How to Choose the Right Investors With So Much Changing, So Fast in Security No matter what stage your company is at when seeking an investor, the search requires a level of integrity that prioritizes your vision, centers value, and doesn't compromise company culture.
By Sanjay Beri Edited by Chelsea Brown
Opinions expressed by Entrepreneur contributors are their own.
When Netskope was founded in 2012, my co-founders and I made a bet that the cloud would change everything faster than most businesses anticipated. It was also clear that security would fall woefully behind if it wasn't re-imagined for a cloud-first era that prioritized the protection of every organization's two most important assets: its people and its data.
Fast forward to today, and we have been fortunate to grow Netskope into an acknowledged leader in what's now known as Security Service Edge (SSE), or the set of security services needed to enable every enterprise's successful journey to the cloud and an environment where team members work and access data from pretty much anywhere.
I am often asked how I selected the investors we chose to partner with, especially at a time (a decade ago) when at least eight out of 10 security leaders told us our vision for securing users and data in the cloud and the broader internet was a little crazy. Unquestionably, choosing the right investors, at the right times, has been critical for Netskope's growth and success.
But as a first-generation Canadian who grew up in Toronto and began working in IT at the age of 16 to pay for university, knowledge of the investment community didn't come naturally from my upbringing or the environment I grew up in. I was fortunate, earlier in my career, to work for companies that were small and scrappy, companies that were acquired and big companies with gigantic global workforces — all of which contributed to an understanding of what's required for growth of a company at different stages. Here are a few lessons I learned along the way that have served me well when choosing investors:
Nurture and maintain good relationships, always
It may seem obvious, but nurturing the right relationships involves trust and commitment, not just connections. To really establish this trust requires maintaining communication with investors, sometimes over years, before choosing one. Prior to arriving in Silicon Valley, I started at Microsoft in the early '90s and worked on the first version of Microsoft Office.
As my career progressed, I would be fortunate enough to meet and work for some of the top executives in tech and security before eventually setting out to build my own company. I first drew the idea for the platform that would become Netskope on a napkin while in a Starbucks. I sat down with Enrique Salem, who at that time was the CEO of Symantec, and later, John Thompson, now the chairman of Microsoft. As a result of our longstanding relationship, both men encouraged my vision and invested in the company.
Related: 5 Things to Keep in Mind While Selecting Your Investor
Align on values and cultural fit, then valuation — not the opposite
I have never picked the highest valuation in any round we've raised at Netskope. That's because I believe that aligning on value and culture comes first. As an entrepreneur, you have the right to pick investors and firms who believe in what you're doing and the way you want to do it. It's important to remember that just because capital is available, that doesn't mean you should take it. This is especially true in today's fundraising environment, where VC dollars are flowing more freely than ever before.
It's easy to feel like the investors have the power, and that you need to follow their playbook. But I think it is imperative to choose an entrepreneur-friendly investor. By that, I mean you want to choose investors who are both constructive and focused on company-building. Also, consider their domain expertise. For example, if the VC has historically invested in consumer mobile apps, cybersecurity for enterprises will likely be a leap for them. Having to spend the time educating a potential investor on the basics of your market can be counterproductive to the process and a sign they may not be the right partner.
Beyond this, being able to assess a potential investor's cultural fit and belief in your vision can help avoid tension and conflict down the line. Whatever you're building, you want investors who understand it and believe in it. You also want to establish an interpersonal fit. You shouldn't only see them every once in a while in the boardroom. You should be able to engage with them in settings beyond that. Ultimately, you should be able to click with them. I value collaborative, open, transparent investors who frankly are "good people" above all else — that, in and of itself, is a big filter.
Related: Choosing Your Investors Wisely
Raise for your company's value from the inside out
I believe culture is one of the key attributes of a high-growth company. At Netskope, we constantly feed an entrepreneurial spirit within the company by encouraging people to think and act creatively and strategically. Beyond our product vision aligning with a massively growing market category, our momentum is a testament to the talent of our teams and people. This culture allows us to innovate and address shifting market demands more nimbly than other security companies. Netskope's latest funding round was significantly oversubscribed due to strong investor conviction that we have the right mix of market opportunity, differentiated vision and outstanding execution by our team.
No matter what stage your company is at when seeking an investor, the search requires a level of integrity that prioritizes your vision, centers value, and doesn't compromise company culture. I have always said that if you could ask for one thing when you build a company, it should be that your destiny is controlled by your own execution — not outside market or industry factors, not your board or capital markets, not competitors. Through the success of my business, I've learned that choosing the right investors helps ensure that this stays true.
