The First Customer

The First Customer - Automating and Optimizing Your Network Infrastructure with Andrew Kahl

December 06, 2023 Season 1 Episode 83
The First Customer
The First Customer - Automating and Optimizing Your Network Infrastructure with Andrew Kahl
Show Notes Transcript

In this episode, I was lucky enough to interview Andrew Kahl, CEO of BackBox.

Andrew grew up in the Midwest influencing his work ethic and entrepreneurial spirit. He shares that his first business was a data security software company, which he started at the age of 30. The company aimed to encrypt data leaving the enterprise, and its first customer was PepsiCo, marking a successful start. Andrew emphasizes the importance of understanding customer needs and building a strong product.

After running the first company for 12 years, it was acquired by Dell, leading to a successful exit. Andrew later joined BackBox after it was acquired by a private equity firm. In his role as the CEO, he highlights the significance of understanding the existing customer base, refining the product, and focusing on customer success. Andrew also touches on the company's marketing strategy, targeting network administrators as key customers and participating in trade shows to build brand awareness. He emphasizes the importance of aligning with customers' strategic initiatives, which aids in selling to the C-suite.

Don't miss out on this insightful episode of The First Customer!

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[00:00:27] Jay: Hi everyone. Welcome to The First Customer podcast. My name's Jay Aigner today. I am lucky enough to be joined by Andrew Kahl. He is the CEO of Backbox. He has founded another company before this. We'll talk about that. he's in Dallas, not a Dallas fan. So everybody who knows me that knows that we can be friends, Andrew, thanks for being on the show, buddy, for not being a hardcore Cowboys fan and a go bird.

So nice to have you. 

[00:00:49] Andrew: Yeah, no, thanks. Thanks. It's great. It's great to be here. And I'm glad we could be friends at the beginning of the show. It's usually the end of it.


[00:00:56] Jay: Yeah. No. I mean, look, we talked about it. The Cowboys fan DNA, is different. So, you know, we're just meant not to like each other as Cowboys and Eagles fans. where did you grow up and did that have any impact on you being an entrepreneur later in 

[00:01:08] Andrew: Yeah. So I grew up in the Midwest outside of Chicago. was born out there in the city of broad shoulders. and, went to school, undergraduate. University of Iowa, graduate degree, Notre Dame, go Irish, go Hawks. and I think that did have a big influence cause Midwest is just kind of hardworking people. And I got that work ethic. A lot of people talk about this grandparents, parents, et cetera. And so, yeah, I think it did influence me quite a bit.

[00:01:32] Jay: That's interesting. I have to, there's some common thread lately where like people who grew up on a farm are the people that have been on the show. And it's like, you know, when I think about the farmers and like the people in the Midwest is like being entrepreneurs, but like you are like 

You have clients, like, you're building something, you're making something, you're selling it. You do all these things as an entrepreneur is like a farmer. You don't really think of, but like, that's a very, like,

it's a very right place for that out 

[00:01:57] Andrew: Yeah, you're, I mean, you're literally building the product, farming it, growing it, then you're harvesting it, you're taking to market. So you're, I mean, you're everything, your production, your sales, your marketing. And yeah, it's kind of hard not to be an entrepreneur or have that feeling, you know, when you're surrounded by cornfields, you know, when you're growing up,

[00:02:15] Jay: Right. so what was the first business you started after you got done your college days?

[00:02:19] Andrew: you know, so the first business, so I went to work, you know, large company, like a lot of folks do fell into high tech 30 years ago, but the first company I started I was 30 years old, and I started it with two other guys and it was a data security software company. And, we had this idea in 2001, the data is starting to leave the four walls of the enterprise.

And so, you know, at the time it was really firewalls and antivirus was the only security software out there. And so we wanted to. it be able to encrypt data that was leaving the enterprise. And so it was a data encryption software company, non governmental because only government entities were really encrypting data.

but we felt insurance companies, healthcare companies, financial services, you know, data is the lifeblood of any company. So how are we going to protect it? And that's what we started.

[00:03:04] Jay: Who was your first customer for that business?

[00:03:06] Andrew: PepsiCo. I'll tell you what, getting a landing, a big customer like that out of the gate is incredibly rare. and it's obviously one of those, you know, you call them a whale that you want to land. And it was for just under a million dollars that they spent with us. But we found the right person who had a specific need. And what it was is all their route drivers had all the customer data on these little, they called them Intermec devices. They were logging inventory and delivering, and those were getting stolen off the trucks. And so they wanted to protect those devices. And so we were started the company in Dallas.

PepsiCo was just up the street from us. We literally ran into the right person at the right time and we talked about their need and we're like, let's see what we can do together. And it started out as a joint development kind of custom project. And the, but that's really what defined our initial, software offering that we put out to the market.

[00:04:01] Jay: Nice to land a little mom and pop shop, like a PepsiCo and your first go at it, how did the, how did the product evolve from that? Did you kind of stick with what PepsiCo or like, how did it change over those 12 

[00:04:17] Andrew: Yeah, it's interesting. That's a good question. It's interesting because, you know, first of all, we had data to support that data. Sorry to keep using that term was leaving the four walls of the enterprise. We knew that there was information that was going outside of the office that had to be protected. And so as we started to do some prospecting and talking to more people, we're like, Hey, we got this great use case. And of course, Pepsi was a great name when people say, well, who's your other customer? And we could just drop that. And so it kind of became a, well, if Pepsi is using you guys, we should be talking to you guys.

And so we went on this string where we started landing big customer after big customer, and we're a little company of literally 10 people. And we didn't even have a million dollars in revenue yet. and so it really just became word of mouth that helped, but the common theme was we exploited this need that everybody had, or this problem that they saw coming was, Hey, how do we protect the data once it leaves the building? And so from there, that we started thinking, okay, you got Intermec devices, you got laptops, you got back at the time, blackberries, and I can't remember the name of them, but you remember the first compact device that had a stylus that you could write on?

[00:05:24] Jay: The Palm Pilot

[00:05:25] Andrew: you. The Palm Pilot Yeah. 

[00:05:26] Jay: Yeah. Yeah. Oh, yeah. I remember 

[00:05:28] Andrew: it's like, okay, now we got to, how do we start protecting all these different vehicles where data can lead the business?

And so, yeah, that's how it influenced our overall thinking and the breadth of our product.

[00:05:39] Jay: were a lot of those businesses. in the Dallas or were you in Dallas at that point? I guess with the in. Okay. So we're the in that area. A lot of the businesses you started to 

[00:05:47] Andrew: Yeah, I mean, our second customer was Mary Kay Cosmetics

and so also just up the street. But, you know, I think they were doing maybe a billion dollars in revenue. So, yeah, big customer. And then we started to exploit certain verticals that come the vertical business vertical like healthcare. financial services where there's clearly a lot of confidential data that you don't want leaking out. We started to exploit those areas. and we got some big banks as customers. We've got some large insurance companies as customers. So really got lucky, started in Dallas and then just matriculated out from there.

[00:06:18] Jay: I mean, do you think it. I always call it the hometown discount, right? if you live somewhere that has potential customers, especially like a B2B kind of thing. I'm not talking like, you know, laundromat, like obviously you have local customers, but like a B2B space and you're in a city, do you think it makes sense to.

Focus in your own backyard, right? And like, try to find because it is an icebreaker, I think, to be like, Hey, I'm from here, which is like the immediate, like, the walls go down a little bit and people, at least that you look, you can peek over the wall to talk to somebody. If you say, like, I'm in your local spaces that helped you guys, you know, initially.

[00:06:52] Andrew: Absolutely. and it even helps us today. But back then it definitely was. I like that term hometown discount. Never heard that one before. So I may steal that from you if you don't mind.

[00:07:01] Jay: Please 

[00:07:02] Andrew: But yeah, it definitely helped with that. And then it was also, the tangential relationships we had.

So our bankers and our insurance brokers, you know, there was interest from them and we actually approached them because We're young and scrappy. We're trying to find customers. We're like, we know that we can help you. Can you introduce us to people within your business? So we stayed within our sphere of influence. you know, people that we were working directly with and then, you know, PepsiCo, we started to expand who are your partners? What are they doing? Who are your logistics providers? You know, and so it's just started to expand from there. And if we got good word of mouth from PepsiCo to somebody that they were working with, or from Mary Kay to somebody that they were working with, that definitely helped us. But then it put a real impetus on us to make sure that we showed up properly because. I don't want to ruin their reputation. If they're going to recommend this, we got to show up big like we know what we're doing. Yeah,

[00:07:55] Jay: No, I always say there's a couple of people in Philly that I, you know, clients of ours that I think are our number one salesman, right? Like if they're recommending you,

[00:08:05] Andrew: well,

[00:08:06] Jay: like it's a no 

[00:08:07] Andrew: especially if you take care of them the right way. And I like the name of your podcast, the first customer, because that first customer, you learn a lot about yourself. You learn a lot about what they need and what the market needs. And it really shapes your overall, you know, customer engagement model.

Now the term de jure is customer success. Which I think is kind of silly because every customer should be successful, 

but how do you take care of them? Cause the, cause once you sell the deal, the long tail of the relationship is the care and feeding along the way. The relationship doesn't end once you get the purchase order and the payment.

[00:08:38] Jay: Right. No, that's, I mean, and the fun thing for me. Taking the things that I've learned and then recycling them into the service itself, right. And like making the product or the offering or whatever it is. And it's like, then your sales and marketing kind of evolve a bit because you're selling something different and you hear what the market thinks about that and you feed back into your product.

It's like this big loop of like what your product starts as. Which is kind of what the first customer is like, how do you start getting that? But then it evolves and it becomes different. And like, you learn those things along the way. And I think, that's a great, that's a great story. I love the PepsiCo.

So tell me when you went 12 years ish with that. Did you guys exit that? And then you moved on, like, what was the story? How'd you end up at Backbox?

[00:09:20] Andrew: no, thanks. so yeah, we did exit. We ran that for 12 years and then, we, Dell, actually acquired us. so it's a nice, successful exit. and we have started a partnership with them. We were actually. The security solution on the Dell Latitude line of laptops,

because again, data is on laptops.

Laptops are leaving the building. How do you protect it? So we were the. Data encryption, provider, which was, Dell data protection. So they eventually said, Hey, let's put a ring on it to use a Beyonce term. and they bought us. and so then the, how I got the back box, the venture capital firm that funded us and the gentleman that sat on our board for 12 years, they started a private equity firm that started buying kind of small sub optimized companies with a good product. they bought Backbox in 2021. we kind of separated and gone our separate way. I went off and operated at scale, worked at some big companies like NetApp and Juniper and, then, reconnected with the old venture capital firm, in 2019. And they're like, Hey, here's our new model. Here's what we're doing. Why don't you kind of be an operating advisor for us and help with some of these portfolio companies? And then just long story short, it became really interesting and fun. They said, Hey, would you like to lead one of these if we buy one that kind of fits your sweet spot? And I thought, well, why not? I love building. and if it's a chance to build something without starting from square zero, you know, you buy a company that is sub optimized, you redo it. Start starting at square one is a lot harder. So that's how I got here. So they bought Backbox and asked me to step in and lead it to the next iteration of growth.

[00:10:55] Jay: So did you have to learn from square zero who the customer was, right? I mean, you know, nothing. I mean, or maybe you do, but do you know some stuff from your previous life that kind of helped you with this stuff? I mean, how did you identify who the hell you were supposed to be 

[00:11:10] Andrew: Yeah, I mean, the good thing about this company is they had a little over 400 global customers. And so, you know, my initial thought was, okay, we got a customer base. Let's get our arms around them and understand why they bought. What do they like about us? Is it the product? Is it the services? Are we aligning to their longterm roadmap?

So a lot of time was spent early on just number one, retaining those customers. But number two, understanding what they were looking for. What is it about back box that was compelling? And the more we dug into that realized, Hey, we've got a really solid product here, so let's make sure that the product continues to get refined and be even better. over time. And then what's the right care and feeding model so that we can make sure we retain those customers and they never leave. And so that's, that was really probably the first year and a half of my two and a half years here spending time getting our arms around that. and to this day, unfortunate, we've got very low turnover, our net retention and our gross retention rates are fantastic. and so, yeah, I think we've, I, everything that we've done here is what I learned at my first startup company, how to take care of a customer because they've entrusted you with their time, their data, and their money. So you don't want to screw that up.

[00:12:21] Jay: That makes a lot of sense. how did you guys, Get your arms around the, you know, I struggle to say the why, just because it's like a, you know, very hippie term these days where it's like, everybody wants to know their why and like, what's your why, but how did you know, how did you figure it out? What are the actual steps you guys took to go?

What's the common thread between these customers? You know, how are we serving them? Like, did you survey them? Did you get on calls them? How did you get your arms around 400 

[00:12:47] Andrew: Yeah. a little bit of both. And truthfully, we, you know, there's not, we haven't, didn't talk to everyone, but we talked to the major customers. Like we, so, you know, we started with a large enterprise, the people that were writing the biggest renewal checks for us. to understand them. And then we went down to that mid market size and it was a simple question. Why did you buy back box? And, you know, they give us answers and we just, so, so we did the survey and then we found out what that common thread was. We started to exploit that common thread quality product. We're solving productivity problems. We're solving compliance problems. And so that's allowed us to figure out number one, who our ideal customer is, who we want to sell to, and then what's the basic messaging.

Cause I hate complex messaging. I hate euphemisms and. Superlatives and NBA talk. It's like, do you have a problem? Yes. Okay. What's the problem. Okay. Can we solve it? Yes. And here's how we solve it. And so we tried to just get it, scrape it down to the basics. And

[00:13:46] Jay: what is the problem that Backbox solves?

[00:13:48] Andrew: yeah, so, well, he's really the simplest term.

[00:13:52] Jay: I was going to say, you better be 

direct with 

[00:13:54] Andrew: know. 

[00:13:54] Jay: because I just

[00:13:55] Andrew: Exactly. So every company. So we do network automation. What that means is we automate the process for all of your network security devices that are connecting your network, whether it's a router or server firewall. All of those have patches and upgrades. Doing that by hand takes thousands of man hours per year.

Our automation software allows you to do two things. Number one, should your network go down? we can bring it back up very quickly the way it was configured. So that all those devices reconnect and business continue, can continue to flow. But more importantly, we automate the process for making sure that every router, server, switch, firewall has its patch, has its upgrade, is compliant, and is authorized to be on the network. Good case study, major soft drink manufacturer is a customer of ours. 000 man hours per year updating the devices on their networks. we took, our automation software took that down to four man hours per year. So it's a massive productivity savings and we have productivity savings like that. Then you can save a heck of a lot of money and redeploy that money and other strategic areas of the business.

[00:14:59] Jay: love that. how are you guys keeping your sales pipeline full today?

[00:15:04] Andrew: well, we do a lot of things. I mean, a combination of, we still do a few trade shows. There's some big networking trade shows that we go to, but a lot of it is organic. it's, you know, SEO, optimization on our website. it's content creation. It's making sure that we are, you know, Speaking the right language, in and around the audiences that are interested in network automation and network vulnerabilities.

So we've really put a lot of our marketing dollars into that. you know, we're not something you're going to see advertised on TV, but our funnel has grown significantly and we're pretty excited about what we've been able to yield this year and even more excited about what we're going to yield next year.

[00:15:41] Jay: Who is your kind of target with that marketing? Like who in a company would be a prospect for you 

[00:15:48] Andrew: no, thank you. This is like an advertising here. I love this.

[00:15:51] Jay: Well, I mean, it's your show. 

You're,this is your time, 

[00:15:53] Andrew: no, it's, well, it's the network administrator. It's the people that are really doing the work and we don't, a lot of enterprise software companies sell to the C suite or the VP, and now they're usually involved in the decision process and we'll approve a PO, but we sell directly to the people that are feeling the pain, the network administrator or the network teams that are running the backbones of a company that are having to do those configurations or write scripts for the automations that are dealing with. The disparate number of devices that are connecting to the network. And so we sell directly to them because we're solving the problems for them.

[00:16:26] Jay: Got it. Did you know that when you took over as CEO, did you know that was your target?

[00:16:30] Andrew: Not initially, cause my initial thought was, Hey, we're it infrastructure. So we're going to be selling at the sea level. And I was actually pleasantly surprised to find out what we're weren't because you start selling at the sea level that elongates the sales process. And one of the things we've been really fortunate is over the course of the year. We've dropped our average sales number sales days by half. And so, and that's partly because we've been really refined on our message and we're selling directly to the people that feel the pain.

[00:17:01] Jay: Mm hmm. And, but so did those guys, and this is getting very into the weeds about your specific customer, which I don't typically do, but I'm curious. it's applicable on a bunch of different edge cases or use cases, or I'm thinking of it, but, if you're not selling at the C suite and you're not selling it, the guys that write the checks.

what is the thought process to get from that, you know, internal champion or whatever you're going to call it, that you get at the network administration level, how do you get to the CFO? Do you have to just convince that network administrator guy? Like this is the product for you guys. I need you to go to bat for this at your C, you know, the C level.

Like, how does that 

[00:17:36] Andrew: Well, we try, that's a fair question. And so, yes, we do ask that question, of course, but we try and understand what are their it initiative, their strategic initiatives for the year. Is it. Is it security? Well, if it's security, then we can play in that realm because we help from a compliance standpoint, you know, ensure ensuring that devices have their patches and their upgrades.

And so if we can understand from a corporate standpoint, what their strategy is from a departmental standpoint, what their strategy is nine times out of 10, we can align to one of those and say, okay, this is why we are a good fit. Yes, we're solving a problem for you. But if you look at where your strategy is headed, Mr.

And Mrs. Customer. We can align to that as well. And that's what we want to do because that creates, this is an overused term that creates stickiness within the account. If they see that I don't want to just be a point in time solution. I want us to be embedded in their infrastructure and a critical component to how we keep them up and running every day. And if we can align to that, then that helps the sales process considerably.

[00:18:33] Jay: and what is the kind of next step there? Is it to build a proposal? You know, for that network administrator. And again, very in the weeds here, but are they up, you know, they upselling it to their C 

[00:18:47] Andrew: Yeah, they are, especially when you're dealing with productivity and dollar savings, those are,

going to get anybody in the C suite interested. If they, if somebody hears. Oh, I can get this done at a fraction of the cost. Tell me more. 

So there's a door, there's a door opener there. The other area, of course, is compliance.

I mean, especially the regulated industries like healthcare and financial services. Again, if we can say, hey, that device is not patched, you're out of compliance, or that device is not authorized to be on your network, or on your network, you've got this vulnerability. If we can identify those things, which we do, then all of a sudden, we're a real partner to them because we're ensuring that they don't have any potential areas for a security breach. 

And again, that gets the attention of a CISO, level person.

[00:19:31] Jay: Sure. No, it makes a lot of sense. you mentioned trade shows, you know, a few big shows that you guys go to. what is the strategy for a company like you guys at a trade show? Is it just awareness? Is it to meet? Like the right person there. Is it just to meet some because typically it's not, you know, the CTOs, you know, like none of the C level people are at these conferences for the most part, right?

Some kind of sub lower level of that. Are you still just trying to make connections there? Like, what is your goal for those conferences?

[00:20:04] Andrew: So it's two very specific things. Number one, you're spot on. It usually is the end user that's going to these shows. I mean, we go to things like Checkpoint and we're just at one in Denver this week called Autocon. That's for the network administrators, the users. And so if we can get the users interested in who we are and be there and be able to have questions and do demos and let them play with the product, that's going to get them excited.

 so to your point, we're specifically targeting the end users. But at all of these trade shows, what we're doing is we're actually finding ways to be part of the speaking agenda. So you've usually, whether it's a keynote or getting on stage or doing a live demo, we want to be able to build our brand awareness by talking about the problems that we solve. Lot in the past, and I've been guilty of this. You spend money, you go to a trade show, you stand at a booth and you kind of just wait for people to come by. We've said, okay, if we're going to go to a show. I want to be part of the show and being part of this, like our CTO, just spoke at auto con last week at Cisco live.

We go to that, you know, he's part of the on the floor discussions with panels, with other CTOs. And so doing that is helping build brand awareness for us and highlighting the problem that exists with network administrators of time, complexity. potential security breaches, security risks. Ha

[00:21:20] Jay: Yeah, that makes so much sense. I love the phrase. if we're going to go to a show, be part of the show, I think that's a really, and you know, obviously, it depends on where you are in your company size and growth and goals and all that stuff to kind of be at that point. But that's, I think it's a great point for some of the more mature businesses out there.

All right. Last question, non business related,

[00:21:40] Andrew: ha. Okay.

[00:21:41] Jay: just for Andrew, if you could do anything on earth and you knew you couldn't fail. What would it be?

[00:21:48] Andrew: my gosh. I would go to work in the, couldn't fail, boyum, I'd go to the NBA. I was a basketball player back in the day,

 loved it. Sadly, I thought my talent would get me. And I didn't, I was at the age where I didn't combine talent and work ethic. I didn't realize you needed to meet.

And so I got so far on raw talents, but didn't put forth the work ethic, but 

I always felt I at least could have gotten a shot.

[00:22:23] Jay: Funny enough, you're the second person on the show that has said that, the one to be in the NBA. the other one, yeah, I can't remember who it was, but you're the second person who said that. So like, it's not that crazy of a thing to say, and I love the sports ones. Cause that's like.

We're all kind of relate to being a kid and you're like, you think you could do something. And then, like you said, the work it's gotta be, that's why it's so impressive. You see those guys doing what they're doing. 

[00:22:44] Andrew: Oh yeah, 

[00:22:45] Jay: Michael Jordan was not Michael Jordan because he was born that way. Like he was a obsessive, you know, he got so much better from his first year in the NBA till his, you know, fifth or sixth or whatever.

Like, yeah, anyway. So I love that answer. If people want to find you, Andrew, if they want to find more about BackBox, where do they find you?

[00:23:03] Andrew: BackBox go to pretty straightforward. And it's B-A-C-K-B-O-X BackBox not black box. We get, that's what's on an airplane. we are or look for me on LinkedIn or US BackBox on LinkedIn.

[00:23:18] Jay: Okay, so you might need to find a way to get back box on the black box, and then you could just use both of them 

[00:23:24] Andrew: Now that, yeah, that's a, that'd be a tongue twister product.

[00:23:28] Jay: back box now on black box. All right. Thanks for joining Andrew. You're fantastic. enjoy the rest of your week. I'll talk to you soon, buddy. Thank 

[00:23:34] Andrew: Jay. Appreciate it.