Founded in late 2004 by
a group of successful security software entrepreneurs,
Third Brigade began with a vision to solve a number of
key enterprise intrusion prevention problems. Since that
time, the Ottawa-based firm has systematically built and
acquired world-class technology, raised $30mm in funding,
assembled a world-class team as well as Board of Directors,
and secured both major customers and global channel partners.
With 70 employees including a Vulnerability Research centre
in India, the firm is a model for how to build an early
stage technology company.
As Managing Partner of Celtic House,
one of Canada’s
premier venture capital firms, Andrew Waitman has observed,
funded and actively assisted many of Canada’s most
successful start-ups. When asked to comment on Third Brigade’s
progress he readily offered, “They have done
an outstanding job preparing for the arduous battle from
diminutive start-up to dominant industry player”.
Bob Hebert recently spoke with Wael Mohamed,
President and CEO, on his journey in launching and positioning
the firm for success.
Did you start Third Brigade with
an idea or market need or with the team that you knew could
come up with an idea?
We started with the market need. As we contemplated putting
a company together, we looked at how the security space was
evolving in the last few years. We saw a certain consolidation
of ideas but not the integration of products that the market
needed. We predicted that the bigger guys would not be able
to deliver on all of their integration promises and that
the smaller guys would be more focused on the technology
instead of the business issues that they are trying to address,
leaving us with an entry to build best-in-class product that
is also enterprise grade. We had a considerable advantage
in that our founding team brought a lot of experience at
the enterprise level and we knew what large customers would
expect of us if we were to be taken seriously.
The next steps were straightforward though never easy: attract
the team, find or develop the technologies that we can commercialize,
validate the whole thing with investors, customers and industry
experts and go from there.
First of all, I live here and my family
is here. Actually when our founding team first met, one
of our driving factors was how nice it would be if we could
find a way to all work together for a company based here
in Ottawa where we would not have to commute to head offices
somewhere in the US. My
most recent employer was based in Texas and I figured I would
be 25% more productive just being based where I live. My
family certainly didn’t disagree.
More pragmatically perhaps, Ottawa is a security software
hub with all of the resources needed to build a world-class
security software company. By that I do not just mean start-ups
or huge companies like Nortel but rather a collection of
companies and people with experience cutting across the whole
spectrum which could help us in the early stages and scale
with us as we grew. This was important not only to us but
to our investors.
What steps did you take to get off the ground?
We came up with a vision for a company and
a suite of offerings to address specific markets and issues.
Start-ups can build, buy or partner to access technology.
Our founding team included superb technology leadership with
a proven track record in the enterprise security space. To
be frank, I would not have embarked on this journey without
total confidence in the caliber of our technical leaders.
We knew what needed to be developed and we started right
away. This was 2004 and Linux was hot but there were a lot
of Windows problems and issues which could not be ignored.
So as we started to build, we also came upon a Quebec-based
company with interesting and complementary Windows-based
technology that would give us an important advantage in the
marketplace. So we built a case to this company and its investors
that they should merge with us even though we were just getting
off the ground. They agreed and the transaction took all
of 60 days. We were off to the races.
We spent a lot of time speaking with customers and analysts.
This latter group turned out to be important. These are the
kingmakers. They know the sector, the players and the holes
in the market. We wanted them to know what we planned to
do and where we fit and why we were important. You should
know that two large partner deals which we eventually secured
were a result of analyst recommendations.
At the same time we were getting ready to reach out to the
investment community. We knew they wanted to see us committed
and we were willing to invest our own money to show that.
We also needed to demonstrate that we could get a prototype
together and get some customer feedback. Everything had to
fall into place.
This is likely the most challenging period for a firm such
as ours as there are so many variables to manage and so many
questions that cannot yet be fully answered.
Can you speak a little more about your success in
raising funds for Third Brigade? How have you done it
and what advice do you have for others?
In a way, startups are all about selling. You have to sell
employees on the dream. You have to sell investors on the
viability and potential of your dream, and of course, you
have to sell customers. We were selling to customers before
we even had a product to sell.
When it comes to investors, a lot of
people start companies without asking the simple question:
Can this idea be funded in this market, under the current
conditions and if so, what do I need to do to be able to
accomplish this? I was fortunate to have access to great
advisors early on in the cycle where I asked a lot of questions
and learned a lot about what potential investors would
be looking for. Investors are organizations with their
own philosophies and dynamics which need to be understood.
You need to know who you are dealing with, their expertise,
their track record and work load. You need to understand
if there is what I call a good ‘mathematical
fit’. What stage of firm do they invest in, what is
their average investment, what kind of returns do they look
for, where are they in their fund’s stage etc etc etc?
If there is no mathematical fit it will take an exception
for them to invest in you. You need to know this before wasting
their time and yours.
Investors want to know if you have the right team and the
right technology. They want to understand the barriers to
entry and whether the market is right. By that I mean market
conditions, size, competitive landscape etc. They want to
know if the deal is affordable. You need to get your ducks
in order and do your homework.
Raising funds is a rather frustrating
ordeal because often you don’t get straight answers
or a clear process on how to get to where you want to go.
What I learned is that every funding market and geography
is different and you have to adjust to the environment
instead of you trying to get investors to adjust to you.
Also, at the end of the day, investors invest in people.
I would go so far as to say that if you are talking to
investors who tell you they invest in technology then you
are either talking to the wrong investors or you have the
wrong people. It is people who generate wealth not technology
and so you better spend a lot of time making sure you have
a team that is going to resonate and work.
We are very lucky to have investors that believed in the
team and we worked together to ensure our business plan was
aligned to them, their shareholders and all of our needs.
As soon as we demonstrated strong prospects, they did not
hesitate to invest.
What have you found to be the secret to managing
It is a process rather than a single event or action. The
most important thing is building trust and mutual respect
amongst the management team and the shareholders and ensuring
that we all share the same goals and objectives. This requires
open communications and transparency to make sure that not
only do the investors understand the issues and complexity
of the business but also the opportunity and potential.
The challenge with a start-up and early stage investors
is that you cannot play by big company rules. You are on
a short leash until you prove yourself. You really have to
under-promise and over-deliver. You need to explain why the
board has to be patient, focus on the prize, and explain
issues along the way. Unfortunately start-ups are rarely
straight-lines between a start and a finish and there will
always be lots of maneuvering and dodging and good days and
even more bad days.
Investors are more interested in how
than why. I have found there are a couple simple rules:
don’t ever blindside
your investors; don’t take them for granted (it is
a privilege to get funding not a given, even if you have
done it before); and third, always explain the potential
and how you can get there. Focusing your dialogue on why
initiatives did not work will not help. Learning from mistakes
is important but it is the management team’s job to
figure out why and show the investors how. As soon as the
investor starts to focus on the why and tells the management
team how, then either you have the wrong investor or the
wrong management team.
You have reached out to put together a pretty powerful
group of independents on your board including the president
of Hewlett-Packard Canada, the CEO of Cognos, and a senior
VP at Oracle in California. Can you speak to how and
I believe that strong organizations require a strong foundation
to allow them to scale, and after reading the book BluePrint
to a Billion by David Thompson, I realized that building
a strong board should be sooner rather than later in the
life of a start-up. The board is an extremely important component
to a company whether it is private or public and it takes
a lot of work to optimize that part of the business. Boards
can add a lot of value, and while I had exceptional investors
on the board, we agreed that strong independents could make
a big difference. We wanted someone from a billion dollar
company who could make it clear what such firms expect in
doing business with small companies. We wanted someone who
had built and exited companies such as ours and could bring
perspective and scars to the table. We wanted specific market
knowledge in our world which could we be leveraged by our
company and we wanted relationships in the markets we coveted.
Also, I understood that the board is responsible for assessing
my performance and helping me scale my business beyond what
is perceived possible. By surrounding myself and the company
with strong, successful people it would force us all to be
better and provide me with mentoring resources on which to
lean on when needed.
How do you attract a board of that caliber?
It was different for each member. For
some it was a matter of giving back to the community while
for others it took convincing that we were worthy of their
time. For yet others it just made good business sense.
Whatever it is there has to be a ‘win-win’ for
all parties concerned.
You have to have confidence in yourself and your business
and go after what you want and you cannot be afraid to set
the bar high. You will be surprised with what you are able
I believe you said one time that to be a start-up
you have to be twice as good as the incumbents. Can you
Being an immigrant myself, I learned that when you are new
you have to be significantly better at what you do in order
to be considered. Start-ups are the same thing. It is very
risky for organizations to do business with unknown, unproven
entities and thus you either have to be the only one in your
space or significantly better than the others to earn the
business. Although it is a great honor for a start-up to
be invited to the table, second place is a very expensive
consolation prize and unlike the Olympics there is no silver
medal to be won.
You also need to be better in Canada because it is difficult
here to get customers to buy from early stage companies.
I am not sure if it is conservativeness or what but compared
to the US, it is tougher in Canada. I would even go so far
as to say that organizations, which should by their very
nature, buy from firms such as ours, simply do not.
Now to be very fair, all of our first customers were local
and we were blessed to work with some wonderful organizations.
However, if we were not as seasoned a group, with the credibility
and relationships we had, I am not sure we could have pulled
it off. We need to improve the culture of working with startups
How would you characterize the culture you have tried
to create and what have you learned that is important
in building a high performance culture?
It is an environment with a clear direction but very open
to challenge the norm, a flat hierarchy but one with respect
for structure and order. It is a challenging balance, in
the end corporations cannot be run democratically the same
way as governments. But at the same time, no one person holds
all of the answers.
Trust is important and that comes from consistency of message
and alignment of interests. For example, we put our own money
into this company and we took our equity in common shares
rather than preferred shares. We wanted everyone to understand
that we are equal to them and their interests are our interests.
It is important to identify and nip issues
in the bud as soon as possible. Lingering issues, even
small ones, can cause disturbances or create unhealthy
rumors or tensions. We tell all of the employees everything
from how much cash we have to how we are planning to win
our next customer. They are part of the plan. A lot of
startups underestimate the importance of this (at least
while they are at the early development stage). Our employees
are our most important stakeholders, they made the decision
to put their career, job and family into our company and
they need to understand where we are heading and how…
What attributes do you look for in recruiting high
performers and how do you evaluate these attributes in
The most important thing is their desire to learn and take
risks; people who work for startups are different than people
who are comfortable in safe corporate settings. The second
most important thing is their ability to scale. The challenge
for startups is they change, they change their shape and
size quickly, and you want to make sure that the people you
are hiring can adapt and scale accordingly.
Presumably unbridled speed bears some costs to an
organization. How have you tried to balance that growth
This is the most delicate equation. How do you make sure
that you do not under-invest or get ahead of the market?
I always remind myself that brakes were invented to make
cars go faster not slower, so I make sure I have good brakes
so that I can take the company as fast as I can. My best
one was the addition of my CFO but in addition to that our
overall executive team is quite diverse in their styles which
allows me to get balanced feedback for major decisions. This
is another reason why a strong board is helpful, one that
can challenge our plans and assist us with complex issues.
We have people on our board who have seen companies scale
to hundreds of millions of dollars per year and know what
to be careful of and what not to do. They also understand
the challenges of breaking the sales inertia and creating
velocity in the market.
What advice do you have for leaders who have aspirations
of building a firm such as yours?
The first thing is affordability….you
have to be able to afford to start a company, not just
financially but also the demands that it will place on
you and your family. In many ways it is easiest for a young
person to start such a company. This has to be a family
decision, and they need to understand the impact not only
on your time but the entire financial change until the
company gets off the ground. Startups are a calling not
a profession and you need people who understand this.
The second thing relates to the ability
to deal with rejection. ..plainly stated, if you are not
resilient, if you cannot handle setbacks, the life of a
startup is not for you. Also, much like the marines you
have to be adaptable and able to improvise. And you have
Finally, surround yourself with the right people both as
partners and advisors. Every day you will be faced with something
you never planned for and having the ability to call someone
or bounce ideas by someone that you trust is truly invaluable.
What is next?
Trite as it may sound, it is all about the
people. We believe we have attracted the right people who can
scale and can do their jobs better than I can. I need to make
sure that I furnish them with the right conditions for success
and treat them with respect. Everything should fall into place
after that. These are exciting times…