tools for you to execute fast and make sure you capture your market share.
Pablo Srugo (45:07)
And you know, fundraising aside, when you think about traction in terms of revenue and customers and you compare the early days of insights to the early days of PointFive, what does that look like?
Alon Arvatz (45:16)
You mean from a fundraising perspective?
Pablo Srugo (45:19)
No, not fundraising. Like traction, like customers, revenue, that side of the business.
Alon Arvatz (45:23)
Yeah. So I have to say that like, you know, I think today the tools for, you know, go-to-market engaging with customers are a lot more advanced. So it's actually easier, you know, to get in front of customers a lot faster. But from a traction perspective, at the end of the day, it's about the pain you're solving and how, how painful it is. If you're hitting, a real pain, you'll see traction, you'll see traction very fast. If not then, then not. Okay. So at the end of the day, I think it's a lot more, you know what pain you're solving than whether or not there is, there are tools or there is attention, of customers in general.
Pablo Srugo (46:05)
But are you seeing this move even faster from a customer adoption perspective than those first first days at insights?
Alon Arvatz (46:10)
Yeah, no, of course, of course. Because we also listen at the end of the day, we have a reputation so people already know us. It's a lot easier to get a credit from, from prospects to something that we built today. And we just know how to do it a lot better. How to do the work on social media to get the right presence, how to create, you know, attention, do creative stuff. We just ran a campaign where we sent boxes to people in our industry, FENOs practitioners with a challenge, and they had to solve it and upload the video to LinkedIn. It was a competition and the first prize was, was donated $500 to a cause You like, okay, that created a huge buzz, huge buzz. This is something I wouldn't have the guts to do at insights ,it would've felt like, you know, too edgy. at PointFive, now that I have a lot more confidence, I know how to do this type of stuff, it's a lot easier for me to execute these types of things. So we also know how to do things a lot better to create attention. So obviously the traction is much, much higher.
Pablo Srugo (47:19)
How fast did you get to like a million in ARR?
Alon Arvatz (47:22)
in PointFive?
Pablo Srugo (47:24)
Yeah.
Alon Arvatz (47:25)
It took us six months since launch.
Pablo Srugo (47:27)
Wow. That's incredible. And I, I assume you're kind of in the high single million sort of thing of arr now?
Alon Arvatz (47:33)
Yes. Yes.
Pablo Srugo (47:35)
That's amazing. Congrats man.
Alon Arvatz (47:37)
Thank you. We're just a year since we launched the product, by the way. So we're just celebrating one year in a few weeks.
Pablo Srugo (47:44)
What advice do you have? Like, we talked a lot about the first time, but when you think about second time founders especially and now you've gone through it for like two years as a second time founder, like what advice do you have for them?
Alon Arvatz (47:56):
So one, I'm not sure if it's advice, but something they should know, you're gonna make a lot of mistakes. Like, you're gonna feel like you're not gonna make any mistakes because you've done all of them on the first time. you're gonna make a lot of mistakes and you have to remember that it's fine. It'll, it's inevitable. Everyone does mistakes. Even I'm sure the third and fourth time founders also makes mistakes and it's fine. I think it's all about making corrections and, and keep moving ahead full force as fast as possible.
Pablo Srugo (48:29)
I think that's completely right. I think you go in- I always remember thinking, man, if I could do it all over again, I'd just be so much better. You know what I mean? Like, everything would be so much better <laugh> and and sometimes it's true and you know, sometimes it isn't like it is, - I have said this also to first time encounters who sometimes are treating that first one like the test, right? And I'm like, listen, like maybe it is, and, and the second one's even bigger, but maybe it isn't. Like sometimes you stumble upon a pain point in a market so large and yeah, it's by happenstance. But you, you could, you know, go down, go down the list of your Airbnbs and Facebook and this and that and, and so you don't want to get it in your head too much. I don't think as a first time founder that like, this is just my first one and, and maybe I'll get a little exit and then my second one will kind of be my real one. It's just, you can't really plan it out that way.
Alon Arvatz (49:13) I agree. And I think if you're a first time founder and you have something good in your hands, go for it. Don't think I need to, you know, do the exit and, and cash out and my next one will be a lot better because you might, you know, hit huge pain, huge market. You need to go full force. There are amazing companies that were built by first time founders. I don't need to give you names, you know, you all know them. I know Apple and, and Google and Facebook. They're all first timers. Okay. So always remember that. So if you have something good, go for it.
Pablo Srugo (49:47)
When did you feel like you had true product market fit? And let's do it a little differently. Maybe like true product market fit with insights, then true product market fit with PointFive. And if there's any material differences, you know, maybe you can contrast and compare a little bit.
Alon Arvatz (50:01)
So first of all, I think that actually at Insights we had a faster product market fit. So I, I think like within like, you know, two, three months really felt like, you know, we have a good fit since we, you know, started selling. So that was easier and faster. Actually in PointFive, I think it was very clear for us from day one that we hit the right pain point, but it did take us a few months with design partners to make sure we are solving it in the right way. Right? So I think like it just had like this design partnership period of like I know it was, it was a few months that we had to go through it. We just didn't have it inside. We just skipped it at Insights. So that's, that also tells you that like product market fit. It's not only, hey, I'm first time, I'm second time, how much experience I have, you know, sometimes you hit the right buttons immediately because you have luck or because whatever reason and it just works. So it's only about listening to the market, listening to customers, you know, understanding where you're already there. And when you're there, you're there and you need to start scaling up.
Pablo Srugo (51:15)
Awesome man. Well listen, thanks so much for dropping on the show. It's been, it's been amazing and I'm sure founders have learned a ton from both of your journeys. <Laugh>,
Alon Arvatz (51:21)
I enjoyed it very much and thank you for having me.
Pablo Srugo (51:24)
85% of people who listen to the show just started listening to it this year. You're probably one of those people. In fact, the odds are 85%. Guess what, you need to go back 'cause there are over a hundred other episodes that you need to check out that are just as good, if not better than this one. Don't miss out.
