During the dot-com boom of the 90s, Chris Petersen could see that increased demand for cybersecurity was on the horizon. So, too, was the need for security analysts to detect and respond to threats rapidly.
He began having friendly conversations about this with his college acquaintance, physicist and analytics expert Phil Villella. In 2003, the pair dove into business together.
To fund those early days, Petersen sold his Washington, D.C., house and became Villella’s roommate in Boulder. When that money dwindled, they broke out the credit cards — and kept the faith that their hard work would pay off.
Their first official office was in a room above an auto body shop.
Petersen, Villella and CEO Andy Grolnick recently spoke with Built In Colorado to share the story of their capital-efficient approach to growth — and where they might branch out in the future.
LOGRHYTHM AT A GLANCE
EMPLOYEES: 675 worldwide; 475 in Colorado.
WHAT THEY DO: Protect client data by making it easier for cybersecurity pros to detect and respond to threats.
CLIENTS: Governments, nonprofits, companies across industries.
ON TENNIS: “Tennis is a very lonely sport. There is no coach, and there is no team when you’re out there — and when you’re an entrepreneur, that’s how it is, too,” said Petersen, who met his CEO on the court.
IN ROOM ABOVE AUTO SHOP: A dog prone to biting.
Tell us how you all met — and why you knew you could be business partners.
Chris Petersen, CTO, senior VP of R&D and co-founder: Phil and I had established a friendship over 10 years as part of a group of college friends. As our careers progressed, I would talk about what I was doing in security, and Phil would talk about the analytics he was working on in the field of physics.
I knew those of us in security were not looking at our problem correctly. We needed to apply different approaches to look at data and information and give visibility to threats. I knew that I could see things in security, and Phil could see things in physics. I also knew these things could come together a bit. I figured maybe we should get together to talk about how to solve problems in security differently.
And if you’re going to start a business with somebody, boy, you had better like that person. It’s also important to have the right composite skills. Phil had the analytics and scientific background. I had some business acumen and the domain experience. I knew we could be a powerful force together.
Phil Villella, chief scientist and co-founder: Folks who get into physics are interested in solving all sorts of problems. When you’re doing a Ph.D. in physics, you do a lot of the same things for a long time. When Chris started to talk to me about cybersecurity, the idea of looking at a new problem was interesting. Detecting threats sounded like a hacker movie, cloak-and-dagger type of thing.
The fusion of my knowledge with Chris’ business acumen and technical knowledge made us a complete team. It would have been very difficult for either of us to do any of this on our own.
Andy Grolnick, president and CEO: I got to know Chris when he joined the U.S. Tennis Association team I was on. He realized I had some experience in tech and had been in several companies. He asked me for some advice and, at some point, he and Phil got a couple of customers. They asked me to join. I was ready to try something different, so I did a lot of due diligence — almost as an investor would.
I had a lot of experience in storage and enterprise software, but not in the security domain. In those days, security was new. So I looked at their vision and assessed whether this was a feature or part of something bigger with longevity. The more I dug in, the more I concluded it was the latter. They had a differentiated platform, a long-term vision — and they were addressing things that were not being addressed.
I also knew that the most precious commodity is not capital. It’s time. What’s really important in the early days, when capital is limited, is that the talent is diverse and capable of doing multiple things. I could see in Chris and Phil talented technical founders who had skills outside their core talents. They also had common sense.
When I became employee number three, we had maybe $20,000 left in the bank. I walked in for my first day and found two guys and a dog in a room above an auto body shop. Almost immediately, the dog bit me in the behind.
Why has your partnership succeeded?
Petersen: Because we intended to solve a really hard problem that really matters because it affects a lot of people — and we have never deviated from that.
How do you relate your early business strategy to LogRhythm’s success today?
Grolnick: We knew we could take two different paths. Our competitors had tens of millions in capital and were more mature. We could have felt inadequate and accelerated to catch up with them — but we decided we were not doing a land grab.
It was not so much about being first to market. We committed to being best in market. We decided to build the company the right way with a steady pace of growth. We would make investments, review and try to learn something every six to nine months — and refine before making new investments. It was an incremental, methodical and capital-efficient approach until we got to the point where we had matured the product enough to put our foot on the gas pedal.
We also paid attention to our core values because we wanted to build a company we’d want to work for in 10 or 20 years. We had known that feeling of getting in the car in the morning and dreading going to work. Today, I’m still excited to go to work, and I enjoy the challenges posed by the problems we’re trying to solve.
Tell us about your first big business mistake and how you overcame it.
Petersen: If I have to choose, I would say it’s that we entered some international markets too early. We didn’t invest enough for our operation to be successful. We put a person here and there without enough critical mass to get something off the ground. For me, that was a big lesson. I now have a different sense of how you do international expansion.
Grolnick: Maybe 10 years ago, we released a product while we were scaling aggressively. We were still in that startup mentality, and we hadn’t invested in QA at the level we should have. Those were the days when the engineers building the software were also doing the QA. The product had some issues, and we had to buckle down and work through all of that. The lesson was learned. We put a real, separate QA team in place.
What tech skills are you looking for in software engineers?
Villella: The ability to deal with Big Data is imperative. We’re talking about data sets that are petabytes in size. You need to have an appreciation for scale — which requires a different approach in manipulating and leveraging data and solving problems. In general, they also have to understand computer security. It’s no longer enough to say you’re good at software design but not good at writing secure software.
What’s in store for LogRhythm’s future?
Villella: We’re at the size and scale where we could branch out into things we haven’t done or thought of previously, things that are not in our roots — like acquiring software and people. I’m also looking at machine learning because I think there’s a bit of a renaissance coming in terms of analytics and how we leverage entire computer systems and get them to behave like computer security analysts. It’s an exciting time in the market.
Interviews have been edited for length and clarity.