Taking a leap into starting a business
According to Eldon Sprickerhoff (BMath ’91), it takes more than an atypical risk appetite and tolerance to leap from full-time employment to starting a business.
With a degree in Computer Science and a minor in Economics, despite a recessionary job market, Sprickerhoff credits the co-op program for helping him land a full-time position right out of university. For the first few years, he worked as a programmer, systems administrator, and network administrator, before moving into information security. That was when he took his first leap into contract work as an information security consultant in “lone wolf” mode.
His last two years as a consultant were spent in New York City working with a prime broker to ensure that their information, and that of their hedge fund clients, were secure. Then in 2001, with another recession (the “dot-bomb”) in full swing, a young family he only saw on weekends, and then 9/11, he headed home to Canada to take the big leap into his own venture.
Sprickerhoff always had this sense, even as a university student, that he would start a business. While home on weekends from New York, he would talk about starting a business with his best friend, whom he had met on the second day of Grade One, Edmund Dengler (BMath ’91, MMath ’94). Having already seen success in building security strategies and tactics on behalf of a prime brokerage and their clients, Sprickerhoff figured there could be a market for an information security business.
“It’s difficult to describe the ‘itch’ to grow something, the profound dissatisfaction with the status quo, and the restlessness I have to move things forward,” said Sprickerhoff. “Then many factors came together: I had a trusted co-founder and supportive wife willing to take the risky journey with me, and information security was still not widely seen as a career choice, so there were very few competitors. Despite immense risks, in retrospect, it was excellent timing.”
eSentire was born. The company started with contract work performing vulnerability assessments and code review. Network sensors, deployed as part of the assessments, found more valuable information about network traffic that pointed to vulnerabilities, and the company pivoted to develop tools and tactics, offering services to help companies continually improve their information security defences.
As the company continues to grow steadily, moving its headquarters from Cambridge to Waterloo, in June 2019, Sprickerhoff’s most significant responsibilities as Chief Innovation Officer (CIO) are to look for blind spots within eSentire’s service offerings, find opportunities to protect their clients better, and maintain and grow market share.
However, innovation isn’t just the job of the CIO at eSentire.
“I delight to see every employee find a way to improve themselves within their career arc, and I feel that innovation is a huge part of that,” said Sprickerhoff. “There’s an old song lyric that states: ‘the hardest part of love is letting go.' You must take a step back and recognize that no one’s going to approach or perform a task exactly the way you think you would do it. You have to let people work that process and get to that goal in their own way.”
Sprickerhoff is thrilled when a fellow employee from anywhere in the organization comes up with an idea he would never have imagined. He's trying to foster an environment where employees independently come up with ground-shaking improvements naturally and regularly.
The path to success has not always been easy – or without fear. Having a tech background did not always make the business side of being an entrepreneur easy. Sprickerhoff believes that they would have reached where they are today in half the time, had he known everything 20 years ago that he’s learned since. Without the business acumen, Sprickerhoff and Dengler had to learn it along the way, and bring others into the business who brought skillsets to fill the gaps.
Sprickerhoff often stated: “If this thing doesn’t work out, it wouldn’t be for lack of effort.” Paraphrasing Waterloo’s Larry Smith, he maintains that if you are going to devote significant effort in your career, you had better love what you do, or you don’t have a chance at success however you define it. Sprickerhoff admits that in the early years he had no work/life balance, just insane work hours week after week, whether on the road trying to drum up business, building up a service offering, or completing consulting assignments. About 13 years ago, he began studying Yoshinkan Aikido to help handle that startup stress.
“I've found it to be incredibly beneficial from both physical and mental perspectives, and it has even helped immeasurably with conflict resolution situations outside of the dojo,” said Sprickerhoff. “One of the questions I ask candidates during interviews is how do they blow off steam. It is essential.”
He knows now that success can take considerably longer than you think and warns young entrepreneurs that they must get used to pitching because no matter how good your product or service is, it won’t sell itself. And he’s still pitching: in March 2019, eSentire raised USD $47 million in a follow-on round from existing investors Warburg Pincus, Georgian Partners, and Edison Partners.
When asked about what advice he had for new entrepreneurs about raising capital, Sprickerhoff had four takeaways:
- Recognize that it is not like what you see on Dragon’s Den – which is a highly edited, “reality TV” version that does not reflect the process and minimizes the full effort, including due diligence. Note that even on Dragon’s Den, only a fraction of entrepreneurs who “get a deal” on the show complete the off-camera due diligence and receive the actual funding committed. However, there are excellent points to glean in the show, including ensuring that within your “pitch” you can describe your value proposition succinctly, demonstrating you understand the market to which you are selling, and know your numbers cold.
- Start the “money raising process” well before you need to. This includes meeting with potential investors throughout the process, regularly keep them informed as to your progress to help build a following and a market.
- Recognize that it is a matchmaking process. Try to understand investors and motivations, their “sweet spot” of funding (including the size of the deal, investment horizon, history), and what else they can bring to the table. Investors will differ by risk tolerance, size, historical deal size, investment thesis, and vertical.
- Do not try to do this alone. Get advice from those who have travelled this path before, who understand how to assemble finances and pitchbooks.