Building a $250B Cybersecurity Giant | Nikesh Arora, Palo Alto Networks

Nikesh Arora is the chairman and CEO of Palo Alto Networks, one of the world's largest cybersecurity companies. He spent 10 years at Google, where he ran Google Europe and later became chief business officer, as the company grew from about 2,000 to 60,000 employees and from $2 billion to $62 billion in revenue. After two years as president of SoftBank, he joined Palo Alto Networks in 2018, when it was an $18 billion firewall company. Since then it has made about 35 acquisitions and expanded to more than 70 products. Nikesh explains the enterprise economics behind that strategy, why he only buys the number one or number two company in a category, and why he negotiates directly with founders and requires a joint product roadmap before signing a deal. He also tells the story of how he and Egon Durban nearly invested in Oculus before it sold to Facebook, how Egon talked him through a 29-round auction for the London Spirit cricket team, and what it was like selling Google ads when he couldn't tell customers the price or the volume. He also shares the Hindu fatalism that keeps him from worrying about what he can't control, how he approaches parenting, why AI makes cybersecurity more valuable, and why he started posting on X. Show notes: https://www.davidsenra.com/episode/nikesh-arora Made possible by Ramp: https://ramp.com Deel: https://deel.com/senra WorkOS: https://workos.com AppLovin: https://applovin.com/senra Chapters (00:00:00) The Oculus deal he almost did with Egon Durban (00:08:45) "I thought cybersecurity was two words" (00:11:44) Why he buys instead of builds (00:14:33) Why the acquired founder becomes the boss (00:16:21) Why he only buys number one or number two (00:19:30) The 30-day test before every acquisition (00:33:38) Egon Durban and the 29-round cricket auction (00:42:32) Why nothing at work stresses him out (00:44:28) Selling Google ads without knowing the price (00:49:42) Coming to America with $200 (00:51:58) Raising kids who didn't grow up poor (00:54:46) Why AI hacking has been good for Palo Alto Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02David Senra?

  Did you read Ari Emanuel's new book?

• 0:04Speaker 01

  No.

• 0:04David Senra?

  You've heard that you're in it, though?

• 0:06Speaker 01

  No, I didn't know that.

• 0:06David Senra?

  Okay. He says the way he met Egon Durbin was that he got introduced to Marc Andreessen, and Marc Andreessen told Ari that him, Nikesh, and Egon had this affiliated group of such a angel investors that were working together.

• 0:21Speaker 01

  Yes.

• 0:21David Senra?

  Tell me a little bit about that.

• 0:24Speaker 01

  So I met Egon when Egon had just come to Europe. And he was a Silicon Lake partner there, and he reached out to a common friend saying, "Listen, I want to hang out with some people, get to understand the tech scene over here, and see if he could get an advisor to Silicon Lake." And I was early 30s. I used to run Google Europe. So Egon and I had lunch, and I said, "Listen," I said, "why are you so reluctant on this conversation?" And I said, "Look, I tried to do this. They really don't want advice. They make you come for a two-day off-site. They present a whole bunch of stuff to you. The last thing I need is more PowerPoint in my life and free coffee." He says, "You know what? This resonates with me. I'm gonna call you, and if you tell me that's a good idea, I'll obviously independently consider if it's a good idea or not,

• 1:08Speaker 01

  because I have to make the decision. If you tell me it's a bad idea, I'll think about it similarly. But don't worry, you'd add as much value in telling me what to invest in, what not to invest in. So then we'll have fun." So I said, "Sure," and I did that for about 15 years. That's when I met Egon, when he was in Europe.

• 1:27David Senra?

  You're just investing your personal money?

• 1:28Speaker 01

  Yeah, of course. But I'll tell you, there's a funny incident. What happened was, one time, I flew back from CES with Marc Andreessen, because Marc rarely travels, but when he does, he goes to CES and he hosts a dinner. And he had me come, we spoke. I spoke a little bit over there, and I flew back, and I sent him an email saying, "Hey, Marc, is there any cool company that you're working on right now that I could put some money in?" He says, "Oh, the guy who spoke at dinner at CES. It was Oculus."

• 1:58David Senra?

  Palmer Lucky?

• 1:59Speaker 01

  Yes. Well, Brendan, to be fair. Brendan or eBay. And Palmer Lucky, of course. I said, "Great." So he said, "Give me a number." So I text Brendan and say, "Hey, we met at the dinner. I'd love to make an investment." He's like, "Great, but you have to come see this. This stuff's real cool." I said, "Okay." So I'm in L.A., and I said, "Brendan, I'm coming to L.A. Can we take a look at your technologies?" It was me and my wife. He goes, "Yeah, but you have to drive an hour outside of L.A. because we have this industrial park. We're gonna go there." So I take a car, I go to the industrial park. The lights are out. So it's not even gonna work. So we're kind of hanging out, waiting for the lights to come back on. We go in. He puts his contraption on our face, and it's got this little virtual-reality-type situation going on. I says, "Really cool. This is very cool. What's gonna happen?"

• 2:43Speaker 01

  Well, it's gonna be cool, because all the promise of visualization, all the promise of gaming, et cetera, et cetera. I said, "Great. Can I write a check?" She's like, "Sure." He's like, "It's you, and Blake Corian, and Vivi Nevo, and I have room for one more." I said, "Well, Egon and I do this together," and Marc was already in the company. So I say, "Okay, so me and Egon." So we agreed to do the deal. He sends me some docs. Oh, he sends me an email. He says, "Working the docs." Doesn't respond. Egon says, "What's going on? Why haven't we heard from him?" So I sent him an email. He says, "Yes, the docs have just come in. They're gonna be here with you anytime soon."

• 3:24Speaker 01

  No docs, and boom. You wake up one morning, and he's just been sold to Facebook.

• 3:29David Senra?

  Before you were able to invest. So this group that Ari writes about?

• 3:33Speaker 01

  We ended up being the technology advisory board to Willie Morris when it was acquired by Silicon Lake.

• 3:38David Senra?

  Okay.

• 3:39Speaker 01

  Marc and I.

• 3:39David Senra?

  Okay. Well, I don't even know about this. So what were you guys advising on?

• 3:43Speaker 01

  Whenever we had a question on technology, the advisory around Egon and Ari are very straightforward. Ari does the 15-minute phone call.

• 3:49David Senra?

  15? It's like, now, I did an episode with him. Now, his book is called Rolling the Calls. Now he does it to me. So I get a call, and it's like, "Hold for Ari Emanuel." I'm like, "You're calling me." And then sometimes it's like 25 seconds, and there's no goodbye.

• 4:03Speaker 01

  Yeah, but you know what? I'll tell you what's fascinating is, so we would do that when we had something to talk about. And I understand his shorthand. He's trying to get something done. He's a man on a mission. But there was a time when I had left SoftBank, and he reached out to say, "What are you doing now?" I said, "Nothing. I'm just trying to figure out what I'm gonna do." He said, "Why don't you come by and come see me, and then we can talk about it." I said, "Okay, I happen to be in L.A. I'll come see you." And my assistant's like, "Ari's office says you're having lunch. What time should I schedule your departure?" I'm like, "Listen, it's probably gonna be 15 minutes. Why don't you schedule half an hour, and then we'll get me to the airport and get me on and fly back." And that was the only time I spent an hour and a half with Ari. So you can tell it. He actually wanted to get into what I was gonna go do next,

• 4:47Speaker 01

  and he actually spent time and invested time in that conversation. So he does have a soul. When it's really important to you, he's gonna spend a lot of time. But most times, he's actually transactional when he wants to get something done.

• 4:58David Senra?

  One of the things I love about Ramp is their mission is easy to understand. They want to help your business save time and money, and that is why they have built Router. Do me a favor. While you're listening to this, go to router.com. Router was built to reduce your company's inference costs by matching every request to the most efficient AI model. Router automatically balances cost, speed, and quality of output. Router is built for CTOs and loved by CFOs. Your engineering team gets the best model for every workload, and your finance team gets lower inference spend. One customer of Router has the perfect description of why your company should be using Router. Choosing the right model makes a meaningful difference to our AI spend.

• 5:41David Senra?

  We run billions of tokens through Router and have reduced our model costs by 92%. Tokens are money. Save both, and you can do that by going to router.com. Deal is how the best founders turn the world into their talent pool. I've been studying how history's greatest founders operate for a decade, and one thing they all have in common is they understand that recruiting and hiring the very best talent is your most important priority. A players recognize other A players, which is why top companies like Ramp, Shopify, 11 Labs, Uber, and DoorDash all use Deal. Many of the top founders I know have personally invested in Deal after using their product. And what they discovered is that Deal is the best company in the world at building infrastructure for global hiring.

• 6:23David Senra?

  Deal will help your business hire, pay, and manage any worker anywhere in the world, so you can retain the best talent anywhere, and spend the rest of your time focusing on what you do best, delivering value to your customers. The founder of 11 Labs has a great description of the value Deal can give your company. He said, "We built 11 Labs to break down language and communication barriers. With Deal enabling us to hire and support exceptional talent anywhere, we can accelerate our innovation and bring more voices, stories, and ideas to every corner of the world." Deal is trusted by over 40,000 companies and growing fast. Learn how they can help your business by going to deal.com/cenra. That is deal.com/cenra.

• 7:06David Senra?

  We were talking a little bit about some of the people that we either know jointly or know of, and you were saying, like, some of the people, like, jump around a lot. Like, they have an idea, and then they're working it out for a little bit, and then they're like, almost like they have ADHD. What's like, how do you think about you? Because you've seemed to have had these jobs for a long time. You're at Google for 10 years. You've been at Palo Alto Networks for how long now?

• 7:25Speaker 01

  Eight.

• 7:25David Senra?

  Eight? Like, I like to focus on one thing for a long period of time. Like, how do you work?

• 7:31Speaker 01

  Well, the good news is, like, even at Palo Alto Networks, or when I was a SoftBank, when I was at Google, you know, Google went from 2,000 employees to 60,000 employees when I was there. It went from $2 billion in revenue to $62 billion in revenue. So you realize, even though you're in one place, you're actually doing so many different things. At that point in time, we went from search, and YouTube, and double-click, and like, you know, buying tons of businesses, thinking, all kinds of stuff. So I think it's not what you do at one point in time. It's how much your brain can get challenged, how many different problems can you get involved in. So you can solve from problem to problem, solve many things in the same space, and as long as you get the right environmental structure right, right?

• 8:15Speaker 01

  If the opportunity is big enough at Palo Alto, when I joined, that was eight years ago. We're a firewall company today, and we do 70-plus products. We're in every aspect of cybersecurity. We're all over AI, trying to make sure we pivot hard on the AI stuff. So you can always keep yourself challenged as long as you get the right platform in front of you.

• 8:32David Senra?

  I just talked to Nick from Revolut, and that was his thing. He's like, "There's no way I was gonna run a company with one product." He's like, "That would be boring." He's running like 20 different experiments at all given times. I think he's in like 30 or 40 countries. He wants to get to 100 different countries. When you got recruited to become the CEO of Palo Alto Networks, they had essentially one product, right?

• 8:51Speaker 01

  Yes, for the most part, yes.

• 8:52David Senra?

  Okay. Was your, this expansion that has since occurred in the last eight years, is that? Did you come in with that plan? Or you're just like, what was the conversation?

• 9:00Speaker 01

  I didn't have a plan when I came in.

• 9:01David Senra?

  You had a hilarious line where it's like, I thought cybersecurity was two words or something.

• 9:04Speaker 01

  Yeah, you know, honestly, in my interview, I ended up talking a lot more about executive security. I thought that was an important topic. And then I realized it was a very small market. But I was sitting talking about how each of us need to be secure. It's like, no, that's a consumer business. You don't want to get involved in that. That's a lot of marketing, a lot of error. So I came in with more of an enterprise framework study than I did the cybersecurity framework study. I sat there and looked and said, which are the largest companies that exist in enterprise? And you look at them and it's like, I don't know, Cisco or Salesforce at that point in time. These are hundreds of billions of dollars market cap. You're an 18 billion dollar market cap company. I'm like, how do I go from an 18 billion dollar market cap company to north of 100? That was the original expectation. And so then I say, if you look at the P and L

• 9:49Speaker 01

  of any enterprise company, most companies spend 15 to 18% in product development. That's kind of where R and D sticks around. Everything else, the administrative is the 6 to 10%. So the entire difference between an operating margin and your gross margin is sales and marketing and customer support. If you can find a way of taking 60% of your costs, which typically live in sales, marketing, customer support, take them down to 20, you can be a 40% operating margin business. That was my insight. I'm like, so how do I get sales and marketing amortized over time? And you figure out the biggest expense in enterprise is customer acquisition. That's the maximum, that's what costs the most. So if you have a low revenue product, which you can only sell one product to a customer,

• 10:34Speaker 01

  it's really hard to build a big business. And if you look at the largest businesses, there's Microsoft Enterprise Business or Salesforce or, you know, take your largest businesses, they sell a lot to the same customer. That was the insight. I'm like, well, if you're going to be big at Palo Alto, we've got to find a way of selling a lot to a customer. You only have one thing to sell. So you go knock on the door, you knock on 20 doors, you spend all the time, and 15 people say, I'm sorry, I don't need it, I already have it. You're stuck with five. If you're knocking on the door, you have a truck behind you saying, what do you want? You want this, you don't want this, you want this, you want this. It's like, you know, the world's your oyster. What can I get you? I'm with that insight. I'm like, well, we need to figure out a way that we can find adjacencies to our business, which the customers will trust to buy from us, so that we can keep expanding what we sell to customers. So we can go serve the top 10,000 customers in the world

• 11:19Speaker 01

  and increase the amount of money you can get for them. You only get that if you earn their trust. You only get that if your shit works. You only get that if it's kind of best in class, because nobody wants to buy the second best product of cybersecurity. It kind of sucks. So you want to buy the best, then our need was you got to be the best. Now, that's kind of one part of the insight. The other part of the insight is, which is still true, it takes four to seven years to build a good technology product. It doesn't matter who you are, what you are, where you are. You look back and say, hmm, this thing was not fully ready. It's been seven years, this thing looks closer to being ready. Whether it's an Uber, it's YouTube, it's Facebook, it's Google search. It took four to seven years, sometimes longer,

• 12:04Speaker 01

  to build a useful product that the customers found exciting and interesting. And that's true in enterprise as well. So I sometimes say, holy shit. And I just joined this company. If you don't have a large product pipeline, it's going to take me four to seven years to build your products. What am I going to do?

• 12:17David Senra?

  You're going to acquire them.

• 12:18Speaker 01

  That's right. But you got to be careful about it, because generally, history is littered with bad acquisitions and companies destroy acquisitions for the most part, whether it's enterprise or consumers. So you got to figure out and say, so I spend the next time, next sort of part of my life studying that. Like, what makes for a good acquisition and what makes for a bad acquisition?

• 12:36David Senra?

  What were you studying? Like, how are you learning about this?

• 12:38Speaker 01

  You go back to look at patterns, right? Like, how many companies did company X buy? How many did company Y buy? Why did they work? Why did they not work? Which ones worked? What are the key characteristics? Was it a failure of the market? Was it a bad idea? You shouldn't have done it. Was it bad execution? Was it bad leadership? You go and figure out and say, great, the other seven reasons why they failed, how can I minimize the risk of failure? And you minimize that by saying, okay, let me control five variables in a different way. And then I only have two risks. I have a risk of I picked the wrong idea. So I bought the right company, the market didn't show up. Right? We had one of those. We bought a company, we thought the market was going in this direction. Market ended up going there.

• 13:15David Senra?

  What was that company and how much did you pay for it?

• 13:17Speaker 01

  That company was called Apparato. We thought the world was going to go to IP-based segmentation. But it never went there. But we bought it, we cut our losses quickly. Once we decided it wasn't going to go there, we moved on. So it's kind of like, almost like portfolio business, right? It's like marginal venture capitalists, like product development. Because the pharma companies do it, right? They try a whole bunch of drugs. They take them to a certain phase and say, cut bait. It's not going to work. You've got to do the same thing. I've been in, you know, companies where somebody says, oh, you know what? We should do this, we should build this, we should buy this. I was like, no, we can't buy it, we can build it. I was at Google when, you know, I said, let's go buy Netflix. And I was like, no, we have YouTube, we can build same capabilities, same thing. It's a video serving platform.

• 14:02Speaker 01

  It's supposed to get professional content instead of consumer content. That's easy to do technically. Great, give us $10 million, go to 20 engineers, we'll solve it. It never works like that, right? So I had the same thing at Palo Alto. If I tell my team of engineers, say, no, we need to buy this. I said, no, we can build it. Well, if you build it, you have two or three problems. One, the guys we're seeing succeed are already an year and a half ahead of us. They have a functioning team of 50 to 75 people who are working on it. You want to go hire 15 engineers. By the time you hire the right people, get your shit together, you start building, you'll have version one, and they'll be two years ahead.

• 14:33David Senra?

  Why do you think so many other CEOs make the mistake? They just, is it like an ego thing? Where it's like, no, I can build this? What is it?

• 14:41Speaker 01

  I don't think it's an ego thing. I don't think CEOs set out to make mistakes. No CEO stands up saying, let me try and make a mistake this morning. They believe whatever they're doing is right, and they most likely identify the right company. I think often M and A fails because of bad execution. Your tendency is, you're too busy, you're doing a lot of stuff. You buy the company and say, great, I have a guy or gal who manages this topic. Okay, this person does video streaming. He or she's been trying to do video streaming for the last five years. I want to buy a video streaming company and give it to him or her.

• 15:09David Senra?

  And you instead put the founder of the company.

• 15:12Speaker 01

  Yeah, I'm like, whoa, wait a minute. This person just got their ass kicked with all the resources and all the money we had to that guy who got funded by venture capitalists and who went out and, you know, lived in a crummy warehouse, hired people, blood, sweat and tears, built something that has product-market fit. And he or she should work for the empire? That's not going to work. He should be part of the empire. So I switch it. I say, okay, this person did really well. This person is now going to be the head of video streaming. Everybody can learn from him, he can work for him. That sometimes doesn't go down well with some of the people who have to end up working with them.

• 15:42David Senra?

  In the existing organization.

• 15:44Speaker 01

  Of course.

• 15:44David Senra?

  They might have been leaving or whatever.

• 15:45Speaker 01

  But it doesn't matter, right? They were the ones who were chartered with winning. They had access to resources.

• 15:50David Senra?

  And they didn't.

• 15:51Speaker 01

  And they didn't. You can't reward that behavior by giving them a prized asset around the risk that they destroy the prized asset. So that's kind of one failure mode. The other failure mode, people saying, you know, I always say this, like, you know, my innovation is my genius. There's just pure dumb luck, right? Which means I'm a founder, I created something cool. These guys are not smart. I'm just going to buy number two or number three. I'm going to spit and shine it, make it look like new, and I'm going to kick their ass. That never works. I want to buy number one.

• 16:20David Senra?

  Well, you talk about this a lot. Why is number one and number two so important to you?

• 16:24Speaker 01

  If you look at most markets, number one and number two end up with disproportionate share of the profits in the category.

• 16:31David Senra?

  This is what you were trying to get out of me before we started recording. Which we'll talk about after.

• 16:35Speaker 01

  Okay, fine.

• 16:35David Senra?

  That's exactly what's happening right now.

• 16:37Speaker 01

  Right, so you know, number one and number two end up with disproportionate share of the profits. Three gets close sometimes, but never. So if you're going to go win, you want to be number one and two in the long term. If you're not going to be number one and two, you got a problem. Now, if you go buy number two or number three, remember, number one still exists. More than likely, you're going to slow down whatever you buy, because you're still a large enterprise and you can't control every variable. There will be somebody from finance saying, I'm here to help. Somebody from HR saying, I'm here to help. So the guy says, dude, let me go build the product. And you have this whole onslaught of people who show up saying, I'm from the mothership and I'm going to help you. So you have to figure out how to maintain momentum for number one.

• 17:15David Senra?

  You don't have an acquisition team, right? I read somewhere that it's just like, fuck me.

• 17:19Speaker 01

  Well, no, there's a, there's a set of people who are very good at what they do, and they work with me. So it's not like I work alone. But, you know, eventually, every acquisition ends up with me being involved.

• 17:29David Senra?

  Let's say you figured, okay, we want to extend to this product. You look at both one and two, right? Can you get into the difference? Like, from the outside, maybe two looks similar to one.

• 17:40Speaker 01

  Yes.

• 17:40David Senra?

  I think when you get deeper and closer, like, do you notice? Can you explain like what you typically find?

• 17:45Speaker 01

  Sometimes there are small differences between one and two, right? And sometimes, we've had a situation where we bought what we thought was number one, and number two went around us and became number one because we screw up the execution. That happens too. We buy 35 companies, not everything works out as per plan. But typically, both one and two have product-market fit. And if you think about product development, and you say, this is what the end product will look like in four years. Number one could have started with this as their primary thrust, and number two could have started with this part as their primary thrust. They both look like they're winning in the product category. But it becomes, sometimes it becomes apparent later that you should have started here, because that's the primary need. And the customer wants this to work really well before they take the second half. But it's hard to tell in the early days

• 18:28Speaker 01

  when both of their 30 or 40 customers that effectively prove product-market fit. So you'll find it's a strategy question, it's an execution question, it's a product-market fit question, it's a business model question. All those things are somewhat different, but they're hard to project how they're going to pan out over the next two or three years. So you have to sit back and look at their, both their positions, and say, which one is more likely to succeed? Then you have to add to that, which one is more likely aligned with our product direction? So, you know, I made a mistake early. The first company or second company I bought, they're spending six months trying to debate product direction after we bought them. I said, whoa, wait a minute, this is a problem. So these guys started a company, and rightfully, the founder's like, I started the company with this vision in mind. I already sold the company.

• 19:13Speaker 01

  That's my vision.

• 19:15David Senra?

  What did you think the money was for?

• 19:17Speaker 01

  Exactly. It's like, no, no, but I sold the company, but I still want to build what I wanted to build. I'm like, it doesn't work like that. But it took me a while to get to the realization it doesn't work like that. I felt like, oh my God, I'm going to like, you know, cripple the founder. But I just sit down and say, dude, it doesn't work like that. So then we changed that model. So what I do now is, when I sit down with the founder, I agree a deal. And I insist on agreeing the deal with the founder. I don't involve bankers or others, because I'm like, you are going to work with me for the next four years. You really want somebody else in the middle negotiating on our behalf? So that there's eventually, so what? That's not what was sold to me? We should have the company. So we had that. The moment we agreed the deal, I tell the founder, listen, let the finance guys, let the legal guys, let the lawyers figure it out on the paper. Go figure it out. Your job is now to sit down with me and my product guys and design what our joint house is going to look like,

• 20:01Speaker 01

  and you have 30 days to do it. So we literally go back and forth on product direction.

• 20:06David Senra?

  Before the acquisitions closed?

• 20:07Speaker 01

  Before the acquisitions closed. But you don't sign the different.

• 20:10David Senra?

  I don't think I've ever heard that idea before.

• 20:11Speaker 01

  I don't sign the definitive term sheet until I get the founder to sign a joint product program. I'm like, if you don't want to build what I want to build, then we shouldn't do this.

• 20:20David Senra?

  It's natural for a founder to like want autonomy and to think that they have the right answers. So how difficult these conversations?

• 20:27Speaker 01

  You'll be surprised when there's a large check hanging on the other side of 30 days. How much more amenable founders are to aligning their product vision than after they've got the proceeds? It's unbelievable. It's night and day.

• 20:40Speaker 01

  And by the way, they have the choice to pull the ripcord. They don't have to do it.

• 20:43David Senra?

  How many have backed out at that stage?

• 20:46Speaker 01

  Nobody backed out. We backed out twice.

• 20:50David Senra?

  Why?

• 20:51Speaker 01

  Because in the process, we figured out it'd be hard to get consistent alignment of the product. We figured out it'd be hard to manage the founding team thereafter because they were they had a very strong opinion on where they wanted to go. We could sense that they were playing ball because they knew that they had to play ball to close the deal. And we just didn't feel that that was going to be the right outcome. In one case, we, as in the 30 days, as we kept digging deeper, as we kept pushing harder, we figured out that the substance was not as strong as we had sensed in our diligence early. So as you dig deeper, you start looking at architecture, saying, what if I buy architecture? And I go, wait.

• 21:35David Senra?

  Do the founders typically stay on long after?

• 21:39Speaker 01

  Some do. So one of the other things we do is, because when you buy something like this, you're buying a team. You're buying a team, you're buying the vision, you're buying the execution. So it's very hard if a founder says, I'm out. So we don't buy companies, the founder says, I'm out. If you're out, you should go, which means you could kill the company anyway if you're going to be done. So you gotta be, you gotta want to be around. What will happen is typically if there are two or three founders, one will slack off because they're doing biz dev. So maybe we don't do biz dev, we do better biz. And once we go to market, we don't need that. So you'll find founders fall off depending on the function that they bring in. But it's never the product guys or engineering guys who fall off because that's what we're buying. We need them. We still have many founders who work at Palo Alto. Some have converted to just continuing to work at Palo Alto. Some have the founding itch and after three years to leave. But

• 22:23Speaker 01

  the other thing which we always do is when we buy a company, we revest the founders for three years, ideally four.

• 22:29David Senra?

  Why is that so important?

• 22:30Speaker 01

  We want continuity. We want the continuity from the execution of vision perspective, right? Because they built something, as I've said, it takes four to seven years to build a great product. Typically, we buy these product companies three years in, two years in, four years in. We think there's another two, three years of consistent product development that needs to be done. And we want that consistency and continuity of the founder and the founding team to keep driving that. So if they're not there to lead it, then there's disruption. Disruption could cause us to lose the lead. As a number one in the category, we want them to continue to execute in that direction.

• 23:00David Senra?

  I've spent the last decade reading more than 400 biographies of history's greatest founders. And if I had to distill what I learned down to a single word, it would be focus. The best founders spend all their time on the thing that makes them great. They spend their time building products, serving customers, and growing their companies. The greatest founders would not spend time rebuilding authentication infrastructure. That is why more than 3,000 of the fastest moving and most important companies in the world use WorkOS. Companies like Anthropic, OpenAI, and Cursor all use WorkOS. WorkOS makes it easy for you to sell your products to enterprise customers. If you build software and you want to sell to the largest companies in the world, there are some requirements that you cannot ignore, like single sign-on, SCIM, role-based access,

• 23:45David Senra?

  audit logs, and more. You could spend months building all this yourself, or you can use WorkOS. WorkOS provides the infrastructure to make your software enterprise-ready. Go to workos.com and get started today. That is workos.com.

• 24:02David Senra?

  I want to go back to this idea of like looking at the number one and number two, and then you get really close to them. And is there anything else that you're surprised? But again, they may look similar from the outside, but the more you dig in, you see why number one is in the position they're in?

• 24:17Speaker 01

  You know, what's interesting is the hardest thing to put your arms around as a larger company is sometimes number ones also win because of sheer will of the founder. Some founders are just, what do you call them? Alpha killers or whatever they are.

• 24:35David Senra?

  What are we talking about? We need context here.

• 24:38Speaker 01

  Yes. You don't want to be, okay, good.

• 24:39David Senra?

  No, no, we've run into each other a few times. And I've watched a lot of your interviews, and I just think there's like a no bullshit. The reason I asked you to be on the show is because like, I like these founders just seem to be like minimal bullshit. Like, we're here to fucking win, and that's what we're doing.

• 24:53Speaker 01

  Yes.

• 24:54David Senra?

  And like this is, I think you've already alluded to this a few times. And I was shocked when we were talking before we started recording, you were kind of like playing that down a little bit. I was like, no, no, no, I'm pretty sure I know what's sitting across from me. And I was naming some other founders that remind me of you in the way that you operate.

• 25:10Speaker 01

  It's one thing to be that as a leader of the entity. It's one thing to have people within your team who are that way. If you acquire a company and the founder is like you described, they're going to break glass. And it's okay. But they also have to find a way of coexisting with the larger entity. Because what you get with working with a Palo Alto, for example, and if you're a founder, you founder, I have 6,000 people in the field. You have eight. You gotta find a way of leveraging 6,000 people. They're not all bad. They're amazing, right? And sometimes when you, when you're a founder, you take on this point of view that everybody's stupid. I'm smart. I'm going to get this shit done. Anybody who comes in my way is basically slowing me down, is not competent enough.

• 25:54Speaker 01

  You gotta change, you gotta need a mental reset. If you're going to survive and succeed in a larger ecosystem, you've got to be able to balance, say, I get it. I get 6,000 salespeople. My job is to motivate 6,000 people to go out there and sell my product. Because they do, my vision of wanting to make this an amazing product is going to be realized because these 6,000 people are going to be my amplifiers. Sometimes founders who are used to doing small team stuff and going and being the underdog don't realize you went from being the underdog, now you're part of the overdog. And that's the only risk that one has to watch out for.

• 26:24David Senra?

  But tie that, what you're saying right now, to the will of the founder. So you're saying like, the will of the founder running, they're succeeding in a smaller company, largely built due to the will of the founder, they have to modulate their behavior?

• 26:36Speaker 01

  Yes. To modulate, you have to be, you have to make sure that they can modulate their behavior and succeed in your environment.

• 26:41David Senra?

  Got it.

• 26:42Speaker 01

  If they can't modulate their behavior and succeed in the environment, then I lose their their leadership on the product part because they're going to rub people the wrong way, and then they're going to get frustrated. So that's what I have to watch out for. Sometimes the one and two has to be adapted by us for who's going to be a better fit in our environment.

• 27:00David Senra?

  I'm kind of like personally obsessed with this idea of like, there's usually a gap between one and two.

• 27:05Speaker 01

  Yes, I heard that the third time, yes. But keep going. You can ask it again.

• 27:09David Senra?

  No, no, I'm not.

• 27:10Speaker 01

  Maybe I'm not smart enough to answer.

• 27:11David Senra?

  No, no, I'm not. Again, this is, this whole show is for my personal education.

• 27:15Speaker 01

  I can see that. But remember, one and two is also a judgment call. It could be one and two, you could have one, you could have this one, A call one and B call two. And I could have B call one and A call two because I'm looking at different criteria to measure it. There's no obvious criteria who's one and two. They would have 30 customers, they would have same amount of ARR. Which one is one and two?

• 27:35David Senra?

  Are you a tennis fan?

• 27:36Speaker 01

  Yeah.

• 27:36David Senra?

  I'm not really, but.

• 27:38Speaker 01

  But sure. Why don't you use a tennis analogy?

• 27:39David Senra?

  But I'm going to tell you, no, because I had dinner. It was really interesting. I had dinner one time with, he's a mental coach to some of the top tennis players. And when he says mental coach, he's like, literally, like, they got other people helping with their swing. My conversations are all about what's going on in their mind. And he said something that was very fascinating. He's like, you know, take the top 200 tennis players. He's like, the difference between one and three is negligible. He goes, the difference between four and 200 is smaller than the difference between four and three. And he was explaining like, like what appears to me outside, like, oh, that person's number four, that person's number three or two. He's like, that seems to get, gap is like really small. He's like, it's actually a lot bigger when you get deeper and you actually understand what is going on in their, like, in his case, he's like, what's going on in their mind is actually accounting.

• 28:24David Senra?

  It's not like a physical, it's not like number three and number four are that different physically. It's like a lot in their mind. So I like these, like, this personal fascination with sports business or otherwise of like, oh, kind of from the outside, this kind of looks similar. And I've run across a ton of founders, and you spend time with them, like, oh, this is why this person is, the gap between them and their next competitor is so large.

• 28:44Speaker 01

  As you said, the criteria defense, right? Like, some could have clear company attributes, which make them one or two. Somebody's got twice the ARR than the other one. Yeah, we get it. They could be deemed as one much easier. Sometimes they have similar starting grounds, or they started from the same place. One came at it from a different angle, then it becomes then which founder is going to lead this to success or the other? And that's where you're getting into the mindset of the founders and the leadership team. And that's what, you know, we say it differently. I say, my job is to fund, once we identify one and two, remember, they also have to be willing to sell.

• 29:14David Senra?

  Which, the people we were talking about before we started recording are not selling for any price.

• 29:18Speaker 01

  That's right. Yes. So there's also that.

• 29:21David Senra?

  Yeah.

• 29:21Speaker 01

  You know, you've got to reanalyze that from the advantage point, saying, well, these could be alpha founders. They could be winners. But dude, they're also, they're also sending you a signal by saying, I'm willing to sell.

• 29:30David Senra?

  Have you talked to Hock Tan about this?

• 29:33Speaker 01

  Have I talked to Hock Tan about selling?

• 29:34David Senra?

  About, he does a lot of acquisitions.

• 29:36Speaker 01

  He does it very differently.

• 29:37David Senra?

  I know. But have you talked to him about this? His mindset's a little extreme. So we were, me and you were together.

• 29:41Speaker 01

  Educate me, yes.

• 29:42David Senra?

  Okay. Well, me and you were together at Dell's house. And this is where I heard this story where he was advising a younger founder that was also there. And he was just like, just make sure that on day one of your acquisition, that the acquired company knows that you are the conqueror and they are the conqueror.

• 30:04Speaker 01

  I have a slightly different philosophy.

• 30:06David Senra?

  I know you. I know you do. Then I asked him, I was like, Hock, why don't you do any podcasts? Do you want to do my podcast? He's like, oh, no. He goes, my wife forbids me to do podcasts. I go, why? He goes, she said I'd get canceled.

• 30:19Speaker 01

  See, I say the opposite. I tell my team, when you're starting a negotiation with a company, remember they're gonna be your colleague. Don't treat them with disrespect.

• 30:27David Senra?

  He's obviously an extreme character. I wasn't taking his disrespect, but like-

• 30:29Speaker 01

  So which one's right? Which one's one and two?

• 30:34David Senra?

  I obviously know that. Think about it. There's no way you could think about it like he does, because you just said, no, this guy's coming in and now he's your boss.

• 30:40Speaker 01

  Look, my point is that I see differently. I cannot win if 20 people around me don't feel they're winning. And for them to believe that they're winning, they have to believe they're a first-class citizen. They have to believe that they're part of the team and their winning matters. And their winning is as much for themselves as it is for me.

• 30:58David Senra?

  Has there been any acquisitions you did too early?

• 31:01Speaker 01

  When I walked in, we had just bought a company called evident.io. Palo Alto bought it before I got there. And then we ended up buying a company called Redlock, which is the same space. The difference was one only worked on Amazon, the other one worked on all three clouds. And I suspect the one that had been bought early was too early, which was bought by my predecessor. But it didn't matter. The company bought it too early. And then we bought the second one, which was in the same space, just further along. So sometimes you could buy stuff too early. It becomes a question of price, stage, and conviction. If you marry the three, right? Am I convinced this is gonna be a big space in the future? Okay. If I'm convinced it's a big space in the future, I need to have a footprint in that space. Sometimes I can go spin up my own team, and then go charge it down and go make it work. Or I can go out and acquire something. The question when

• 31:46Speaker 01

  I go acquire something, and how long had they been around in that space? And, you know, how expensive was it gonna get? And I think the current times are most representative of the risk. Today, companies are getting funded valuations I don't understand, right? Now, imagine if I wanted to acquire a company today, the same company you've kind of acquired today would be one-third, one-fourth the price three years ago, in a different funding environment as compared to today. They're probably as early, but three times or four times more expensive today.

• 32:17David Senra?

  So what do you do?

• 32:18Speaker 01

  You buy them. If it makes sense on your strategy. Look, M&A is not a strategy. M&A is a mechanism to validate or to amplify your strategy, or to execute your strategy. And people come and always ask me, what's your M&A strategy? I don't have one. I buy companies when I believe I need to go win in a category and I don't have my team at the place I'd like them to be at this point in time. I gotta go look for another team that's gotta figure it out and they have the right people in place. So you go buy it. If something's worth $200 million, it's worth $800 million. Because my job is to take the $200 million asset and turn that into a $5 to $10 billion asset.

• 32:53David Senra?

  If something's worth 200, it's worth 800. What does that mean?

• 32:56Speaker 01

  As a $300 billion company, I should be buying things which I believe in the next five to 10 years will be worth $5 to $10 billion for us.

• 33:02David Senra?

  So you're not gonna remember the other 500 million. This is Egon Durbin. So, in there was one of the most memorable parts of Ari Emanuel's book. They're buying W, no, IMG.

• 33:13Speaker 01

  Yes.

• 33:14David Senra?

  And I think they wanted to pay 1.9 or 1.8, and it went to 2.2, something like that. And I think maybe it might have been like Ari's team that was kind of like fucking up the deal. And Egon comes in, who has way more experience with this. He goes, you're never gonna remember the 400 million.

• 33:28Speaker 01

  Yeah.

• 33:28David Senra?

  And he's like, is it an asset we want or not? Like, you're gonna remember fucking up the deal, but you're not gonna remember the 400 million.

• 33:34Speaker 01

  Yeah.

• 33:34David Senra?

  And, you know, they obviously closed the deal and it's been way more valuable to them.

• 33:38Speaker 01

  Egon and I bought a cricket team together in London.

• 33:41David Senra?

  I thought you did that with Devesh.

• 33:43Speaker 01

  No, no. Egon and I are the equal owners. He and I came up with this together and he called me. I was about to go play golf at the AT&T and he called me. He says, how's the auction going? It's like 6 o'clock in the morning, because it's in London. I said, the last auction went for two rounds. We're at round number 24. He's like, I know. You're gonna want it cheap, because you like value. This is an upbringing. This is sport. Welcome to sport. Don't stop bidding. I was still on the phone with you to give you moral courage.

• 34:12David Senra?

  Wait, how many more rounds? You were at 24. How many did you have to go?

• 34:15Speaker 01

  We ended up at 29 rounds.

• 34:16David Senra?

  Well, once he said that, you're like, fuck it, we're gonna miss.

• 34:18Speaker 01

  He was like, yeah, what's the worst? We're bringing back half of it. Doesn't matter. Because this thing's gonna be a huge success, or it's gonna be failure.

• 34:24David Senra?

  So he did it to you too?

• 34:25Speaker 01

  No, but I did the same thing, but I was trying to be cute on the other one. And he just reminded me that, you know, you say that in your professional life, think about it in your personal life too. So that's what we did. You know, I saw him at the range at 7 o'clock and he said, do we own the team? Like, yeah, we own the team now. It happened. So yeah, he's consistent in his, in his point of view.

• 34:44David Senra?

  I've heard this phrase differently before. I'm curious if you, if you agree with this characterization. You're not buying companies, you're buying founders.

• 34:51Speaker 01

  You're buying teams. You're buying teams, you're buying their point of view, you're buying their strategy, you're buying their execution, right? A company is just a construct that is around the team that allows us to be held in some legal entity, protect IP, and eventually turn that into sort of go-to-market capability. But effectively, what is a company? When you come up with an idea, your first instinct is not that I'm gonna start a company. Your first instinct is, I'm gonna go build something amazing.

• 35:14David Senra?

  Yeah.

• 35:15Speaker 01

  When you go build, you call yourself a builder. You go find like-minded people who have shared the vision. And then you're the most charismatic person in the room, because you're trying to convince people to get on the bandwagon for your story. Because you had the idea. And it's typically one or two or three people. So you're doing everything. You're a builder, you're building, you're, you know, validating your strategy every time you hire the next person. You're looking in their eye and telling them, this is what we're gonna build. And the person gets excited. And if you're hiring smart people, they also have to buy into it. So you're basically building a team. You're building a team of like-minded people. You're bashing out the edges. You're aligning the strategy and getting to a point and say, okay, now we all agree we're gonna build this. Now let's go at warp speed and build the shit, because you're gonna beat everybody else to the punch. That's what you're doing. The company is just a legal entity. Think about most of these guys.

• 36:00Speaker 01

  They probably have one administrative person who does HR, finance, facilities, and brings coffee. So, I mean, the company is a construct in which you organize. But you're actually buying a well-functioning cohesive team. That's what you test for. Can this team execute better than other teams out there? And when you think about it like that, and say, I'm gonna compete to that team that's kind of near and a half getting together and training together, and they're on the field every day, they live in the same house, they work 80 hours a week, and say, I'm gonna beat them by hiring a bunch of corporate people, by going through my HR team, going through four interviews, and going through internal processes. Like, holy shit. You're never gonna beat them. They're far ahead.

• 36:36David Senra?

  There's a couple of things that are popping in my mind while I'm listening to you. Have you ever heard this guy named Henry Singleton?

• 36:41Speaker 01

  No.

• 36:41David Senra?

  Okay. Henry Singleton, essentially like the proto Buffett. He ran this very successful conglomerate called Teledyne in like the 1960s. I found him because I read, when I'm interested in somebody, I read every single thing they've ever, like, written about them or written by them. And they will all tell you, the people they studied. And so Buffett and Munger kept talking about this guy named Henry Singleton. Munger said that Henry Singleton was the single smartest person he ever met. Buffett said it was a crime that American Business School students didn't study him. His returns were utterly ridiculous. And a lot of the ideas that I thought that Buffett used for Berkshire were actually, he learned from Singleton for Teledyne. But he grew by acquisition, just like you did. And at one point, he, I think he does like, I should know this, I just did another episode on him.

• 37:25David Senra?

  Let's say 135 acquisitions. I think at one point, he owned 130 companies. 129 of them were profitable. So he bought really well. But then, he changed his strategy and he stopped acquiring. And then from there, he never acquired another company for like another 15 years. I'm thinking about him while you're talking. Is there a chance where Palo Alto Networks stops acquiring?

• 37:46Speaker 01

  Possible. As I said, it's not, it's not, it's not as existential a strategy for us. It's a way we can maximize the value for the business. It's a way we can maximize the outcome for our customers. At some point in time, we believe we've reached a point where the marginal value to accrete to the customer is through us making sure all of our stuff works at a customer. Maybe we focus on that. There's no hard and fast rule that we have to keep acquiring.

• 38:12David Senra?

  Is anything going on in AI changing how you think about acquisitions?

• 38:15Speaker 01

  Yeah.

• 38:16David Senra?

  Can you say more about this?

• 38:18Speaker 01

  This is the most transformative technology we've ever seen in our lifetimes, and possibly will be. So if you look at the impact it's already having, it's fundamentally changing how everybody works. Like, can I say this differently? When I was at Google, we democratized knowledge or information. This is democratizing intelligence, right? We all have in our back pocket, something that gets more and more intelligent over time. So we basically have access to intelligence we never had. Like, I'm pretty sure two or three years from now, AI will get to a point of reliability where we will trust it as much as a human being who's an expert in the topic. You know, you talk to your nutritionist, you talk to AI and say, you know what? My nutritionist is not smarter than my phone giving me nutritional

• 39:02Speaker 01

  advice, or my physiotherapist, or my trainer. So you suddenly find that AIs get to a point where it's gonna have so much data, so much tribal knowledge, that it's gonna be able to decide. You'll be able to torque it, saying, listen, give me advice which is at the frontier, which is kind of a little bit risky, or give me advice down the mainstream. You'll be able to torque, saying, how much intelligence do you want? How much differentiation you want in the intelligence that you're gonna get? So if that's gonna be true, it's gonna fundamentally change the way we work. It has to, right? A lot of organizations are structured in work that is being broken down into silos, right? Even the process of product development is split across eight different teams. You have documentation people, you have testing people, you have coding people, you have product people, you have UI people. So you've

• 39:44Speaker 01

  got eight different sets of people who combine together to build a product, which makes no sense. The only reason we did it, because we created a specialization, because nobody could be great and amazing at everything. But if you believe that you can harness all this intelligence in a way, that one person could master all these eight crafts, because they have very able assistants, which will do 90% of the work for them, it fundamentally changed the way we get shit done, the way we build things, the way we do anything in our lives, the way companies are created. So that's gonna be true. The shape of a company, the shape of the organization that we run today is gonna be fundamentally different five years from now.

• 40:19David Senra?

  I found one of my all-time favorite quotes when I was reading the book Zero to One. The quote says, "The single most powerful pattern I have noticed is that successful people find value in unexpected places. And they do this by thinking about business from first principles instead of formulas." That is exactly what AppLovin has done with their advertising platform. AppLovin connects you with over a billion potential new customers in mobile games. AppLovin allows you to capture undivided attention. AppLovin ads are full-screen videos that are watched for an average of 35 seconds. That is retention that blows other ad platforms out of the water. And you can launch on AppLovin in minutes. You set the goal and AppLovin achieves it. No complex setup, no expertise needed. And AppLovin

• 41:02David Senra?

  scales quickly. They can put your ads in front of over a billion potential customers. Other businesses have seen immediate results, scaled to hundreds of thousands of dollars of spend per day, and increased their revenue by millions. So you wanna get started quickly before all of your competitors are on AppLovin. And you can do that by going to applovin.com. That's applovin.com.

• 41:25David Senra?

  Cyber security companies more valuable.

• 41:27Speaker 01

  Yeah, I think even more so more technology, more interconnectedness makes cyber security companies more valuable. Look, cybersecurity didn't exist 25 years ago because there was no connectivity. You had a mainframe, you logged in, it was secure, there's no problem. The problem is now David can log in from here into his bank account. Now that becomes a track vector. So the more people can log into shit from everywhere, just expands the attack surface. I saw this morning, Facebook says 3.65 billion people who are daily users. There's 3.65 billion people getting into their infrastructure every day. Every door into the infrastructure is a potential cyber attack surface. You do that across the world. I don't know, between the 8 billion people we have, we must interact with hundreds of consumer applications.

• 42:09Speaker 01

  There must be trillions of interactions every day, which are on a line that allows you to interact with some enterprise's infrastructure. The more you do that, the more likely that you need security across all those vectors. The more technology changes, you need more capability around security. For example, the products that'll secure AI don't exist fully yet because AI is so new. So yes, it's good for our business, the more you connect things.

• 42:32David Senra?

  You're like a, I don't, like more of like a stoic kind of person. You seem like you don't get stressed or you said like, I read something like you said your business doesn't stress you, which is very unusual.

• 42:42Speaker 01

  Yeah.

• 42:42David Senra?

  Thing to say.

• 42:43Speaker 01

  Life should stress, you should wake up every morning, do the best you can. And then remember, if you grew up sort of in India with Hinduism, it was like, there's a strong sense of fatalism. All you can do is do your best.

• 42:55David Senra?

  Okay, I don't know about this, explain it. Explain how you grew up in like this fatalism thing.

• 42:59Speaker 01

  Remember, like you've got 1.8 billion people in the country. You've got to make sure that they all understand that they can do their best. And eventually there is a hand of God, which dictates what eventually happens. Or it's the notion that it is uncertainty. You can't create full certainty. Things will happen to you, which you can't control. The only thing you can control is what you do. And if you do what you do really well, then you should sleep well. Because you can't get worried about everything that can happen to you from an uncertainty perspective. That is a sense of fatalism. That is what keeps society somewhat orderly.

• 43:27David Senra?

  But you do understand it's easy to say that and very hard to apply for a lot of humans.

• 43:32Speaker 01

  Well, it doesn't stop anyone from trying, right? We try and control every outcome that we can around us. We try and minimize risk around us. We do, we all do that. But at some point in time, we're going to say, I've done my best.

• 43:41David Senra?

  Did you have this like ability when you were younger and like early in your career?

• 43:47Speaker 01

  No.

• 43:48David Senra?

  This is like.

• 43:48Speaker 01

  This is recently found in the last five years, yes.

• 43:52David Senra?

  You're saying this is like the last like five years. So you're working at Google, high stress, more anxious person?

• 43:59Speaker 01

  No, Google's the best business. Like, you know, the search business keeps going.

• 44:03David Senra?

  Still like, that was like the greatest, like that seems to me, and maybe I'm wrong, is like you had like a lot of success before that. But you know, you're working on like, you know, once in a hundred year company at that point. You had, and you were young, you were in your 30s, right?

• 44:17Speaker 01

  Yeah.

• 44:17David Senra?

  Like.

• 44:18Speaker 01

  It can get to your head.

• 44:20David Senra?

  But I feel like the pressure to like, this is a huge opportunity. This could be a once in a lifetime. This will change, this opportunity will change my life.

• 44:26Speaker 01

  Funny, it didn't feel like that when you were there.

• 44:28David Senra?

  Okay, say more about this.

• 44:29Speaker 01

  Normal, you just felt wow, this is this great rocket ship that's working. And remember, you're 34, you've never actually worked in any other company of a similar ilk. You're now the center of attention of technology and like, great, everybody's searching around you. Every morning you wake up, there are more searches. Every morning we wake up, more people want to advertise. So it's an execution problem. It's like, how can I get like, when I joined, people were spending money at Google in Austria with an American credit card. That's the only way you could buy advertising in Europe. Can you imagine? Can you imagine it comes like, I'm so sorry, I can't collect your money. You've got to go get yourself an American credit card in US dollars and then pay me.

• 45:02David Senra?

  And they're doing it.

• 45:02Speaker 01

  Wait, let me do that. I'm looking, saying, we're making $10 million in Austria. We don't accept local currency. How the hell is this happening? That's a, that's, that's a different business problem, right? You're just basically, it's like, let me see if we can get out of their way. So you're trying to eliminate friction and try to create scale, which is great learning for me. And I said, great, that I can do. I can eliminate friction and create scale. I don't have to worry about demand. Like, I used to joke, like, you know, I used to go to a customer saying, what are you here for? What do you do? So I'm the head of sales for Google Europe. It's like, what does that mean? So, well, I sell advertising. Great. So how much is it? I'm like, I actually don't know. It depends on what the last guy bid. He's got to bid more than that. So you can't tell me what's going to cost me. I'm like, not really. It depends on how much you're willing to bid. Great. How much can you take a day?

• 45:46Speaker 01

  I don't know, it depends on the number of people who search because we can only serve ads when somebody searches. So you don't know volume, you don't know price.

• 45:53David Senra?

  Yeah.

• 45:54Speaker 01

  What kind of sales guy are you? Think about it. I'm selling ads, I don't have, I don't have control on volume, I don't have control on price. Price is controlled by bidders and volume is controlled by people who search. I can tell you, when it rained in France, we used to get a lot more revenue because people sat home and searched. That's good. So you got to still go to customers saying, listen, the way it works is you work out an ROI. Every search is worth something to you. If I send you a search, look at your conversion rate. If you convert that into an insurance sale or into an e-commerce transaction, you figure out how much you're willing to pay for a lead. When a lead becomes conversion, so we used to sit and do ROI maths with our customers so they can understand what their maximum bid should be. And they say, now go give us all your money and just as long as it hits below your bid, take as much searches as you can. That was my job.

• 46:40David Senra?

  It's pretty straightforward. I'm friends with Adam Ferrugi, the founder of Apple. And then, and he's just like, very simple, like, I sell revenue. Like, if they're giving me a dollar, I have to give them back more than that. And it's like, very easy to sell, as long as I can give them back more than that. We'll come back to Google in one second. So I want to get to this though. From the outside looking in, it seems like because of the proliferation of AI, the fact that it, there's like, I think you were, you were just on my friend's show. I'm friends with John and Jordy from TPBN. And I caught a clip of that today and there was some kind of.

• 47:07Speaker 01

  Yeah, there was a discovery of a vulnerability called PHP, which is like used like 22 and a half million places, which is being used right now.

• 47:13David Senra?

  Yeah. And so my point is like, you've got to be waking up every day, hearing more crazy shit. It's only going to get crazy in the future.

• 47:18Speaker 01

  Yes.

• 47:19David Senra?

  And you seem to not allow yourself to be stressed by it, which from the outside, it seems like this would be the most intense stressful part of your entire career. Why am I wrong about that?

• 47:29Speaker 01

  But I can't do anything about it. And we all have to go figure this out, you've got to go fix it. But stressing is not going to change the outcome.

• 47:37Speaker 01

  The outcome is going to be changed by us getting, getting, getting something, something to do with it, right? We all discovered this morning, I found out about it like yesterday in the morning. Our teams went and looked at everything we have to make sure we don't have the vulnerability. We found it, we blocked it, we found the patches, we bashed ourselves. He said, how do we go protect our customers? Team worked overnight, built a patch. We, when it came out this morning, we announced, they announced their patch, we announced our patch. They put it out in the public domain, we're getting on the phone to any customer who has a problem. We solve it, that's all we can do.

• 48:07David Senra?

  So how do you describe like this philosophy though?

• 48:10Speaker 01

  I'm just saying, wake up every morning, do the best you can to the best of your ability, leave no stone unturned, and then let fate do the rest.

• 48:17David Senra?

  Is this real?

• 48:18Speaker 01

  Yeah.

• 48:19David Senra?

  Well, okay. When's the, when were you the most stressed or anxious in your life?

• 48:24Speaker 01

  When I was the most anxious in my life, when I had to give a speech at my daughter's wedding.

• 48:29David Senra?

  Is this the daughter that just started the fund?

• 48:30Speaker 01

  Yeah, this is the daughter who got married in February in India.

• 48:33David Senra?

  What's her name?

• 48:34Speaker 01

  Aisha.

• 48:34David Senra?

  Congratulations.

• 48:36Speaker 01

  She used to work in marketing in Brex and.

• 48:38David Senra?

  Wait, she used to work in marketing for Brex?

• 48:40Speaker 01

  Yes. Kids don't take advice from parents with the most part. But I'm blessed that once in a while she'd listen to something and she'd go process it differently. And I said to her, I said, you know, what excites you? She said, that, you know, it's exciting when marketing doesn't seem to be the most important function in a company. So I'm working in marketing, what should I be thinking about? I said, look, if you look around here in Silicon Valley, the most exciting job are people who get to talk to founders, people get to understand what they do, get excited about business. If you're excited about business, you got to think about venture capital. So she thought about it, she did her own research, figured out that she's going to go work. And she worked with Bill Maris at Section 32. And then she's getting married this year and she's like, I think I should start my own fund. I said, that sounds like a great idea, you should. So she's been through the motions, she's done a lot of research, figured it out.

• 49:25Speaker 01

  Then she started going around thinking who would be people who'd invest in her. And she said, will you be my advisor? This is the best thing a father can get. And she calls me once or twice a day, we talk about companies, we talk about what she's thinking about. It's a blessing, it's great.

• 49:41David Senra?

  That's beautiful, man. When you think about your own childhood, did your, this innate drive that you had to achieve, largely internal, I would imagine, did you get a lot of pressure from your parents?

• 49:51Speaker 01

  No, my parents didn't tell me what to do. I used to come home from school, do my homework. My mom would be happy that I did it. She'd be chasing my sister around, trying to get her to find out what homework she had. I got my shit done. My dad didn't know how I got into university. He didn't know I got into business school in the US. I just went to him and said, I need $2,000. He's like, I don't have that. I said, can I give you 200? He's like, yeah, I'll take 200. I took 200 and showed up here. Then he sent me 2,000 afterwards to pay part of my tuition and that was it.

• 50:21David Senra?

  You don't put any pressure on your kids?

• 50:23Speaker 01

  No.

• 50:24David Senra?

  Like, how different are you as a parent than your parents were to you?

• 50:30Speaker 01

  Look, that was a different era. At that point in time, parenting was different. Parenting is different now. Parenting in India is different, parenting in the US is different. So, you know, you obviously have all those differences that come into play. I have two younger kids who are 11 and 10, so more involved in their lives than I was with my 29 year old.

• 50:45David Senra?

  Why?

• 50:46Speaker 01

  More time. I consciously try and take out time and I'm sure my kids will say it's never enough and my wife will say it's not enough. But I try and take out time as much as I can. So it's different. No, I don't believe in putting pressure on my kids. The kids have to be able to express themselves and do what they believe is best. But I've seen, so I did some bizarre thing. I don't know how many people have been born since humanity started. Must be in the tens of billions, right?

• 51:10David Senra?

  No, I think it was, I mean, I read about this a long time ago, it was like over 100 billion.

• 51:14Speaker 01

  Okay, 100 billion people have been born. It's a well-known problem. Every kid has a parent by definition. And even now, we struggle with parenting as a problem because there's probably so many variants of parenting that most people can get it wrong. So I just want my kids to be happy in their lives. If they're happy, my mission is accomplished because I've seen so many scenarios where kids are not happy. And it's not clear where, where, where things go wrong. It's not clear from a parenting perspective, or it's in the DNA, it's in circumstances. So I just want to make sure my kids are healthy, happy and balanced. If I can achieve that, they can do whatever they want.

• 51:49David Senra?

  I love the framing you just put on there. It's like, everybody's had a parent, parenting is a no thing, it's around, and we still don't have it figured out.

• 51:55Speaker 01

  No, you show me where's the ultimate guide to parenting?

• 51:58David Senra?

  I'm particularly interested in this because most of the biographies I read, obviously the person usually starts out, there's some people that are born into wealthy families and they wind up achieving a lot. Obviously, most of humanity is not wealthy, so therefore, like, most of the people you're going to read about weren't. And there is something that they almost universally struggle with, which is basically, I was the son of a poor man, now my kids are the son of a rich man. What do I do about this?

• 52:20Speaker 01

  Nothing. You created a distinction by yourself. When you were the son of a poor man, there was somebody way poorer than you. And from their vantage point, you were the son of a rich man. Right? So I think we all get born into a circumstance. And things very dangerous to take that circumstance and keep reminding your children, remember, I was poor, you should be more grateful. That's what happens, right? Especially for people who are very, not very, who were poor relative to where they are today. They feel this notion where they have to keep reminding the kids, well, it wasn't like this when we were born. No, we used to do this, we used to that. Like, dude, get over it. They're born in this. Figure out a way that they can enjoy this and make sure that they learn how to

• 53:02Speaker 01

  yearn for more, how to go have drive, how to go get achievement, right? You gotta be careful. So I think you have to be blessed if you can find a way that your kids want to achieve. They want to build, they want to make things happen on their own. And they just don't take their circumstances for granted. And that's the hardest part in parenting is to make sure that you kids have drive, your kids have ambition, your kids want to achieve. My son is obsessed with basketball. Great, go for it, let him follow his passion. My daughter wants to be a gymnast. She's got tremendous work ethic. She's great. He's extremely sort of, you know, friendly. He likes people. He likes hanging around people. He knows a lot about what he wants to know. That's great. If my kids can have passion, they can go chase their passion. They can show ambition and drive.

• 53:44Speaker 01

  I don't care if he becomes a basketball player, a basketball commentator, as long as he wakes up every morning and is happy and felt that he gave it his best.

• 53:51David Senra?

  I completely agree with this perspective. Out of all the examples I've read about, I love what Sam Walton said in his autobiography, which he wrote when he knew he was dying, had cancer all over his body. And he says, I know I'm a fairly overactive fellow, which is the most understatement of a century. He's like, I don't put pressure on my kids. This is like, let them do. Why would I want them to be like me?

• 54:09Speaker 01

  But it's kind of interesting. If you do it the right way, you know, your kids will watch your behavior. They watch more behavior than you think. They know, they know more about how we are, who we are than we possibly can ever understand. And sometimes they will want to do certain things like you. But if you try and force them to do certain things like you, you're never gonna get there. I can see my kids would like to do certain things like me. And that's great. I'm very happy that they want to. And I'm sure sometimes they're looking saying, I never want to do that thing that my dad does. So that's fine, too. As long as they can find out what parts of what I do, they like to do, and what parts of what I do, they don't like to, they're fine. I'm okay with that.

• 54:46David Senra?

  I'm thinking back to like all the other people I've had on the podcast. And I'm like, I just feel, yes, AI is changing every single business. Toby Lukey was on this, this, this show earlier this year. I'm gonna see him again in like two weeks to record again. And his whole point was like, we're gonna look back on the year 2026, where because of AI, like every business is up for grabs. So every business is being transformed somewhat, right? But I feel like yours might be the most out of anybody else I've had on the show.

• 55:10Speaker 01

  No, no, no, let's, let's, let's break it down, right? Cybersecurity is, because I don't come from, and I told you, it was two different words in my mind 80 years ago, so I'm still gonna treat it like that. It's somewhat straightforward, right? Cybersecurity is the idea that bad actors trying to get into your infrastructure and exfiltrate something important. Let's take that for a promise. If I know it's bad, I can stop it at the perimeter, right? Bad guy shows up at the door, you know, he looks bad. He's got a, he's got a hood, he's got a gun. This is bad. We know how to stop them. So half of cybersecurity is stopping bad guys at the perimeter, bad things at the perimeter. Okay? That's half of cybersecurity.

• 55:51Speaker 01

  10, 20% is analytics, how to get hygiene right once it's inside your house to make sure shit's solid. The remaining 20, 30% is if somebody gets in, what do I do? Things will get through your perimeter, inside your infrastructure. How quickly can I find the bad guy? And I quickly can eject them out of my infrastructure before he or she can do harm? That's cybersecurity in a nutshell. Okay? How does AI impact this? Okay, well, let's start with your comment about vulnerabilities. AI says, I can find holes in your perimeter faster than anybody else in the world. Okay? It used to take days to find it, it used to take forever. I can find holes to enter your perimeter. Okay, great. My perimeter just became more porous, right? Now, AI is not gonna patch the perimeter.

• 56:32Speaker 01

  I have to still go look through the infrastructure, find where the porous parts are and patch them, right? I could be a software company, I could be an infrastructure provider, because everybody's IT stack is made up of 10,000s of vendors. So all of everybody's exists in our software and the software is driven by our customers themselves. So that's kind of the step one. That's what we're seeing right now. The likes of MITOS, the likes of the new models that OpenAI has, the likes of G M 5.3, they have immense capability of finding vulnerability. And bad actors can rent them cheap and throw them at you and find everything that you have vulnerability around. So what is the call of the hour? The call of the hour is to find a way to bash these things swiftly so these bad guys can't get it. Okay? Guess who's building the service? We're building a service which is called virtual patching. We write signatures, we put bandaid around the entire perimeter, we know where the holes are.

• 57:17Speaker 01

  These people can't get in. Over time, our customers will patch the underlying systems and they'll be fine. So that's kind of one problem. The good news is our business has gone up since MITOS came in.

• 57:27David Senra?

  That's what I mean, that's what I'm trying to get to.

• 57:29Speaker 01

  People are like, holy shit, can you help me patch it? Now guess what? Yes, I can help you patch it. I inspect everyone's parameters. So you've got a laptop somewhere, I live on a laptop, I charge you 25 bucks a year. And I watch 150 megabytes a day, give or take, on your laptop to make sure nothing bad's coming in.

• 57:46David Senra?

  You told me you're hacking my phone calls.

• 57:48Speaker 01

  I was just kidding. I wouldn't know how to do it. Anyway, remember cybersecurity is two words. So the marginal cost of inspection of traffic in laptop by me is zero. I don't charge you more the more traffic that goes through. AI is set up to charge you every time you run traffic through AI in terms of tokens. So if AI tried to do my job at your endpoint, it'll cost you $5,000 a day. Or pick a number, right? $500 a day, or pick a $50 a day. They can't do what I do at $25 an endpoint. If you go back inside and if the bad actor gets in, what happens? Yes, AI can help you analyze all the anomalous behavior quickly, but you still need harnesses, you still need security expertise, you need data ingestion, you need infrastructure.

• 58:33Speaker 01

  So in a nutshell, our business is not at risk.

• 58:37David Senra?

  Yeah, from outside, that's what I was assuming was the case. That's what, that was like the-

• 58:41Speaker 01

  You always assume that CEOs are trying to maximize their businesses from the outside. Generally, that's a good rule.

• 58:46David Senra?

  Yeah, but we talked about no one except wanting to lose, but a lot of people lose every day. So this is what I was trying to get to. Who do you go to when you want to learn about like the frontier of AI?

• 58:55Speaker 01

  Who do I go to when I want to learn more about AI? There are different people. I spend, I'm gonna say at least four or five hours a week with AI founders of some sort. Because these kids are young, they possibly worked at OpenAI, they probably worked at Google somewhere. They've got these companies. They're very kind, they spend time with me, they try and tell them what they do, how it works. So, you know, I learned about open weight models, I learned about training, I learned about training data. I learned about, you know, guardian agents. I go around, I talk to tons of people. I try and, I talk to probably five or 10 cyber startups a month, maybe 15. So I'm trying to absorb how they're thinking about it.

• 59:37Speaker 01

  Because in a bizarre way, this is a new and developing science, for lack of a better word. There are no real experts. People know how to do their shit. Everybody else is trying to imagine the implications to everything else around them. And they're trying to build a mental models, they can build product and go win in this category, right? There's no concept of, you know, data labeling before you started having self-driving cars beyond the label data. Now that's turned into reinforcement learning, simulation models, neural networks that are trying to simulate data so we can train AI. So you literally have to stay in the conversation with tons of people to understand and absorb what people are talking about. So you just have to spend a lot of time on Twitter, spend a lot of time talking to people, spend a lot of time reading stuff. You're kind of like, half I understand, half just gets through the other side.

• 1:00:22Speaker 01

  I can't absorb everything, that's how I learn.

• 1:00:24David Senra?

  No, you brought up another thing I wanted to ask you about. What's behind your new presence on X?

• 1:00:30Speaker 01

  Well, I think I said that, I was giving shit to one of your fellow podcasters.

• 1:00:37David Senra?

  Harry?

• 1:00:37Speaker 01

  Yeah. I was giving Harry shit, saying, this is great for you. You keep bringing all of us in, you build your own brand, all of us like are effectively props for your brand. He's like, well, that's your fault, not mine. I'm like, what do you mean? He's like, well, you get the right to build your own brand if you want to, you just don't. I'm like, how would I do that? It's like, well, go tell people next, what do you think? You have a lot to say in a podcast. Why do you wait for me to ask the question? That's a good point. So then he told me to tweet every day. I'm like, okay, and then-

• 1:01:04David Senra?

  I'm enjoying your tweets. And you're tweeting almost every day.

• 1:01:07Speaker 01

  No, no, it's, it's, it's a lower frequency now. I, I listen.

• 1:01:10David Senra?

  Oh, you can't, you can't listen, you're really good at it.

• 1:01:13Speaker 01

  But you know, you can only put your foot in your mouth if you say something too often, because if you, you almost have to not feel the pressure to do it. So I like that advice. Don't feel the pressure to say something all the time. You end up making it a job. I don't want to make it a job, I want to do it when I have something I want to say. So I think I say stuff and I want to say stuff. People ask me how much time I spend, who writes? Actually, I do, I just write in the back of the car.

• 1:01:33David Senra?

  It's obvious that you write it, come on, people-

• 1:01:35Speaker 01

  You know, once I had it checked by Claude or something, and it made some grammatical edits, and people just gave me so much shit.

• 1:01:43David Senra?

  Oh, I saw that one. And you're like, you're writing AI.

• 1:01:45Speaker 01

  So my idea is I had AI check it, and I'm never gonna do that again.

• 1:01:49David Senra?

  No, you're, you're really good at this. In fact, there's a guy that's always on this camera that gives me a heads up when we hit a certain time, and he just gave me the heads up, and I was fucking shocked at how fast this time went. So that's usually a good-

• 1:02:00Speaker 01

  It's a good sign?

• 1:02:00David Senra?

  It's a good sign, man. I really appreciate you doing this, this was awesome. We've got to do this every few months.

• 1:02:04Speaker 01

  Sounds like a plan.

• 1:02:05David Senra?

  Thanks for talking. I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review. And make sure you listen to my other podcast, Founders. For almost a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through Founders.