$160 million. That’s the amount Huntress, a managed security platform, has raised to date. But for CEO and co-founder Kyle Hanslovan, the journey to this impressive sum was far from straightforward.
In a recent episode of Category Visionaries, Kyle shared hard-earned insights on fundraising in the cybersecurity space. His advice? It’s not just about the numbers—it’s about the story you tell and the conviction you bring to the table.
The Storytelling Imperative
“It’s storytelling. Plus amazing unit economics.”
That’s how Kyle sums up the essence of successful fundraising. But he’s quick to point out that for early-stage founders, the storytelling aspect often takes precedence.
“For any early stage founder, the unit economics are largely discounted,” Kyle explains. “You have to prove that, yes, your claims are possible.”
This emphasis on storytelling doesn’t mean fabricating or exaggerating. Instead, it’s about painting a compelling picture of your company’s potential and the problem you’re solving.
The Danger of Understatement
Interestingly, Kyle’s experience reveals that being too conservative in your projections can actually work against you.
“I pitched so accurate of what I was going to be able to do,” Kyle recalls. “I said I was going to hit 1.5 million in revenue one year, and then I said I was going to hit five and I ended up doing 5.3 and then I said I was going to do ten and I hit ten and then I said I would do 20 and I did 20. Nobody rewarded me for that accuracy.”
In fact, this precision may have cost Huntress in the early stages. “They actually, in their minds, were discounting because they hear so many flamboyant, amazing stories that they internally discount,” Kyle explains.
The Valuation Impact
This conservative approach had real consequences. Kyle estimates, “When I’m looking at what that’s worth, it’s probably worth over $100 million in different places. I’ve taken more dilution because my pitch wasn’t as crisp as it could’ve been.”
However, Kyle is quick to put this in perspective: “As somebody who grew up broke, it’s all gravy at this point.”
The Long-Term Payoff of Accuracy
While this accuracy may have cost Huntress in the short term, Kyle notes that it’s paid dividends in later funding rounds.
“By the time I showed people so many times I could do what I would say I did, it’s made the later stage of raising capital much easier,” he shares.
This track record of delivering on promises has built a strong foundation of trust with investors, smoothing the path for future fundraising efforts.
Balancing Ambition and Realism
Based on his experience, Kyle offers a nuanced approach for founders:
“Make sure that you tell the full potential of just how big your idea can be. Don’t limit yourself with what’s reasonable, but tell them this is the full capability. But I would also say, bring that humility and caveat and say, even though this is the full potential, I think because of execution we could look something closer to that.”
This balanced approach gives investors the big vision they’re looking for while also demonstrating a grounded understanding of the challenges involved.
The Importance of the First Round
While Kyle is philosophical about the dilution Huntress experienced, he stresses the importance of getting the first round right.
“What I’m more worried about are founders who lose 33% of their company in their first series A instead of 25 because that has a big ripple effect on how your cap table looks in the future,” he cautions.
This advice underscores the long-term impact of early funding decisions on a company’s financial structure and founder equity.
Navigating Investor Skepticism
Cybersecurity for SMBs isn’t always an easy sell to investors. Kyle faced significant skepticism about Huntress’s focus on this market.
“From the Angels to the series A all the way, believe it or not, into series B was the first time I got conviction for SMB. So that is five years in, people did not believe in my go to market,” Kyle remembers.
His advice for founders facing similar skepticism? Let your data do the talking.
“I had the people telling me the stories, people showing. I had the data that I was building from the bottom up on saying, look, this is how big the total addressable market is. That kept me going,” he shares.
Key Takeaways for Cybersecurity Founders
- Master the art of storytelling: Paint a compelling picture of your company’s potential, but ground it in reality.
- Don’t undersell your potential: While accuracy is important, don’t be afraid to present your full vision.
- Balance ambition with realism: Present the full potential of your idea, but also provide a more conservative estimate based on likely execution.
- Pay attention to early-round terms: The terms of your first major funding round can have long-lasting impacts on your cap table.
- Use data to combat skepticism: When investors doubt your market or approach, let your data make the case for you.
- Build a track record: Consistently delivering on your promises can make later funding rounds much smoother.
Fundraising in the cybersecurity space is as much an art as it is a science. By balancing compelling storytelling with solid data and realistic projections, founders can navigate the complex world of venture capital and secure the funding they need to bring their visions to life.
As Kyle’s journey with Huntress shows, the path may not always be straight, but with persistence, adaptability, and a clear vision, cybersecurity startups can achieve remarkable funding success.