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On raising $40 million, making decisions and hiring staff



James Foster. (Submitted photo)

James Foster.
(Submitted photo)

James Foster is CEO of ZeroFox, a social media cybersecurity company in Baltimore. Last year, the company raised $40 million in a round of financing. Foster spoke to Tim Curtis of The Daily Record about a number of topics, including working with investors and hiring staff.

Portions of this interview have been edited.

Tim Curtis: How do you keep your vision when you’ve got these outside influences of investors?

James Foster: It’s tough. Raising capital is probably one of the toughest parts of the business, because during fundraising it’s a full-time job. It’s a full-time job to work with investors and really make sure that their questions get answered, and the bigger the check, the more work it is. Every round, we’ve done a bigger round; our series C we just closed was 40 million dollars. The bigger the round, the more effort it is, and unfortunately there’s no one that you can hand off the CEO job to while you’re fundraising, and there’s nobody that you can hand off fundraising to either. What I will say is the more the market matures the more our numbers speak for themselves. It’s more work and it’s more diligence and more effort to close bigger rounds.

Early on, when you’re selling a vision to get fundraised, that’s very different than years later when you’re selling acceleration. Now, I sell, “look we can grow twice as fast, do twice as much if we had more capital, and here’s the model and the data points that back up all of my statements.”

TC: Do they let you build the company the way you want, or is there some input from them? How does that work as you’re building your business?

JF: They don’t micromanage me, that’s for sure, but I’d be foolish not to take their advice and their feedback and their guidance. I walk into every board meeting or every board discussion that we have, hoping that I learn from them and hoping that from their purview they can provide some guidance that maybe, because I’m heads-down working inside the company all day, every day, that I get to step out for four or five hours once a quarter, get some real feedback, and go, “hey, that makes a lot of sense. Let’s try it this way as well.” We’re constantly tweaking the organization to move faster. We sign more customers up every day now than we did two years ago and I couldnt have done it without the support from my board.

TC: What kind of tweaks do you have to make to sign up more customers?

JF: I think it’s the entire gamut. It’s everything from “are you running a well-oiled sales machine that can identify the type of prospect that makes sense? Do you have product marketing in place to make sure that you’ve got the right sales enablement materials that your customers are going to need? Are they talking to references that make them feel really confident that you can help them? Do you have the right customer success teams in place to make sure that your customers are happy and that they’re getting the value they need to be successful with your platform?” Even finance and operations — “are we running the type of organization that that has full grasp of our costs and expenses and that make sure that we’re not spending ahead of the market curve again?” Unfortunately it’s not a dial that you have to turn. It’s often several little dials at the same time in different directions that create the best solutions.

TC: What’s the margin of error? And has it changed over the lifespan of the company?

JF: I tell people all the time it’s single percentage points. So the difference between a great company and a good company sometimes is in 5 percent margin of error. A great company may have a 95 percent retention rate of its customers. An okay company, 90 percent, and that 5 percent retention rate is the difference between great explosive, hockey-stick growth or just linear growth. Gross margins can live and die in 5 percent. A gross margin of 75 percent is very different from 80 percent or very different from 65 to 70 and you start looking at public company comps. Most of them look alike, and the best companies are the ones that have improved things by 5 percent. Is your sales force 5 percent more productive than the competition? Can your development team code 5 percent faster than the competition? Are our customers 5 percent happier? If I constantly work on those 5 percent across the board and always try to get the next 5 percent I think we’ll win in the long run.

TC: Is there an example that you can think of that took you that extra five percent from good to great?

JF: I’m not sure there’s a single moment where I said ‘Hey, now we’ve got there.’ I think for us, the fact that every single week I can judge this company by 5 per cent ups or downs and a lot of different KPIs was one of those revelations that we had built a company that can make decisions based off of data. If I can look at you and go, “hey my customer satisfaction rate is fantastic. But all of a sudden over here my gross margin’s a little bit lower than where I want. I need to raise that 5 percent.” That’s a big shift. I bet most organizations can’t do that. We put a lot of time and effort into make sure we understand the data behind this business so that we can make informed decisions quickly.

TC: Is that something you’ve learned to do now or something that you learned over other businesses?

JF: I’ve learned over several years I’ve had great mentors great investors great team members that you know that kind of champion the same values that I have and one of them is making decisions based off data. I wouldn’t hire somebody to join my executive team if they don’t appreciate that. I’m not looking for people to get here and start making decisions based off their gut instinct. That gut instinct will help me make decisions faster and look for data in a faster manner. But they shouldn’t be making your decisions for you. This isn’t a gut decision business.

Hear more from James Foster, including how Zerofox was started, in the “Insights” business podcast at




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