Arkose Labs is a SAAS company that protects its customers against cyber criminals. Founded in 2016, the company has raised 130m USD and has grown to now protect some of the biggest tech companies such as Microsoft, Twitter, Roblox and many more.

Throughout the show, Kevin lets us in on the fascinating world of defending against cybercrime, the importance of learning sales and why working with the criminals is sometimes a good business strategy. If you enjoy the show feel free to share with family and friends and leave a 5 star review.

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Audio

Highlight Clip

Kevin: The irony is I think the best entrepreneurs or some of the better entrepreneurs in the world are actually the criminals that figure out yeah, such creative ways of making money.

It every year we see like new ways and we're just like, wow. That's, that's genius. Wrong, wrong application of the genius, but still, you kind of can see the spark of entrepreneurialism in all these people that are working day in and day out for the wrong reasons. Yeah. But, yeah, they, they're building very legitimate business enterprises from, committing all these kind of acts online.

I mean, ultimately they, they're not constrained by the same legal and moral issues that everyone else in business is constrained by. Right. So I mean, all of a sudden you've opened up your market to a whole range of other ways of doing business. So what you're saying makes complete sense, even if it's a little troubling.

Introduction

(Generic Introduction)

Dion: Welcome to the Dion Guagliardo Podcast, where I interview business people who run or have sold businesses worth a few million dollars all the way through to billions of dollars. While most of my time is spent to managing investment portfolios for people after they've had a successful exit. I've always been fascinated by the entire process and hearing the insights that successful entrepreneurs and business people have learned along their.

At Fortress Family Office, we're an investment portfolio manager and we manage portfolios for high net worth families. If you'd like to know more about not only the way we approach investment markets by our philosophy on life and business, feel free to subscribe to my weekly insights note. Go to www.fortressfamilyoffice.com and hit subscribe.

(Episode Introduction)

Dion: In this episode I interviewed Kevin Gosschalk, founder of Arkose Labs. Arkose Labs is a software as a service company that protects its customers against cyber criminals. Founded in 2016, Arkose has raised over 130 million US dollars and has grown to now protect some of the biggest tech companies in the world, Microsoft, Twitter, Roblox, and many more.

throughout the show, Kevin lets us in on the fascinating world of defending against cyber crime, the importance of learning sales and why working with the criminals is actually a good business strategy, sometimes fascinating show. I really enjoyed this one, one of my favorites. If you enjoyed the show, feel free to share with family and friends and leave a five star review.

Guest Background and Introduction

Dion: Kevin, thanks very much for joining us and welcome to the show.

Kevin: Great. Thanks for having me on.

Dion: Do you wanna just start by giving us a little bit of background as to what your business actually does in simple terms?

Kevin: So Arkose Labs that I started in Australia, we are a security solution and our job is to prevent bad people from making money.

So simply put, our goal is to make it cost more to attack our customers in the profit motives for our adversaries. And if you do that, they stop attacking people. So, that works quite well. Yep.

Dion: And this is cyber criminals, right? This is what we are talking

about here, correct?

Kevin: That's correct. On the internet.

So we, we protect all the large social media companies, all the big video game companies who work with the big banks, all of those accounts that we all have online. Our job was to protect those accounts from criminals trying to break into them or create accounts and make money from them that way.

Dion: Yeah.

and I'll, I will get into the sort of your, your business journey and, and your leadership style and all that sort of stuff. But I do wanna start with dealing with cybercrime. How difficult has that become? Over the years because surely it's advanced

A lot.

Kevin: It's a good business to be in, I would say protecting against, criminals.

Yeah. Because an increasing business every year, I would say. the irony is, you know, we're, we're, we're kind of talking, building businesses and things here.

(Clip)

Kevin: the irony is I think the best entrepreneurs or some of the better entrepreneurs in the world are actually the criminals that figure out yeah, these such creative ways of making money.

It kind of, to me, every year we see like new ways and we're just like, wow. That's, that's genius. Wrong, wrong application of the genius, but still, you kind of can see the spark of entrepreneurialism in all these people that are working day in and day out for the wrong reasons. Yeah. But, yeah, they, they're building very legitimate business enterprises from, committing all these kind of acts online.

Was Business Always the Path for Kevin Gosschalk?

Kevin: And from a business perspective, were you always going to run a business, build a business, or what was your, your sort of, when you were younger, what was your passion?

Yes. It's a good question. I'm, I'm an engineer by trade. I'm a big gamer, bit of a nerd, all that kind of stuff.

I actually studied game design at qt. I didn't really intend to build a company going into university in Australia. Like, it was kinda like I'd go work at a tech company somewhere that, that would be cool, I guess one day. my, my parents always had their own businesses and my dad always, always shared kind of like I, how he was running his company, you know, much smaller company that they're doing like.

Car sales, caravan rentals, caravan sales, these things, very successful entrepreneurs in their own right. Very different kind of scales like tech, tech entrepreneurship. Yeah. But I've always, I guess, had that in the family of people kind of being like, yeah, you should, you know, think about studying your own computer shops, so computers or something like that, you know?

So I've always kind of been supported, I guess, through that lens, but I didn't necessarily think I would do what I've done, that's for sure.

Dion: so business part of how your family operated, probably, to a degree, second nature in terms of the scale the business has got who, and some of that information is probably private, but it's a large organization now.

Right. And that's probably, like you said, surpassed your initial expectations, at least.

Kevin: Absolutely. I mean, you know, I think at the very beginning, like I, we weren't business people. We had no idea. We, we saw a tech problem, a user experience issue, and we're like, Hey, we can probably do something better than that.

But literally no understanding on the business world, no idea of how important this was. Didn't start the company through that lens at all. It was really through the lens of, Hey, we think we can build some better tech here, wouldn't it cool if, you know, we sold it for like 10 million or something one day.

Obviously the business is worth dramatically more than that now. and growing constantly. And, and, and the nice thing about where we are right now is we have such a clear line of sight to where we want to go with the company, like the next horizon, you know, continuing to build this business out further.

Compared to where we were kinda when we started the company like seven-ish years ago, whenever it was. it's pretty amazing. You kind of, when you start a company, you have no idea how to even get to like six months in and then like you're six months in, you're like, okay, I just still don't know how it gets a year in.

And then now when you kind of get to the latest stage, more stability, obviously product market fit, those kind of things behind you, it kind of gets easier. I actually prefer this phase than the early phase. I don't want to go start another company tomorrow. I'm very happy knowing where we're going and building this one.

This is great.

Dion: Yeah. Okay. That's interesting. there's the initial hard yards. Doesn't mean that rest of the yards aren't hard, but those initial hard yards are quite difficult. You're still figuring everything out,

Kevin: well, that's right. it's either it works or it doesn't work. Like the early phase of like, We worked for years, it felt like before we really had any semblance of what you deemed kind of product market fit. Like a repeatable like yeah. If I, if I pitch it this way, people are like, oh, that makes sense.

I have that problem too. we didn't really even get that in earnest until I moved to the us. I moved here about five years ago. First couple of years we were trying to do from Australia and that was really hard cuz we're, we're selling into a, an industry where the biggest companies are the ones that really feel this pain the most.

Cause they got the most users to protect and these kind of things. So it's actually easier to sell to them than it is to sell to companies, say, in Australia where, it's actually quite hard to sell as a startup into Australia. Nevermind being an Australian startup in Australia.

That's, that's very difficult.

How Arkose Labs Achieved Product Market Fit and How Kevin Gosschalk Knew

Dion: Yeah. Ok. And, and in terms of that move, when did you realize that you, you had product market fit that you talk about, so it obviously took a long time or longer time than you expected. Wh when, what was that sort of aha moment?

Kevin: I think we, we had a view on product market fit. I don't know if we truly had it when we thought we might have had it, but, you know, we had it shortly thereafter.

But, about 18 months into running the company, we were still trying to figure out the business model. Like our competition was giving away their product for free. It's a small company called Google that didn't help us, it's progressed better now. Now Google don't like us. Anytime they come up against us, they're like, okay, we lost that already.

They actually know us quite well. I'm sure someone from Google's listening. Hi folks. it's, it's quite interesting. You know, in the early years we kind of figured out our business model with the help of some of our really first customers. Like one of the, one of the really pioneering customers for why purpose is where we are.

Today's a company, a chat app. Called Kik was a Canadian company, in Waterloo. They've since now sold that, business to another company. But, we worked very closely with them to protect their user base, very large app at the time. So this was a, product that used to have basically half of like the US app usage for chat back then.

So it was really popular back in its heyday. I think it's still used quite a fair bit now. I'm not sure there's a lot of competition now. A very different market.

Dion: I remember when it came out, actually, my kids at the time, it was a, the new thing. The teens were doing it and they all sort of got into it and then left it now that it was Snap, Snapchat and TikTok since then.

So,

Kevin: and TikTok and I remember, it's all fragmented now cause you've got Instagram, you've got all these different ones. Right. and we're fortunate 'em to work with most of those as well now. So we've, we've kind of come full circle it feels like with, early, starting with social media and now we continue to work with a large social media platform, which is a lot of fun because they, they're very attacked.

There's a lot of value in going after large user bases. You can do all kinds of scams and schemes. So, yeah, very interesting companies to protect. But, yeah, we work with them on our kind of original construct. I remember flying, I remember the, the, the original contract with them. I think it was like a $20,000 a year contract.

And, there was a lot of work. We had kind of two business models at the time. One was like an ad supported revenue business and then there was like this direct revenue business and we're like, I dunno, can we, can we charge people for our product? Cause our competition was not, it was a free product we're competing with.

So we're trying to do like an ad supported thing as like a way of keeping it free. That was the Yep. Original kind of path we went down thinking that was the way we had to do it. turns out people are willing to pay for file superior products even if the competition is free and is by Google. and this company really helped us.

Interesting figure that out. My first international trip for the company was flying to Waterloo to meet their team and discuss, Hey, maybe we can do more. Maybe, maybe I could come home with a $60,000 contract. Wouldn't that be nice? $60,000 a year. We were like sub hundred K back then in revenue or something.

And I went, met the team. you know, they were very happy with everything we'd done for them. We've done a fantastic job. All their metrics just looked incredible. It was all data driven in terms like they put us in. Look, from here you can see all the abusers. Then you put in Arkose and like all the attacks basically be mitigated.

And it's been that way for several months. They're very happy with things. I ended up leaving there with a contract worth $120,000 and we had no idea that it was even possible to get, like we put together two tiers hoping they'd pick the middle tier, but they actually went with the higher tier.

they said, Hey, what else could you do for us? And it ended up growing almost three x that in, within like six months. So, could almost, over a quarter of a million. And that was all U s D. The Australian dollar, as you know, is, is atrocious, which is fantastic to be collecting u s D most of the time.

so that was a nice boon to us. And that, that kind of helps solidify. We had some other early customer wins, so electronic arts was actually another very early customer for us. Okay. So Kick and EA were like our first two real customers. Right. EAs contract started smallish as well and we kind of grew that.

They're still both customers vows today. And then we got a few other wins on the board. So companies like Dropbox and, and GitHub and, and number of others. These are all big brands obviously, but they also are the ones that kind of saw the value of solving this and were willing to work with the startup that had a pretty compelling product pitch.

This was a very technical product. One customers like this was not marketing and sales. This was me going and talking to a bunch of technology people as the engineer that was also writing the thing. When I got back and that was kind of like our early couple of wins, I would fly to the US monthly.

I did that for about a year and before I got to the point where we had both collected. Enough logos to make it make sense that like, Hey, actually I'm gonna spend more time in the us. Like this is where it's working. We kind of figured out an approach. But also I think at the time we, we were actually break even technically, so we only had like seven or eight employees at that time, but we, we were break even on those deals.

And then the intent was to go to the US and obviously do it a bit more seriously with you know, the venture capital game and all that fun stuff. Yeah.

How Venture Capital Enabled Arkose Labs to Scale to their Quarter Billion Valuation

Dion: At what point did the venture capital come into it? So obviously you're getting revenue in the early days and you started to work that out.

Obviously the VC side helped you scale, but where, what, where, where, how

Kevin: did that work for you guys? Yeah, so it's when I came to the US I moved here September, 2018, something like that. Mm-hmm. And we didn't know anyone here, so I was like in San F.

So I moved to San Francisco because like if you're gonna move anywhere in the US Yeah. And you're doing a tech thing, we already had some early customers here, like, okay, the logical place to go is to sf, like all these companies we could potentially work with that were in sf. So came to SF but didn't know anyone.

So I was like, okay, now what do we do? And it was just me. We still had the rest of the team. Were back in Australia, so we, we kept things very, very, very lean, obviously at the time. And we were invited by the I think it was Austrade, you know, this kind of landing pad over here in San Francisco, Francisco.

Oh. They, uh, recommended we join an accelerator which was Alchemist Accelerator, which is an enterprise SaaS focused accelerator. So if you have a business that sells to enterprise in your SaaS product, Their purpose built for you to kind of join them as an accelerator versus like Y Combinator, which is more like anything can kind of enter y combin.

Yeah. That's potentially a big business, but there's like a lot of overlap in terms of advisors between them and stuff like that. So you kinda get the same caliber. Mm-hmm. And this is before Covid, so back when, you know, people used to go to offices and stuff, it was fantastic. I dunno how accelerators work.

They're probably better now, but I'm guessing they're more remote now than they used to be, but Anyway, so we decided to join the accelerator initially we're a bit skeptical cuz we're like, eh, we're already at like three, 400,000 a r r, which, you know, that's pretty good. Like when you join an accelerator, these are people that have like nothing.

They don't even have ideas sometimes. Yeah. They're trying to like find a co-founder. So we were pretty late, I would say, to join an accelerator. Yeah. The owner of Alchemist. I remember talking to him. I was in a, I was in a conference in New York. I remember we won actually, GitHub at that conference.

I remember now. I, I was talking to him on, I don't know, one of the rooms, I guess. And I'm like, yeah, I don't think this makes a lot of sense. You're asking for a lot of equities. Like I, I'm not gonna disclose the terms, but high equity, I ask, considering we've already got revenue on these kind of things.

We had some angel funding from Australia. We can probably talk about that in a moment. But we had some angel funding from folks in Australia, but we hadn't done like a series A or any institutional capital yet. Yeah. And he said, look, treat us like an advisor and how much equity would be fair for an advisor and come to the program.

We wanna have some more later stage businesses also kind of join and be part of it. And like, okay, so an advisor I'd probably give, I don't know, whatever percentage you'd give to an advisor as an early stage. And he is like, all right, fine. We'll do that as an experiment. And he let us in, join the program.

The Biggest Benefit Kevin Gosschalk got from Alchemist Accelerator

Kevin: The biggest benefit I found from the program wasn't the classes, cuz again, they were focused on things that were just too early for us. Like it was very early. Yeah. Which was great for most of the attendees wasn't quite for the stage we were at. Yeah. It was actually access to the mentors and coaches.

So I was the only person kind of pitching this product as an engineer. Turned somewhat sales guy, I guess, originally had no idea how to pitch things, had no idea how, how to put compelling contracts. All this stuff was way over my head at time. And, I got access to a sales coach. That's what I really wanted.

I wanted someone to help me figure out the sales process. Like how do you sell something repeatedly? How do I pitch to people? How do I, you know, all that kind of stuff. And I, and I got a, Dan Kaplan, fantastic advisor. Very, very awesome at like being. Overly fair with his time. I was supposed to meet with him like once every three weeks or something, and he would meet with me daily.

Mm-hmm. He would come in and we'd go through the deck and we'd talk about it. I'd record sales calls. He would listen to them with me. We'd think about different ways we could position stuff. So he really kind of helped me figure out the machine really in pretty quick timeframe. Like we were really working hard probably about eight to 12 weeks, and at the end of that process I was like, I'm ready to hire a sales guy.

I kind of, I kind of get this now, like I've got kind of a potential process here. and yeah. Then of obviously the journey of your first sales team and what I've learned and done well and not done well and all kinds of, the whole journey of that. But I think founder led sales, you kind of are doing until you're like five.

I mean, even now, I, I spend a lot of time helping the the sales team, but it's very much a supporting role now. Used to be like I was the guy for the first five, maybe 10 million. I pretty much let that hands on. And I think, all founders of early stage companies, tech or otherwise will learn that that's actually the most important job.

Why All Founders Must Learn Sales

Kevin: You can hire people to build technology. You can't hire people so easily to evangelize why that thing is important and how it works to very technical people. I think that's a bit of a, a secret of founders that are technical is you can do that better than anybody.

Dion: Yeah. And, and no one understands it like the founder, right?

Founders are usually of varying degrees of confidence or, ability when it comes to the sales part, but no one knows it like the founder. And so once you can harness that side of things and work out, like you say, work out your process and all that type of thing

Kevin: you're away.

Yeah. I think the other benefit of a tech founder leading sales or being very, like early on in the sale tech, people hate selling stuff by the way. So like you. You naturally have a, a version against doing it. I, I don't consider it selling. I love evangelizing it. I love talking about the problems. I know our product works, so I'm very passionate about that.

Like they're, the reasons why people have had confidence to buy from us is cuz they can see that we know what we're talking about. You know, we've had those early customer wins. The, the really first early customers. They're the, they were the hardest ones obviously to convince. They Kik actually came to us.

They found us they reached out to us and said, Hey, we have this problem. Ironically was Google's product. They were using it. So it's not really working. It's not stopping anything can. So we appreciate you Google. You've helped us start our company as well as all good companies do. I guess. we're one of the 10 that came from, and, Really from there it was just evangelizing the great work that our team had been doing and, and kind of how the technology worked and how, how thoughtful we were to solving very specific pain points of this kind of technology.

I think people really appreciated how deep in the weeds, I remember going I think it was electronic arts invited us up to, integrate our technology into some of their flagship properties and, big security teams. So I I, I flew up to Vancouver by myself cuz I was like, I, I can't really take it on with me cuz I know they're not gonna really know how to like present to these folks.

(Clip)

Kevin: And I've had a bit of practice at this point I remember they had about 30 people or something on their side. It was this huge conference room they inviting me into. Wow. And they're like, so you're gonna come present this this product to us? It was like, where's your team? I was like, oh, it's just me.

Like, okay. All right. So they had all these people come in to obviously pick it apart, figure out is this gonna be any good? Is it gonna work or not? And, they were awesome. So tech, I love, I love working with and partnering with technologists because they really get it. Like when they, they come in very skeptical, but they become your best evangelist once you convince them.

Like they truly appreciate and understand it. So, I, I just love that the technology sell. Anytime I meet someone that's a technologist in a position of like making impactful decisions at these big companies, a lot of our customers are the big tech companies cuz they're very tech driven. Like, it's about the data, it's about the results.

It's about how does the tech work. It's a fundamentally make sense. It's not, you know smoke and mirrors. We actually have a warranty on our product. We're the only company in the security space in our field that has a warranty certifying that it will do its job, otherwise cover losses. No one else has that in our space.

Yeah, I read that. That was interesting. Yeah, I came up with that idea walking around blackouts seven, eight years ago. Everyone, these vendors, all the vendors booths say the same thing. You've got no way of knowing. Like it's just so much BS and then every year half of those vendors ceased existing. So like that's how noisy and bad it is in security space.

So the original object project behind the warranty, which we only finally launched last year and we launched a second warranty this year, we got more coming on our product, was to stand up from all the people that are saying, yeah, our product's just as good as our case. Like, well, okay, well we're backed by insurance carriers.

Well what about you? You've got nothing. Oh, okay. Most of security is, is best efforts. Like you don't get a contract certifying it will actually stop threats. Yeah. So yeah. Okay.

Dion: That's interesting isn't it? But is I'll just go back to that sales side of things. The you're quite right in terms of sales really is just solving somebody's problem.

And if you can look at it that way, it becomes a, a far easier. Process in a far easier conversation to have because you, all you have to do is find people who have that problem and then you can explain how it's solved. It's, they'll, they'll buy after that. That's, that's, you know, oversimplifying,

Kevin: but it's on paper.

It's so easy. Yeah. It's so easy. I think engineers certainly can be trained. Like I've obviously learned over the years. I'm, I'm pretty good at presenting compelling reasons and asking the right questions. It, I, it, and initially it was very much, here's my product, here's why it's great.

That was kind of my pitch. I was like, I kind of work with certain people, but it didn't work with a lot of people. And the, the right kind of pitch is like, What's your problem? Like, how are they, how are they getting in? What are you currently using? What would success look like? Some of these things. that was kind of the second phase, like when I started getting sales coaching.

You kind of figure out better ways of phrasing questions and, and learning and listening more than

Dion: speaking. I was gonna say, most of it is listening, right?

Kevin: Yeah. That's what I've been told. I still like talking about how great our customers are and what we've done. That's, that's worked pretty well for us.

Even now. It still works pretty well, but yeah, listening's, listening's an important part of it, I would say. I have a much bigger team now. They can go do the listening first and then they can bring me in when it's time to do the talking.

fair enough. That sounds like a good pieces you enjoy the most, I guess, as you get further along.

How Kevin Gosschalk has Evolved as a Leader and how he's Achieved Success

Dion: Yep. Sounds like it's working. As a leader, how have you, how have you evolved over the, the, the journey so far and it was only a short journey, I guess really it's, you was talking about service 7, 7, 8 years from when you started to now.

there's obviously a steep learning curve as you progress. how have you evolved as a leader?

Kevin: Yeah, that's a, that's a earlier question. I think both myself, the company, our customers, the team, we've all evolved along the same way. I think the, the reason why I've been successful is actually because I, I do take guidance fairly well, I would say from people that should be a lot better at this than I am when it comes to building a company and these kind of things.

But I've been very fortunate, you know, one of our very early investors Ko Richard Moore, one of our first board members actually, mm-hmm. You know, really being pretty active in coaching and guiding and giving just mentorship and kind of being willing to spend the time with me. Talking about basically anything.

I even remember like some of our, one of our first lawyers, I remember talking to him like every other couple of weeks and just asking him questions about like, how do you structure things? Like how do you do this? Like we got these deals, how do we sign it? Like what contracts, like how do we put that stuff together?

It was a lot of asking questions and learning, like just the stuff I've learned is just comple, it feels incredibly arcane but also incredibly critical to building a company. But like, I don't see how you learn this stuff. Like an individual person starting a company with no prior knowledge in, in running a company.

There's just no way you know how to do that. Like you're never gonna, and you can't really learn as you go per se. Like you gotta be taught as you go. So like you can learn from people but you can't learn by doing it yourself. Like it's really important to find people that'll coach you along the way.

Otherwise I think you'd fail very quickly. I think that's probably one of the, yeah, bigger reasons people do fail is cause they don't have people helping guide them to success.

Does the Serious Aspect of Tackling CyberCrime Impact the Companies Culture

Dion: Yeah, I mean, that makes perfect sense. You look at where you started and the culture of the business that you've got, does the type of industry you're in change the culture from what might be a culture of a business in a, you know, in a standard tech startup company versus something that, you know, seems a little, little more serious?

I mean, I, I'm, I'm stereotyping here and I don't necessarily know, so correct me if I'm wrong, but, you know, doing what you do is a serious business. Right? So does that change the, the culture of the business?

Kevin: I hope we're not too serious. Maybe we are serious. I mean, we, we, we definitely, we definitely have like financial crime kind of customers and we have like customers where it would lead to.

Bad things and, you know, we're protecting use cases where child trafficking is ultimately funded by the money that were stopping being collected. So yes, there is absolutely a serious component to the work. We also protect the largest video game companies in the world. We're venture backed by Sony PlayStation users, so we also get to work with like video game companies and, and tech companies.

So I think we really kind of cover the spectrum because we just have such a broad customer base and we, we have the people that like gaming work with our gaming customers, and they're like, this is the best thing in the world. Like, we're protecting all the big game titles so we can see the traffic spikes when the new game launches, and we're kind of part of that experience, and that's really cool.

But I think from a, from a culture standpoint, yeah, I'm not a serious kind of person. Like I, I, it's not me. So like, that can't be the company's culture if you're not having fun. And it's hard. Like it's, it's, it's, it's a lot of work and the attitude for me is. Very much we'll figure out a way regardless kind of thing.

And we always, we always do. Like I've seen us figure out the way so many times. I know we'll keep figuring out the way, even if we've got new people in there. Like that's a big ask cavity. Sure. You can do. I was like, well, yeah, you can't do it without attitude. You can do it with the right attitude though.

You can figure it out. Yeah. So I think culturally it's like any other tech company I would say. I don't think there's anything about our our use case that that makes us Yeah. Hire more serious people. That doesn't change. We, we expect ex very high expectations. You know, we work with big banks, we have compliance through the wazoo.

All those kind of stuff we gotta deal with. But that doesn't mean work has to be measurable either, right? Yeah.

Dion: Do you think you set the tone for that ear in the early days and, and continue to do that? Does that come from the founder?

Kevin: Yeah, I think like we have, a few different regions.

So we have obviously our team back in Brisbane, Queensland, and Australia where I started the company. We have obviously our team here in the Bay Area. We, our third largest, office is actually in Costa Rica. And they have a fantastic culture and I wasn't really even part of building that culture, to be honest.

Cause that's a different location. They're just really cool people. Our customers love working with 'em. I think they're great. I love visiting them. We have obviously people, you know, globally, remotely that, as we all know, with, Covid being what it is. But, you know, our kind of business, it's a 24 7 for the sun kind of business.

(Culture clip)

Kevin: Like we don't Right. You know, turn it off on the weekend. So we have employees that work weekend shifts, like they're actual dedicated employees for weekend coverage and stuff like that. So we have true 24 7 follow the sun. We have people in Barcelona, we have people, in Argentina. We have, you know, team in India, all that kind of stuff.

Right. So. Okay. I think. A bit of the tone is absolutely set. Like as we, we try not to be too serious. I think a large chunk of the tone, it really depends on the employees. They really set their own culture in many ways. Like we, we try and enable and steer by removing people that we feel are detractive to.

Yep. Genuinely nice people. I, I think if you have people that are painful to work with, you lose the nice people that you do wanna work with. Yeah. Because they don't wanna stick around and work with assholes and stuff like that, which rightfully Yeah. A hundred percent. So I think you set culture by fixing culture in some ways.

Maybe not fixing mm-hmm. Course correcting or whatever it may be. Yeah. But I think ultimately the employees are such a critical part of building the culture. Like one person cannot set culture for a hundred, a hundred plus people. Like I, I think that they can help guide it, but I think it's really hard for one individual to do it.

Kevin Gosschalk's Biggest Strength as a Leader and how it Helps Him Succeed

Dion: Yeah. In terms of your biggest strength as a leader, what would you, what would you say is, has been your biggest strength?

Kevin: That's a question I should ask my team one day. I think for me it's, I am very optimistic, I would say. Mm-hmm. And I, relatively hard worker. I would say persistence, I think is my number one strength almost over all else, perhaps is find a way, persist through.

It can be done, obviously help the team figure it out or, or do it or whatever it may be. I think persistence is the reason why, I've been successful as a leader. Like, there's been a lot of hard things to figure out how to get to where we are today, and there will continue to be a lot of hard things, but I, I don't have a sense of like, oh, it's too hard.

We get, we're gonna give up. It's just too difficult. I can't figure out a way. Like, you can always find a way. and if you don't know, you can find people that will help you figure it out. So I think persistence is, probably my strength above all else. Okay.

Kevin Gosschalk's Biggest Weakness and how he Overcomes It

Dion: And what about in terms of weakness? What, what was something that you sort of, your, one of your biggest weaknesses that you sort of, and how'd you overcome it?

Kevin: Yeah, it's, it's an interesting question. You know, I think, it's sometimes hard to reflect on why, what, why, why have you been successful despite this kind of thing, right? Yeah. So I think, you know, I'm probably being ironically as an Australian, which I, I feel is very ironic is very confident, maybe too confident sometimes which can potentially be off putting to certain people.

It's like, well, you know, he is so sure of himself kind of thing, right? So it's kinda like that, the ego seeming kind of thing, when in reality I just, I just love what I, I love what we do. We do such cool stuff and we work with such cool companies and I'm so proud of what we built that I think sometimes that can kind of be offputting to some people, but I actually think that's a strength in most scenarios, cuz most people see that as like, okay, we have confidence, this guy can get stuff done, like, we believe in this, you know?

Yeah. But I, I've seen that definitely. At times put people off. Like, I think, yeah, certain non-technical people or maybe more business orientated people will kind of see that more threatening than helpful perhaps in certain lights. Yeah. So it's, it's something I've gotten feedback around in the past from like, okay, I need to figure out how to turn that down, but what I really do is just have other people talk to them instead of me.

And that, that's worked fantastically as well.

So, no,

Dion: you've got that. No, that makes sense. I mean, you've gotta be who you are. Right. And that's right. That, like you say, I think that's probably more a strength than a weakness, but I, I completely understand how people can take it the wrong way and it can Yeah.

Play against you. But that doesn't necessarily mean you should change because it is also strength, right?

Kevin: Yeah. It's like, it's the reverse of the tall poppy thing. I think I've somehow been very fortunate to not be laden with that curse from Australia, which is I think, a very unfortunate situation.

Cause I think a lot of people in Australia do fantastic things, but then Aussies are just too, I don't know, negative sometimes, to be honest. It's very strange now that I've spent so much time internationally. There are a lot of pros for Aussies, but there's definitely certain negative things that you're like, you know, that's not great.

It's just not a great way of thinking or acting, so it's kind of a shame. Yeah. Putting people down legitimately. Putting people down. That sucks. You know?

Dion: Australians typically want you to do okay, but not too well. That's right, that's right. Not so, not so well that You made me feel bad. It's, that's right.

Do do. Okay. We, we don't wish you harm, but we don't wish you do, do too. Well,

Whereas in America it's very different. Right. It's like the bigger, the better.

Kevin: Everything is, you're the best in the world no matter what.

No one can beat you. Yeah. It's very different, but they don't have as good a. Humor, which is very upsetting. Sometimes you have to be very guarded with sarcasm. In America, they're not, they're not Some of of them get it, but not all of them. It's in Australia. It's like an art form we refined, insulting through the lens of not really trying to insult, but I don't know.

Yeah, that's probably not good either. That's probably a negative quality of Australians, I guess.

I enjoy it. Yeah. If you understand it, I think you enjoy it, but otherwise people just think we're rude and mean probably so

Dion: Yeah. It just hits, hits, hits the wrong spot sometimes, doesn't it?

The Secret Benefit of being an Aussie in the US

Kevin: The biggest benefit before we move on, I think of any Aussie found I working internationally is everyone loves that accent. We get like free, free blank check on almost everything because of the accent. It is amazing how much goodwill you get from being a foreigner in America.

Like people legitimately like accents in America. I don't think the same is true in like Australia. Like I don't think Australia's like the American accent and stuff like that. So it's, I dunno, that's a weird one.

Dion: No, it probably doesn't, probably doesn't work both ways I don't think.

video1668137910: No,

Kevin: no. And it's, it's easier honestly to sell to Americans as an Aussie than it is to go talk to Aussies cuz we're all, we all sound the same.

We also have the same funny accent, whereas in, in America's like, oh this guy's got a unique and it makes you stand out more too, so. Yeah. Yeah. Interesting. Yeah. Yep. And obviously, you know, we're a security company so I always like to open conversations with, I'm a born convict, so who better to help protect against security threats.

Yeah.

Why Hiring Criminals is a Smart Strategy in the Cybersecurity Industry

Dion: Right now. Yeah. A hundred percent. Now speaking of convicts, I did read that you've actually employed some people in the past, tell me if I'm wrong here. People who have been on the other side of the That's right. The equation

Kevin: here. Criminals. Yeah. Yeah, this is generally a useful thing to do if you want to figure out how the other side plays the game cuz they, they don't play fair and it's, it's kind of good to know this sort of stuff.

So we had a chief criminal officer, so we had a, kind of a consultant that came in. We worked with 'em for about a year and taught us like everything about how criminals make money, how they launder cash, like how does the mechanics of crime work, right? So he, he went, he went to jail and all kinds of stuff.

So he was very legit. very, very good at what he did. Kind of very non legit, legit person. Very legit criminal. But yeah, it's kind of fascinating. He had like a taco stand didn't exist, but he had it on the books to help, you know, launder money through it and all these kind of different things that they had to do to pay, because if you don't pay taxes, you can't spend the money.

Like you can't buy a car with money that was taxed that you didn't earn. Cuz guess what? Yeah, that's pretty obvious. So, you know, you kind of learn how does that work? I think the other thing is, It's not glamorous being a criminal. I think some people think like, yeah, it's pretty glamorous life. Like most of the people that are doing that stuff didn't grow up in good families and, you know, they didn't get taught the right things.

Like, it's, kinda hard to be honest, when you talk about the serious part, I, I definitely consider that sort of stuff more serious is, The people we go up against, whilst really good at building these companies, the fact that they're kind of doing that instead of having a job at a tech company where they could apply themselves and move the world forward in a positive way, there's typically, yeah.

Reasons for that. I would say that they haven't been diverted off the path of prime at some point in their life, which, you know, we, we contribute in a small way. We stop people making money, doing crime. Hopefully they go do something that's non-criminal. That's the goal. We've also helped convert some people from doing more black hat related attacking stuff to actually working with the companies that we protect to actually protect those companies.

Okay. And kinda get more into like a security career path. So we've, we've, we've been all, all in between. It is the, the benefit of being a vendor in this space is we're kind of in the middle of the criminal and the brand we're protecting, we're not, our interest is just stopping our customers from being attacked.

We don't really mind exactly how we achieve that. We're okay with working with the adversary if it means they stop attacking our customers. Obviously our customers, that's harder generally to do for them, for legal reasons and all this kind of stuff. So we've, we've kind of been a arm's length, middle man I'd say in some of these relationships.

So like that's stuff we don't really talk about very much, but like that is incredibly fascinating.

Dion: Yeah, that's really interesting. Like, and it's not something that you, from my point of view would ever think of, but that, that's a really

Kevin: fascinating insight and it just seemed like a thing you do. Like when we were talking to these people, we just kind of naturally figured, like, I've never spoken to people like this before in my life.

And you know, we now I've done it quite a lot. And it wasn't like there was no one that could give you guidance on how to do that. We just kind of figured it out as we went along. Yeah, I think as long as everyone's playing fair. these people we typically go up against are very smart and they have great ideas and they, they're very good engineers typically.

So, you know, there's, you know, we had one that we would, we would create we used a product, bug crowd at the time, which is Aussie company actually as well. Casey, yeah, yeah. Yep. So we would've a private bounty where we would invite this individual in just to work with them and, we would give 'em like spec work.

Like, here's a project. Like if, if we had this new feature, how would you attack it? Like how would you make money from attacking that? Like what, what, how would you monetize that? Who would you sell that to? So we do like spec work and we pay at bounties for these kind of things. We, we paid out quite a lot of money cuz it was useful in getting them to stop attacking our customer cuz they now became kind of a consultant, which was good for us and our customer, but it also let us improve our product because we were learning things that we didn't really know.

We were trying to reverse engineer how they were doing this stuff versus just asking them, it's like, hey, Could you write a code X point on this? Like how would you go about doing it? So

Dion: yeah, it's almost like a role play, isn't it, in terms of like getting the, before you actually go to the Yeah. You'd rather them do what they're gonna do offline or off, off the real life stuff than attacking the actual customer.

Right. So it

Kevin: makes complete sense. That's right. Yeah, that's right. And, you know, attacks, they build from one customer they might use against other customers of ours, and we don't want it getting leaked and all those kind of things. So it's generally better for us and other customers to kind of, you know, squash that sort of stuff.

Right.

Individual vs Organised Crime in the Cyberspace

Dion: Yeah. And, and in terms of the types of people that you are, the way you are describing some of the, the engineers and the people there, it sounds sort of almost like it's individual people doing things. My thinking was that it was probably, there was a lot more organized crime behind it. What's the, what's the actual mix in real life in terms of that sort of thing?

Is there a a big organized element to it, or is it sort of individual? Well, how does it work?

Kevin: Yeah, it's, it's mixed. I'd say in the early days it was more individuals. Uh, nowadays it's far more organized because of the complexity of attacking a product. Like Arkose is just too much now for an individual to do.

So we really now more seeing organized crime, like if anyone wants to attack our customers in any way where they're actually legitimately profiting versus it being like a thing they're just enjoying doing requires a lot of resources and a lot of ongoing work. You know, we're obviously every day protecting our customers.

We have 24 17 monitoring always taking action. Anytime a threat occurs or attack occurs, we jump on it straight away. We're really good at that. Like our goal is to stop attacks before they make any money. The sooner we stop them, the better within minutes or seconds, right? And ideally automatically from the system.

So if it's not automated, we have people doing it doesn't really matter as long as we stop them as sap. Cuz the quicker you stop them, the less profit they make, the less willing they are to keep attacking you. So the goal is stop them as soon as possible. So that's really hard for like an amateur kind of program, or you can't really, like you could have attacked us many years ago, 5, 6, 7 years ago.

Not today. That doesn't work anymore. Okay. So now the only people left attacking us, in honest us are people that are in it to make big money. And they have a lot of resources. So something we've seen in the last 16 months is something we call cyber crimes as a service. So you can now purchase from third party developers, which build the tools that you can use to attack companies like ours or the customers of ours.

They're actually entire engineering teams that you can hire. And they're making quite a lot of money. Like these are, they're not just attacking Arkose, they're attacking a number of companies in this space. But they're, you know, these businesses are making millions of dollars a year basically selling tools to attack, They're not attacking us purposefully.

They're attacking all our, the kind of brands we work with. Right. We're obviously in between, so they have to deal with us as part of it,

Dion: that's the, and they're the opposite of you guys basically, right? Is that what you're sort of

Kevin: in some ways basic? Yeah, pretty much. Yeah. Yeah. That's pretty much it.

They're kinda like the evil twin of our, of our industry. I would say. It's, it's it and it's SaaS. Like these are products you buy a monthly subscription fee. It's crazy, right? They have warranty, they have SLAs on support, like, they're like legit non legit businesses and none of them are based in the us They're all based in like Vietnam and China and these harder to prosecute locations, I would say.

Yeah. But yeah, so you kind of have to fight them from a product cuz you can't really fight them so easily, legally.

Has the Geopolitical Situation Impacted the Volume of Attacks

Dion: Has the geopolitical situation in the last sort of couple of years changed the way your industry works and how has, you know, I'm talking about obviously Russia, Ukraine issue and Russia.

Becoming presumably more active? I don't know, maybe I'm just reading more about it. Also, the China US situation, has that changed your industry in a big way?

Kevin: I would say there's been changes. I think just in general attacks, they're just so lucrative that it's always kind of happening. Right. State nation states, I'm sure a lot of it does occur.

We, we protect, like I said, the large consumer businesses, large video game companies. Right. These aren't necessarily getting attacked by nation states. They're not governments. Yeah. Okay. I, I'm sure those kind of attacks do occur against potentially some of the banks and stuff we work with, but typically they're trying to penetrate the network to get access to like employee data.

We're protecting the consumers. Like, yeah. China's not interested in getting into, well, they might be, I don't know. I don't work in China, but We are more primarily dealing with financial motivated criminals. They're in it to make money. Right. Okay. And if you stop them making money, they, they do give up where state actors are not really motivated by money.

They're motivated by other reasons. Of course. Yeah. Knowledge or control. Yeah, we've typically seen adversaries give up, which would lead us to think that they're not state based. We see very well funded adversaries, but they typically do give up if the efforts don't return anything.

Dion: Yeah. Okay. No, that, that makes sense.

I understand that. I, I never really thought about in that much detail before, but you've really got different types of cyber criminals in different sort of

Kevin: businesses. Right? Yeah. I think actually kind of interestingly enough, it's always kind of an awkward thing to say cuz it's, it is kind of what it is.

But there was a lot of crime occurring from Ukraine prior to the war. Not so much nowadays, but Right. Yeah. Okay. It was, it was a country of lower socioeconomic. So it was inclined to have more people go down this route because you can make a lot of money doing this stuff compared to like a living wage in these kind of regions.

Russia's always been kind of a more than happy to host illegitimately used business software, I would say. Like if you wanna buy a data center or bad ISPs or whatever, pretty easy to get one from Russia and they're not gotta prosecute. So, you know, you still see that sort of stuff that hasn't really changed too much, I would say.

The infrastructure hasn't shifted too much. We're still seeing similar kind of stuff from a few years back. Yeah, that makes sense.

The Best Advice Kevin Gosschalk Received and how that Helped Him Grow Arkose Labs

Dion: In terms of the advice you've received as a founder over the year, over the years, what, what's the best sort of advice that you can remember somebody giving you in the early days or, or could be latter days?

Kevin: So this is the thing with advice is I don't think there's been like one pivotal piece of advice. I feel like there's pivotal pieces of advice. Continuously, but I, I don't think there's been one thing where like, okay, that's why we're where we are today. I think a lot of it's been, it, it's a journey.

It's a very large journey. As you said, it's only been seven, eight years. It's nothing. Trust me, it feels a lot longer than that when you're doing it every week. It feels like a year, nevermind, seven years of that. Right. So it's, it's definitely a journey or relatives. It is relative. That's right.

But just being incredibly fortuitous to have advisors from very early stages. If anything, I think the biggest gap was not getting more advisors earlier. If I had gotten more advisors earlier than I did, I think potentially we could have accelerated things. Didn't really get a sales advisor until like almost two and a half years in, or two years in, or whatever it was.

If I had one of those much earlier, like actually someone that would help me figure out how to take it to market. But not just anyone that would listen to me and answer that question. Someone that knew how to do that, right? Like that's the trip. Mm-hmm. You gotta find domain advisors. I think, it's great to have like the general kind of CEO coach or business kind of coach, but like, if you really wanna solve core, core problems, you really gotta try and find someone.

this is the coolest thing about the Bay Area, is you can find an advisor that any possible little thing you want. In Australia it's a lot harder cause a lot, a lot fewer companies have been successful there. And yeah, the people that have been are actually typically quite hard to get in touch with.

Whereas in the Bay Area, everyone is willing to give their time to entrepreneurs. Like you can ask, like, I remember asking some of our early customers, like, like people I'd never met at these companies. Like one of our early advisors is a gentle called Matt Tomlinson, he's the Chief Technology Officer of electronic arts.

I'd never even met the guy. He said, the division over here, I'm looking for advisors. Would you be interested in kind of mentoring me? And he is like, Sure, tell me more. And like, he's been an advisor now for like, ages, years, six years, right? Yeah. Wow. Yeah. You'd be surprised. You can ask pretty much anyone for advice.

As long as you're genuine and you, and you listen to that advice, you're probably gonna get something from them. And they're probably willing to give you more. Keep asking if you follow it. If you don't follow it, then they'll be like, why amt I wasting my time, kind thing. Yeah. Yeah.

Dion: Fair enough. But no, that, that's, that's really interesting.

How Much Arkose Labs has to Date

Dion: And in terms of the company you were talking about, the different growth you've had, you've raised money along the way. I'm not sure if I read something along the lines of somewhere around 70 million and I read it along 180 million. I'm not sure which of those are, are Right.

Kevin: So it's question where the data source has come from, but we, we've raised, I think it was like 130 million US in total. our last round was 70 million. That was our series C we did with SoftBank. So that was, that was our last round of 2021.

Yeah.

Dion: And, and what was your process as you went through that in terms of determining not just the amount, but also the types of people or types of groups you, you bring into the, the company? Because obviously that's a critical part of

Kevin: what you do. Yeah, and I've been quite deliberate with that through the years as well.

It's not just we need to raise money, anyone willing to give us money? Great. You're now an investor. Yeah. It's, it's being more deliberate I'd say in the early seed stage. It's more like that cuz you're trying to just find high net worth. Yep. Dip in 50 K here and there, whoever's gonna help 10 K, 20 k, whatever.

You know. especially in Australia where historically it's been harder to raise capital. I think it's a lot more mature now Yeah. Than it was back then. But you know, when I was starting this company, there wasn't really much of a scene for venture capital to be honest. Yeah. Our first institutional investor, u s vp.

So the reason why opted to go with them and they've been a fantastic partner and obviously still today a fantastic partner is they had experience in our space. There was another company called Threat Metrics, which actually started in Australia as well. It's a fraud solution that most people aren't even aware of, was an Australian final company.

They had just sold that business and for almost a billion, like a billion a e d, so like 800 something U s D or whatever to big provider and over here. And, it was very similar. They started over there. They flipped it to the us. They kind of had the two different locations. They sold in kind of a similar market, kind of similar buyers.

Like we don't compete with 'em, but we sit alongside them with a lot of our customers. Mm-hmm. We know the people that would use that product. So there, there was a good natural synergy with just that investor understanding us very well. So that was very important. They also helped me get. Reid Taussig, the CEO o of that company to join our board as well, and he's been fantastic.

Well, he's been a very close, he's been a board member for almost five years and he has been another fantastic advisor. So, all of those things kind of add up. Our series B investor was actually Microsoft, so Microsoft was already a customer of ours actually before they invested. Well, one of the few portfolio companies that they had that was already being used by Microsoft.

Typically they invest in companies and are like, Hey, we'll try and get you into Microsoft. We were in kind of a rare situation where we'd already started working with them and we knew there was a good strategic fit. Obviously, Microsoft owns a lot of properties. That our targets adversaries, you know, think of like, you know, social media platforms, tech companies, yeah.

Azure, all these different kind of things, like these are all very lucrative things for attackers and adversaries. So we aligned very early on with Microsoft, both as a customer, but then also joining as a strategic investor that led our B round. And then the head of Microsoft Ventures moved to SoftBank shortly thereafter, and then when he was at SoftBank, invested in US again.

So he led the second round, the C round. And that was really thanks to the work that he'd seen us do at Microsoft. So we, got to keep working with him through that journey.

Dion: Well that just shows you how important some of those personal relationships and business relationships that you make along the way really are right.

When you see something as clear as that that's pretty impressive.

Kevin: we've got a good track record. So I think, I think they're all, I think they're all pretty happy with, the work we've done. I know our Aussie seed investors are very, very happy with the work we've done. They've gotten on paper, very good returns on paper.

Some of them have sold some of the equity through these rounds. We've let some of the early investors, And that has been very good for them. So I'm very, very proud. The people that helped us kind of get to where we are are getting something out of it. That's awesome. Giving back to the Australian, I think we're gonna make a lot of very wealthy people in Australia when this is all said and done, so that's great.

Yeah. Yeah. Very

Dion: good. Now I normally finish off by going through the final four quick rapid fire questions, but you've told me you're not really into books or or looking at other business people you'd prefer to just get on with the job. So I'm gonna skip those questions,

Kevin: Kevin. I think, nothing against that, but I think for where we are as a business, Very hands on running the company.

Yeah. Today and, and every day there's, there's plenty of work to be done, I'd say around, around here. And, yeah, don't, don't focus too much on what other people are doing. Really focus on what are we doing for our customers and what are the adversaries doing to teach us what we should be doing better.

Like, we have a very interesting product that's kind of led by the people we're brought in to stop in many ways. So it's kind of fascinating kind of product to build, but we are always learning from them, that's for sure.

Dion: Yeah. No, I think that's obviously working, so you just keep doing what's working.

What's Next for Arkose Labs and 5 Years Ahead

Dion: Well, my final question would be, what's next for the business? Where's the next five and 10 years go for

Kevin: the company? so we operate in a number of segments but we're still pretty early stage in the sense that, you know, we, we haven't launched major partnerships that are publicly known.

We're, we're pretty deep into that process. We've been working on some for over a year, let's say. They're coming out very soon. So really building the flywheel of proper partner motion oem, these kind of things. We have a fantastic product to do that with. But again, we've been kind of too early to kind of focus on doing that.

You kind of need to build business and prove it first, and then you kind of start getting to that stuff. And then really going after some of the industries that we're not that deeply embedded in. Now we've got some early customer wins in, you know I don't wanna give away too much. Obviously our competition's watching everything we do, so it's pretty funny.

But, some early customer wins in certain verticals and we're gonna go get a lot more of them. I'll tell you that soon thereafter. You know, the, the next major goal is getting to a hundred million in annual recurring revenue. That's, that's, that's basically, the next, the next goal for Arkose. And we have a very clear plan on how we're gonna execute and do that, and then we'll figure out the next goal after that.

But that's a pretty good focus for now, I'd say. Perfect.

Dion: On with the job. That's right. Thanks very much, Kevin, for your time. It's been really, really interesting. Thanks for having me on.

Outtro

Dion: Thanks for listening to this episode. I hope you enjoyed the show. If you did, we would really appreciate if you would leave a five star review and share with family and friends. Thanks.