ForeScout announced its full year results last week for the first time since its October IPO. They topped expectations across the board, meaning one thing – clearly the company is doing much right.
This caused me to reflect on what I, as a scale-up stage investor, have learnt about my craft from the best entrepreneurs and teams I’ve had the privilege to back.
Naturally I’m going to start with ForeScout. The aphorism that it takes ten years to become an overnight success is certainly true for the firm and along the way the company did a number of things brilliantly, many of which called for difficult decisions at the time.
Founders, we love you
The first is that ForeScout and its founders have stuck together since day one. This is a lot easier said than done, as the difference is enormous between a small start-up in Tel Aviv and a company getting on for 1,000 employees with operations in 10 countries and customers in 70 countries. It takes a lot of flex and adaptation to different and often challenging circumstances from both the company and the founders themselves. But when you get it right it adds another dimension of leadership and inspiration, both of which sprinkle over the company like gold dust.
Slow, slow, slow, slow, quick
Soon after I invested in ForeScout, the market they were then in, network access control, became frenzied. The traits were hype, bullish market research reports, excited VC investors and many new competitors. Competitors spent the money they’d raised in visible ways such as marketing, with big flashy booths at security trade shows and the like, and doubtless in less visible ways too. ForeScout didn’t do this. It used the money it had raised cautiously, on product, engineering and US sales. Everything else, marketing included, was kept on a shoestring. The team made absolutely sure that it was listening carefully to customers of the type we most wanted – Global 2000 enterprises – and could meet their needs well. Sales were hard work – ForeScout was evangelising what it did and although there was market acceptance of ForeScout’s product, there wasn’t much tangible pull from the market.
Competitors of course experienced the same conditions. And because they had overspent, they then ran out of cash and fell way. This phenomenon accelerated during the financial crisis period.
And then what happened? Market pull began to kick in. Smartphones and tablets had proliferated in the enterprise, IoT devices were beginning to appear and the BYOD (bring your own device) trend took off. These brought about new and severe network security needs which ForeScout was perfect to meet. And by this time there was hardly a competitor to be seen. That’s when we loosened the purse strings and started investing strongly across the board including into marketing, international expansion (I was closely involved in this in EMEA) and professional services. And as market pull accelerated over the ensuing years, the ForeScout team increased its investment pace further.
Find where you’re the best there is and then get better at it
As market pull came through, ForeScout realised that it was uniquely able to secure enterprises’ IoT estates. It could have gone into the SMB market, developed or acquired different security products, or diversified in any number of ways, all very interesting, but instead the team resisted these alluring temptations. The company stayed focused, relentlessly, on what it did best in the world and where there was a substantial market opportunity.
Champion your champions
In its earlier days when sales resources were limited, ForeScout had only a few Global 2000 companies among its customers. But boy did the ForeScout team love them. By going the extra 10 miles to meet their needs, ForeScout nurtured the key individuals within these customer organisations to become invaluable sources of product advice and advocates for the company – true ForeScout champions. Ultimately, these people became pivotal in spreading the word about ForeScout, enabling the company to attract both more customers of their ilk as well as the best executives in the security space to join its ranks.
Hire the fewest and the best
Using customer references to help bring in more customers is of course commonplace. But where ForeScout stood out and still does, it is with the benefits its champions brought, specifically the fact that they would act as trusted referrers of top industry talent. They would guide the best executives they knew in the industry to ForeScout’s door. This meant that ForeScout could concentrate its hiring efforts on such people. It’s how the company built up its stellar board, for example, and was able to bring on its outstanding CEO Mike DeCesare, who had previously run McAfee, in 2015.
There are many more things ForeScout got very right, it’s just that as I look back these are the five which were the most striking to me and from which I learnt the most.