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Friday, March 20, 2009
Thought Leaders
Maria Cirino: IT security sector ready for real growth
By Mass High Tech staff
MHT's Doug Banks: 10 Women to Watch in tech
MHT managing editor Rodney Brown on NECN: 22 tech companies give back to community
Flash Slideshow: Mass High Tech All-Stars Thought Leadership Roundtable
Maria A. Cirino
Managing director, .406 Ventures LLC
MHT All-Star: 2001
Previous position: Chairman and CEO Guardent (acquired by Verisign Inc. in 2003)
Where have your travels taken you since you were named an All-Star?
Guardent was a great experience. We built it up over the course of four years — and they weren’t the easiest four years, either: 2000 to 2004 — and got the company to profitability. I learned a ton about information security and spent several years since then helping to start another information security company called Veracode. That experience led me to what I’m doing now, which is to say, “Gee, if I’m going to run Veracode, that is all I’m going to do for the next five years. But if I start .406 (Ventures) we can do five Veracodes in the next five years.”
Where do you see the venture sector going?
It’s almost back to the future in terms of the VC industry, in that fund sizes are getting smaller not larger. They got larger for the last decade or so, and now there is going to be precipitous dropoff. So I think you will see some more specialization.
Where do you see growth in IT security?
What tends to happen in that space is that as soon as one company or a handful of companies start to gain some traction, all the other security companies that have identified themselves as something else turn themselves into that company. They overnight magically transform themselves. You have this herd mentality. It makes it difficult to compete or differentiate. The poor customers are the ones I feel most sorry for because they are just barraged with all these companies that claim to have these solutions, and very few of them have the solution as advertised.
Is the economic situation as bad as everyone says?
It’s interesting, we have some companies in our portfolio that have been around for a couple years that had record quarters in Q4 and are on track to have record quarters in Q1 of 2009. One of them sells exclusively to banks, one of them sells exclusively to hedge funds, and one of them sells biomass wood pellets to augment your home heating systems. One of them happens to be an antifraud platform. If you’re a bank and you know fraud is costing you $20 million a year, and you can buy a solution for $1 million or $2 million a year that is going to help save you $15 million to $18 million, you are going to write that check all day long, no matter how bad your bank is doing. By the way, if you’re not writing it you probably are putting your executive officers in jeopardy of going to jail because the compliance rules are telling you “you must attend to this.” So companies that will do well in this market are companies that save you money, make you money, and keep your executives out of jail.
How is this time different from 2001-2002?
2001-2002 was a horrendous time for technology companies. It was a technology meltdown. It wasn’t a meltdown of the finance system as we know it. What we have been through over the past four or five months is a banking crisis. It is now being followed by the aftermath effect of that, a depressed economy, and we’re going to live with that for the next couple of years.
What are the challenges to success for an entrepreneur?
A lousy exit environment for as far as the eye can see. Now, I’m also an optimist, so the flip side is that it costs you a lot less to build companies in an environment like this. It costs you less to hire people. There are many shared services that exist today that startups can tap into that didn’t exist in boom times. But you have to have more patience. You have to build your companies today as if you are going to have them forever or you probably will. If you are building to flip in this environment you are dead.
Do you see your portfolio companies and other companies having issues with credit?
In a world where you can be smart or lucky, I’ll take lucky every time. We were fundraising for a year and a half. We closed our fund last February. Therefore, a lot of our investments are pretty young. We haven’t invested a lot of the fund, so we are still sitting on a pile of cash.
What does the work force look like?
It’s not just easy to hire, but you are able to hire phenomenal talent at a much lower cost than two years ago, or certainly, God forbid, 1998 and 1999. We were ruining kids out of school by paying them $110,000 a year just because they had some level of programming expertise. I guarantee you that the majority of young people who came into that environment are walking around today with a chip on their shoulder the size of Montana because they have never been treated that way again, and they can’t figure out why.
Who do you look to as a leader today?
Well, I’m pretty excited about our new president, recognizing that the bar couldn’t been any higher for the guy. But a lot of us hold out some pretty high hopes that there are going to be some pretty significant changes. The optimist in me sees more good things coming out of a tough environment, recognizing that it’s a pretty tough slog while you are in the middle of it. The historian in me has seen a lot of good things coming out the bubbles.
Are entrepreneurs coming in with solutions to what is happening now?
Yes, many of them have honed their solution or honed their pitch to have a much more value centric, and a much more attuned to “Hey this isn’t just a really good thing looking for a market. But this is going to save a ton of money for this group of people.”
Editor’s note: Thought Leaders is a Q&A feature in which we catch up with a Mass High Tech All-Star or Woman to Watch Honoree to find out what they are working on now and their thoughts on today’s issues. For the complete interview, visit www.masshightech.com/print-edition-stories.html
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