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From startup to stratosphere in seven years: How ReaQta caught the eyes of IBM

October 30, 2023 Our Work

By Dimeon Van Rooyen

Built with scalability in mind, successful tech startups are able to achieve growth at a rate never before seen by mankind. The stellar successes of these companies often serve to hide the fact that most tech startups will fail. To be successful, these businesses have to get a long list of important things right in a very short time, including time management, money, legal requirements, marketing, and, perhaps most importantly, appointing the right people in the right positions. There is also another secret to success that many ignore: building the business in a social, cultural, and engineering ecosystem that allows it to thrive.

All areas and jurisdictions in the world are unfortunately not created equal when it comes to creating an environment for e-business to prosper, and some places offer a multitude of advantages for startups. When one says this, it is natural to immediately think of Silicon Valley, but recently, the Benelux area has become a true hub of innovation. It should therefore not come as a surprise that VC and growth equity providers such as Fortino exist to support innovation in this ecosystem.

As stated, tech startups need to get a long list of requirements right just to stay alive and then hopefully flourish soon after. They therefore desperately need the strength of investment that exist in such an ecosystem, as it also comes with the non-capital support and expertise that their finance partners provide.

One example of a startup that made full use of this relationship is endpoint security solutions provider ReaQta. In just seven years, it went from a startup to being internationally recognised to the extent that IBM announced its acquisition of ReaQta last month. In this case study, we will look at what they put in place to achieve such impressive success in such a short period.

Short time span, huge success: the ReaQta story so far

Location, location, location

Because start-ups are putting out fires coming in from all directions for at least the first months of their existence, hitting the ground running is not optional. This is were ReaQta’s approach has been exemplary. The business was created and registered in Singapore, but operates from Amsterdam to tap into the aforementioned supportive ecosystem.

ReaQta provides clients with a class-leading suite of threat detection and reaction products that provide complete visibility of endpoints, threats, and malware. The exceptional technology works both on and offline, can detect previously unseen attacks, and provides devices with a nano-OS virtualisation layer to isolate the solution from attacks.

This level of security is becoming an essential service to any business, but to tech startups in particular, as cyber attacks continue to grow in number and sophistication each year, rendering traditional antivirus software almost worthless.

In addition, ReaQta also supports the ecosystem in which it operates through its response team, that helps companies that experienced a breach get back to full operations in the shortest possible time. The team performs all threat detection and elimination remotely, allowing the core business to continue to operate uninterrupted.

Given the constantly increasing importance of cybersecurity in support of business continuity, it is not surprising that other providers such as Darktrace, EclecticIQ, Zivver, Friss, and Elastic have also chosen to make the Benelux ecosystem their home. Amsterdam in particular has proven popular, given its international talent pool for both commercial and engineering resources, not to mention the proximity of the security hub in The Hague.

Going to market

Before even considering creating a startup, a business case must be made that the company can provide products and services that differentiate themselves sufficiently for there to be a market for it. The founders of ReaQta are offensive cyber experts, with anti-terrorist experience, which means that they know hackers’ approaches as well as the hackers themselves. They knew that this knowledge provides a massive advantage in creating the best possible defensive solution.

Most of the members have also lived and worked internationally, poising the business for global growth. This international mindset, which was evident from talks since day one, was another differentiation point compared to other startups which may display some initial inertia towards leaving their home countries. These attributes confirmed to the founders that they have a business model that would be successful.

The last piece of the go-to-market puzzle was the VC provider. Here, ReaQta could benefit from feedback, insights from past experience, and best practices in terms of go-to-market approaches. This phase of the business life cycle is fraught with danger, even for companies with a clear idea of product differentiation and possible target markets.

Decisions need to be made on which customer sector, segment, and distribution channels to focus on, and how to test their success. This in turn allows the business to make informed decisions in terms of where to focus and invest. While this sounds simple enough, many young companies get distracted by pursuing multiple go-to-market strategies or opportunities at the same time. This approach is possible and sometimes even necessary, but the business runs into trouble when it fails to eliminate or deprioritise some, or doubles down on others. Again, this is a situation where the experience of the VC partner can be invaluable.

Bringing a unique product to the market is of course only the first step. Thereafter, the hard work of telling the story of your product’s capabilities in a compelling way to your target audience starts. Here, again, ReaQta followed an intelligent approach by including its performance in the MITRE ATT& CK Evaluation in its marketing material. The MITRE Corporation publishes its globally respected evaluations on the efficacy of cybersecurity products against stringent benchmarks. Since ReaQta was awarded an excellent score by MITRE, they could use this information to show potential clients tangible proof of product quality.

ReaQta’s marketing approach was a reasonably standard, but well-coordinated content marketing mix, the compelling message meant that they were able to generate interest from the outset.

Turning a weakness into a strength

In addition to the challenges faced by all tech startups, ReaQta also had to deal with challenges unique to the cybersecurity market. The main of these is the crowded nature of the market, dominated by large incumbents, mainly from the US.

This not only represented a challenge in terms of having to operate on a much smaller marketing budget, but also in attracting top talent, as the pool of top cybersecurity talent is quite tiny, and the incumbents have deep pockets.

Given the mission critical nature of cybersecurity products, there is also the challenge of getting clients to move from a relationship with a large international provider to a smaller and newer alternative.

However, ReaQta still had a few things going for it, and leveraged these advantages to great benefit. Firstly, the EU’s push towards greater cybersecurity, along with stringent government requirements, made a local provider more attractive.

The second advantage was ReaQta’s unique business model. Today, most cybersecurity solutions are distributed by MSSPs (managed security service providers). This is because most cyber solutions, while claiming automation, still require a significant number of people to monitor and act upon signals thrown up by the software. This is mostly outsourced to the MSSPs who sold the cybersecurity solutions to these businesses

ReaQta is different because its AI-first solution was built from the ground up and only needs a fraction of the people required by the products of their main competitors. This reduced workforce generates a higher ROI for MSSPs, leading them to be more inclined to sell ReaQta to their clients.

Of course, higher ROI alone is not enough to sell a product as mission critical as cybersecurity, but it was another innovative avenue to place an already superior product in front of potential clients.

IBM steps in

Because the business was created with growth in mind from the outset, ReaQta emerged strongly from the difficult initial startup phase. After just a few years, it was already highly acclaimed, and the customer list continued to grow at a good pace. ReaQta was also starting to get its fair share of industry awards. IBM, for one, took notice and soon they were in talks of a possible acquisition.

As these talks progressed, it became increasingly obvious that the direction IBM wanted ReaQta to go was the same direction they envisaged for themselves. While M&A talks can sometimes become acrimonious, the negotiations between the two parties progressed smoothly.

During this period, the VC partner can also play an important role for its client, having managed such processes in the past. While it is always important for the VC partner to be clear on potential issues, it is just as important to show the emotional intelligence to get out of the way when negotiations are going well. These negotiations concluded with IBM announcing its intention to acquire ReaQta on 2 November 2021.

The value of partnerships

ReaQta’s VC partnership with Fortino allowed it to scale quickly and make it a business worthy of the attention of IBM in just seven years. The finance and the expertise provided by Fortino were key factors, but another vital ingredient was that ReaQta never veered from its commitment to quality and excellence. As they started to grow, they never compromised. Instead, they had more resources to commit to maintaining this excellence.

This approach has led to wider industry recognition, such as the 2020 Europe Technology Innovation Award from Frost&Sullivan

In October 2021, ReaQta was named a Cool Vendor in Gartner’s Network and Endpoint Security Report. Gartner awards this accolade to “a small company offering a technology or service that is innovative, impactful or intriguing.”

ReaQta’s gains were not only in terms of recognition of the superiority of their products, but also in terms of the value they created for their shareholders. Although the acquisition occurred sooner than expected, ReaQta was able to reward investors handsomely for the faith they placed in the startup.

Partnerships such as these underscore the importance of venture capitalists in the exciting Benelux tech ecosystem. As long as value is recognised and supported, the pace of innovation is set to continue to rise unabated.

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