Cyera's Hypergrowth, Cake's Cap Table Push, and ServiceTitan's Stellar IPO | E2060

Alex kicks off the show (0s)

• This week's episode of "This Week in Startups" is hosted by Alex, with co-host Jason Calacanis being absent due to illness (7s).
• The episode features guests from a Twist 500 company, Cyera, and the founder of Cake Equity, as well as discussions on major news stories, including the ServiceTitan IPO (19s).
• The show is sponsored by LinkedIn Jobs, where businesses can post their first job for free, with terms and conditions applying (41s).
• Other sponsors include The Washington Post, which is offering a subscription deal for twist listeners, and Beehive, a platform that powers newsletters with AI tools and other features (53s).
• A recent incident involving a self-driving car from Waymo is discussed, where the car failed to stop at a traffic roundabout and continued to drive in circles, but a software patch has already been released to address the issue (1m29s).
• The incident is seen as a setback for Waymo, which is currently trying to expand its operations across the United States (2m5s).
• The episode will cover various critical news stories from the startup world, including the progress made in self-driving technology and other major developments (2m11s).

Cyera’s Yotam Seveg joins the show (2m12s)

• Yotam Segev, co-founder of Cyera, is back on the show to discuss the company's recent developments, including a $162 million acquisition and a $300 million fundraising round, which has doubled the company's valuation to about $3 billion (2m13s).
• Yotam and the host share a similar childhood experience of going around roundabouts for entertainment, which was a common activity before the rise of social media and online gaming (2m40s).
• The host mentions that some people in Gen Z and Gen Alpha are adopting a new philosophy of going for walks without headphones, which is seen as a way to experience boredom and appreciate the outdoors (3m30s).
• Yotam is expecting another child and jokes that having two kids will give him more time to work on his company (3m55s).
• Cyera's recent fundraising round was a preemptive situation, where insiders offered a compelling deal that allowed the company to raise more money and accelerate its growth (4m28s).
• The company's focus is on its customers and product, and fundraising is not a primary concern, but Yotam acknowledges that not every startup has the luxury of having major investors offering preemptive term sheets (5m17s).
• Cyera's privileged situation is due to its traction in the market, the strength of its space, and the total addressable market, which has attracted significant investment (5m56s).
• Cyera is a company that focuses on data security posture management (DSPM), helping companies figure out what data they have, where it exists, and who can access it, with the goal of becoming the data security platform for enterprises (6m7s).
• The company uses machine intelligence to categorize data as part of its DSPM product, aiming to consolidate and simplify the security stack for customers and make data security more effective (7m1s).
• Cyera's focus is on the data asset, which is often intangible and scattered across various environments, including cloud, on-premise, endpoints, and third parties (7m40s).
• The company's approach differs from others in the security space, such as CrowdStrike, which focuses on endpoint security, and Palo Alto Networks, which focuses on network security (7m24s).
• Cyera's customers often have complex ecosystems with data spread across multiple environments, including AWS, Azure, GCP, and various SaaS applications, making it challenging to manage data security (8m41s).
• When security incidents occur, companies struggle to determine what data was potentially exposed, highlighting the need for effective data security solutions (9m15s).
• The current state of data security is often inadequate, with security practitioners rating their data security as a 2 out of 10, on average (9m43s).
• The subject believes that a particular organization is the worst at a certain aspect because they cannot imagine that other organizations they come into contact with are also immature in that aspect (9m55s)

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• Hiring the wrong person can have severe consequences, including decreased productivity, slowed team momentum, and a negative impact on company culture and productivity, ultimately derailing the entire company (10m7s).
• On the other hand, a great hire can accelerate business growth, and finding such individuals is crucial, with LinkedIn being an ideal platform to discover "bar raisers" who can elevate the organization's standards (10m26s).
• A "bar raiser" is someone who joins an organization and raises the bar for everyone else, and LinkedIn, with over a billion members worldwide in more than 200 countries, is the perfect place to find such talent (10m28s).
• The majority of LinkedIn users, 70%, do not visit other leading job sites, making LinkedIn the primary platform for job searches (10m45s).
• LinkedIn offers a range of features, including AI-powered job description crafting, to help attract the right candidates, and 86% of small businesses find a qualified candidate within 24 hours of posting a job (11m3s).
• LinkedIn Jobs allows users to post their first job for free using a specific URL, with terms and conditions applying, providing an opportunity for businesses to find the right talent quickly and efficiently (11m22s).

Evolution from information security to cybersecurity and automated data categorization (11m34s)

• The concept of Data Security Posture Management (DSPM) is fundamental to a good security posture, especially for Enterprise companies with lots of data, employees, devices, and networks, and it's surprising that it took until now for DSPM to be set up as its own category in cybersecurity (11m35s).
• The problem of data security is not new, but rather the oldest problem in the field, dating back to the early days of information security, which later shifted to focus on cyber security as attacks became more prevalent (12m18s).
• The ability to move data from one place to another has changed significantly, with the amount of data being generated today being completely disproportionate to what was generated 10 years ago, both on a personal and Enterprise level (13m26s).
• The approach in the past was for Enterprise employees to manually classify sensitive documents, but this approach didn't scale with the growing amount of data, leading to the need for automation (14m14s).
• Data Security Posture Management (DSPM) is about automating the classification of data, differentiating between data that matters and data that clutters, with 98% of data not being critical (14m46s).
• The automated categorization of corporate data is an important concept, with the goal of accurately identifying and securing sensitive data, and some companies claim to have achieved up to 95% accuracy in this process (15m18s).
• The system is designed to handle vast, diverse, cluttered, and messy data, identifying important documents and classifying data without requiring extensive learning from the customer company about their classification processes (15m33s).
• The system operates on two tiers: the first tier identifies the data, and the second tier determines its importance, with the understanding that if the first tier is well-understood, the second tier becomes easier to manage (16m7s).
• Enterprise practitioners believe that the business owns the data and should decide what data is important, but businesses often struggle to take ownership of this responsibility (16m29s).
• The system helps businesses own their data by providing security practitioners with a mechanism to identify sensitive data, making it easier for business leaders to have informed conversations about data protection (16m42s).
• By creating a map of reality, the system enables businesses to focus on what matters most, get rid of unnecessary data, and remove data they never intended to have (17m30s).
• Visibility is a huge accelerator for action and accountability, and the system's ability to provide visibility is a key aspect of its value proposition (18m2s).
• The system's ability to provide visibility is made possible by advances in natural language processing, such as those demonstrated by ChatGPT, which can analyze large documents and identify key information (18m16s).
• The system can analyze hundreds of millions of documents and hundreds of petabytes of data at Enterprise scale, giving businesses valuable insights into their data assets (18m42s).
• While the system's accuracy is currently around 95%, it is expected to continue improving, with the goal of reaching 96% or 97% accuracy (19m7s).
• Incremental improvements are being made to close the gap in data classification, with the engineering team continuously working to improve the classification engine, addressing advanced use cases around data classification, and dealing with challenges such as identifying whose data it is, whether it's real or synthetic, and understanding use cases for B2B enterprises with multiple customers (19m12s).
• Advanced classification use cases include identifying the ownership of data, such as whether it belongs to customers, employees, or specific groups of citizens, and AI can help automate and provide this information to practitioners, making the visibility created actionable (20m12s).
• The use of AI in the enterprise can help clean up clutter and dangerous data, reducing corporate liability and addressing the question of what AI can be used for in the enterprise (20m31s).

Cyera's acquisition strategy and impact on the company (20m44s)

• Cyera acquired Trail Security in October for $162 million in a cash and stock deal, with Trail providing data loss prevention (DLP) capabilities that offer visibility into data in motion, transmitted or pushed somewhere, which is incremental to what Cyera was doing originally (20m45s).
• The acquisition addresses two challenges customers face: not knowing what data they have and not being able to protect it, and not being able to detect and block data from going to unwarranted third parties (21m31s).
• Trail's agentless DLP approach sits on top of existing choke points, such as email and endpoint security, and brings together quality classification, identity, and context to orchestrate efforts for customers (22m52s).
• The acquisition was not primarily about adding a feature to the existing SRA platform, but rather about entering the DLP market with an innovative approach and disrupting incumbent activity (23m30s).
• The deal did not bring a noticeable amount of revenue to Cyera, as Trail was a young company, but it has brought Cyera into a new market and allowed them to broaden their story from DSPN to a more comprehensive data security narrative (23m41s).
• Cyera, a full data security platform, is becoming a leader in data security for the industry, with a strong company culture and a cohesive team of around 400 people. (24m34s)
• The company recently raised more money, despite not being low on cash, which suggests they might be pursuing more M&A activities to complete their data security platform. (24m43s)
• When considering M&A, Cyera weighs the pros and cons of building versus buying, prioritizing cultural fit and the right technology to achieve their mission and vision. (25m16s)
• The company's approach to M&A is similar to getting married, where they need to really love their partner and be willing to integrate them into their cohesive team. (26m2s)
• Cyera's past acquisition of Trail was driven by customer demand, and the product is now selling well, which will help the company's revenue growth rate and net retention next year. (27m2s)
• The company is looking to triple its revenue and new ARR next year, which is a similar growth rate to this year, and has already received a preemptive term sheet from investors. (27m38s)

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• The issues that defined the recent election campaign are still relevant, emphasizing the need for a trustworthy news source like The Washington Post (28m10s).
• The Washington Post offers various formats, including apps, podcasts, and custom newsletters, catering to different preferences and busy lifestyles (28m18s).
• A notable feature of The Washington Post is its ability to read articles aloud, allowing users to stay updated on the go, whether hiking, skiing, or engaging in other activities (28m25s).
• To stay up-to-date on current events, it is crucial to subscribe to a reliable news source, and The Washington Post is offering a discounted subscription rate (28m40s).
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• This discounted rate is equivalent to the cost of a cup of coffee every three or four months, making it an affordable and worthwhile investment in staying informed (29m3s).
• To take advantage of this offer, users can visit washingtonpost.com/twist to subscribe for the discounted rate (29m7s).

AI's impact on data security and competition in the cybersecurity market (29m10s)

• The AI question from a customer perspective is a significant factor in the data security market, with customers seeking to use their data in an AI context while keeping it safe, which has been a tailwind for companies like Cyera (29m10s).
• However, it's still early days for Enterprise AI adoption, and the current AI buzz is only about 18 months old, with mainstream adoption taking time, even for the best technologies (30m35s).
• The tailwinds for AI adoption are only starting, and they will continue to grow for several years to come, with companies like Cyera working with large organizations to support their secure AI adoption journey and responsible AI governance (31m15s).
• There is no slowdown in AI adoption, and the acceleration will last not just for quarters but for years, which bodes well for future revenue growth (31m26s).
• Companies like Wiz, a hot name in cybersecurity, are growing super fast and are a huge ally and partner to companies like Cyera, with a focus on cloud security, infrastructure, and vulnerabilities (31m36s).
• The cybersecurity market is highly competitive, with multiple contenders for every dollar, but there is room for many players to succeed, including Wiz, which is expected to go public eventually (32m31s).
• Wiz's eventual IPO is anticipated, but it's not a pressing concern, especially after ServiceTitan's successful IPO, which performed better than expected (34m1s).

ServiceTitan IPO, market reaction, and implications for the industry (34m19s)

• The ServiceTitan IPO has made the IPO market a more realistic option for companies, especially those in the SaaS industry, as they mature and grow quickly (34m30s).
• The focus for companies should be on building a great business, with a strong product, team, and customer base, which will ultimately determine their worth and potential for liquidation through an IPO or other means (35m10s).
• The IPO market warming up could make it more appealing for companies that can raise large amounts of money in private markets to go public earlier, rather than waiting until they have reached a higher ARR (35m32s).
• There is a risk that if companies wait too long to go public, the value will have been largely captured by the private market, leaving less upside for public market investors (35m49s).
• The international market for enterprise software is large, allowing companies to grow rapidly even at a high valuation, with companies like ServiceNow being an example of this (36m5s).
• Investors are attracted to companies with the potential to become billion-ARR companies with hypergrowth, and companies like ServiceTitan are seen as examples of how to achieve this (36m25s).
• The key to success for companies is to get the product and go-to-market strategy right, laying the foundations for continued growth and market capture (36m47s).
• The conversation concludes with an invitation for the guest to return to the show in the future and an acknowledgement of the company's recent fundraising and acquisition (37m23s).

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Tech companies reaching significant market caps and IPO performances (39m5s)

• ServiceTitan, a company, dropped its S-1A and initially announced an IPO listing range of $52.57 per share, but later raised the range to $65-$67 per share, and eventually sold its IPO shares at $71 per share, beating its raised range, which is an incredibly bullish sign for the company (39m27s).
• The company's stock opened at $101 per share, went up to as high as $105, and was worth $101 as of the next morning, resulting in a great IPO pricing run, listing, and trading (40m26s).
• At a price of $101 per share, ServiceTitan is worth about $8.9 billion, close to $10 billion, making it a decacorn or very close to it, which is significant for a SaaS company going public today (40m43s).
• To achieve a $10 billion price tag, ServiceTitan's Q3 midpoint revenue range guidance is roughly $200 million, with a net loss of $47 million, mostly due to share-based compensation, and non-GAAP operating income of about $1 million, making it essentially break-even and still growing well (41m15s).
• The company's valuation as of the end of trading had a roughly 11x revenue multiple, indicating that if a company is growing at about 25%, has about $200 million in quarterly revenue, and is roughly break-even on a non-GAAP basis, the market will give it a roughly $9-10 billion valuation (41m47s).
• This raises questions about how many unicorns in the market today don't meet this threshold and what they might actually be worth, considering companies tend to get more valuable as they get larger, even if growth rates slow (42m8s).
• ServiceTitan's successful IPO is a positive sign for the IPO market, startups, and the space, making it a great Christmas present for the market (42m54s).
• Although the company had to take a haircut to go public, it still traded well after listing, from $71 to $101 (43m4s).
• ServiceTitan's valuation was around $9.5 billion in June 2021 after raising $200 million in its Series G funding, but it fell to $7.6 billion in November 2022 after raising nearly $400 million in its Series H funding, indicating that the company hasn't created much new value since the 2021 fundraise (43m12s).
• Broadcom has reached a market capitalization of $1 trillion, joining nine other US-based companies with a market cap of $1 trillion or greater, with the only non-US company being Saudi Aramco (43m50s).
• Broadcom's stock price rose about 20% due to impressive quarterly earnings, beating expectations with earnings per share of $142 and revenue in line with expectations (44m23s).
• The company's revenue growth was driven by its acquisition of VMware, but more significantly by its AI-derived revenue, which grew 220% year-over-year to $12.2 billion (44m47s).
• Broadcom's adjusted EBITDA margin was 65% in its most recent quarter, and the company had $5.5 billion in free cash flow, representing a free cash flow margin of about 39% (45m41s).
• Aera Labs, a company that builds data center infrastructure, went public earlier this year and has seen its stock price rise from $36 to around $130 per share, driven by strong revenue growth of 47% sequentially and 26% year-over-year (46m14s).
• Broadcom is described as a boring company, but its results are noteworthy (47m8s).
• Broadcom's results are exciting, despite the company itself being unexciting (47m10s).
• The results of both companies mentioned are exciting (47m15s).

Texas attorney general's lawsuit against tech companies over data practices (47m17s)

• Texas Attorney General Ken Paxton is suing 15 technology companies, including Char AI, Instagram, Reddit, and Discord, over their data practices with minors, particularly focusing on protecting children's privacy and safety (47m17s).
• The lawsuit is part of a growing trend of Republican-backed efforts to take tech companies to task for data privacy issues, both in Congress and at the state level (47m42s).
• This move appears to contradict the general narrative of less regulation, highlighting the complexity and varying perspectives on regulation, privacy, and data security (47m55s).
• The lawsuit reflects Texas's aggressive approach to policing tech company data practices, demonstrating the state's commitment to addressing data privacy concerns (48m17s).
• The issue of data privacy and regulation is multifaceted, with individuals from the same party holding different views, emphasizing the need for ongoing discussion and consideration of diverse perspectives (48m12s).

Cake Equity’s Kim Hansen joins the show (48m21s)

• Kim Hansen, the founder and CEO of Cake Equity, joins the show and is welcomed by the host, who appreciates his corporate attire, awarding him 10 points for wearing the company shirt (48m41s).
• The host mentions that they learned a lot about Cake Equity while preparing for the show and invites Kim Hansen to explain what the company is building (48m58s).
• Kim Hansen is given the opportunity to introduce Cake Equity and its mission at the top of the conversation (49m0s).

Cake Equity's mission, platform, and cap table management software demo (49m2s)

• Startups have the potential to achieve great things when founders and teams are aligned around a big mission, and building tools to help them on their journey is crucial, especially with the capabilities of new technology like AI (49m2s).
• The journey of building a startup is tough, and every person in a startup should have ownership, which is why employee share option schemes (ESOPs) are important (50m1s).
• However, setting up an ESOP can be difficult due to legal hurdles and expenses, which is why Cake was founded to solve these problems and provide a modern, scalable, and flexible platform for cap table management (50m28s).
• Cake's platform supports global teams and provides tools for companies to issue equity, handle options pools, and get 409a evaluations, making it easier for startups to manage the financial and critical aspects of their business (50m54s).
• The platform is easy to use, with guides and a checklist to help users get started, and 80% of users can get value right away within minutes of signing up (51m30s).
• Cake's interface clearly shows who owns what, making it easier for founders and stakeholders to understand the company's ownership structure, and it supports all types of stakeholders and securities (51m58s).
• The platform provides a view of the company's stakeholders and their share ownership, which can be accessed by founders and other authorized users (52m21s).
• Founders and employees can collaborate using a checklist and guides to understand equity and share ownership, making it a joint effort to navigate complicated share structures (52m30s).
• The goal is to break down equity into simple, one-click solutions, making it easier for founders and employees to work together with their advisors, such as lawyers (52m50s).
• Accelerating startup team motivation through equity is crucial, and it's essential to establish a connection between founders and employees, helping them understand the value of equity (53m4s).
• Founders often struggle to explain the value of equity to employees, depending on their maturity level in equity, making it challenging to communicate its worth (53m13s).
• An employee app is available, allowing employees to see how much they own at the current state, with features to send messages and kudos back to the founder, facilitating organic communication (53m24s).
• The app provides a clear view of ownership, which increases every time an employee invests more, and employees can track the valuation of the company over time (53m36s).
• Each employee or investor has access to their own pace of learning, with features like flashcards that provide bite-sized information, lifting the burden off founders to explain complex equity concepts (53m55s).
• The platform is built for mobile, making it simple and easy to use, unlike enterprise software like Concur (54m13s).

Cake Equity's user interface, employee engagement, and expansion plans (54m29s)

• Cake Equity's user interface aims to make equity management more visually appealing and user-friendly, using a visual language to simplify complex legal concepts and increase transparency and trust (54m32s).
• The platform's long-term vision is to make equity sharing more common and accessible to all companies, not just startups, with the goal of every employee having ownership and a portfolio of companies they've worked with (55m36s).
• Cake Equity is currently focused on serving C2 series A startups, but it also works well for earlier-stage companies and has a free plan for up to five stakeholders, providing standard legal contracts and insights (56m35s).
• The platform has a low churn rate, with series B and C companies continuing to use it, and Cake Equity is committed to growing and maturing with its customers, building close relationships and listening to their needs (57m21s).
• Cake Equity has a significant automation component, aiming to automate the "boring paperwork side of things" and enable companies to self-serve and get started on their own, in contrast to more services-based competitors like Carta (58m12s).

Automation in onboarding and international growth challenges for Cake Equity (58m22s)

• Cake is a company that provides a self-service equity management platform, allowing 80% of companies to unboard themselves within minutes, a process that usually takes four days with human assistance (58m22s).
• The technology behind Cake's platform includes a contract engine that integrates with the cap table, allowing for the automation of equity transactions and the creation of standard contracts (58m47s).
• Cake uses AI to analyze the behavior and actions needed to take for founders to get value upfront, guiding them through the process with checklists and guides (59m23s).
• The platform provides a modern and data-driven approach to equity management, allowing founders to mature at their own pace and make a good impression on investors and employees (59m43s).
• Cake has a global team of 27 people, with headquarters in the US, and uses technology, including LLMs and machine learning, to automate everything they do, allowing them to scale without hiring hundreds of people (1h0m28s).
• The company's approach is to use technology to automate decision-making, contracts, and unstructured data, making it possible to provide a more efficient and effective equity management platform (1h1m5s).
• Cake is originally an Australian company, but has a global presence, with a team in the US and a focus on providing a modern and innovative approach to equity management (1h1m20s).
• A company is working on a platform to support equity usage in different regions, including Australia, Silicon Valley, Singapore, and London, with a flexible contract engine and rules to accommodate various regional requirements (1h1m36s).
• The company launched in Australia and became the leading capable provider, then expanded to 50 countries, with a significant demand in the US, where it had its biggest month in October, followed by an even bigger month in November, and an expected bigger month in December (1h2m50s).
• The company's growth is mostly coming from the US market, where its growth package is in high demand, and it plans to capture a market share in the seed through series A companies, with a focus on founder-friendly and modern data-driven platforms (1h3m34s).
• The company has a pro package that has been launched in Australia and has low churn, and it plans to launch it in the US, with a focus on selling other services and building brand awareness (1h4m29s).
• The company's goal is to support startups and founders, with a focus on being founder-friendly, and it believes its values and culture are wanted everywhere (1h3m15s).
• The company's market sizing potential in the US is significant, with thousands of seed through series A companies, and it plans to focus on this niche to capture a market share (1h3m52s).
• Cake's approach to handling customers who want to switch to a rival service is to provide easy downgrade and pause options, as well as an export feature, allowing founders to own their data and make decisions easily (1h5m31s).
• The company's philosophy is to be founder-friendly, making it simple for customers to leave the platform if needed, with a one-click solution for offboarding and data ownership (1h6m32s).
• Cake's mode is to be flexible, scalable, and easy to use, which sets them apart from competitors with strict subscription policies (1h6m53s).
• The company is building an in-house data team to extract insights from anonymized customer data, with the goal of providing best practices and standards for treating employees well (1h7m46s).
• Cake has already launched features that provide guidelines for giving options to employees, and they plan to release frequent reports on data learnings, starting in Australia and soon in the US (1h7m50s).
• The company aims to provide insights on market standards, best practices, and employee treatment, without giving financial or legal advice (1h8m17s).
• The conversation concludes with an invitation for the guest to return in June to discuss their growth and US expansion, with the expectation of at least triple-digit growth in 2025 (1h8m47s).
• The company's website is cakeequity.com, and people are advised not to visit cake.com, which is not the correct company website (1h9m4s).
• The guest, Ken, is thanked for coming on the show, and the host invites the audience to visit cakeequity.com to learn more (1h9m14s).
• The host, Alex, wraps up the episode, mentioning that Jason will be back on the show early the following week, and teases upcoming content before the holidays (1h9m23s).