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Michael Argast has played many roles throughout his career. He has worked in operations and networking delivery and even ran sales engineering worldwide for a security firm. These experiences, combined with other roles in customer-facing security departments, would help inspire his participation in his current venture Kobalt.io.
Kobalt.io offers what can be considered a “security program as a service”. With security being such a significant and layered operation for businesses, often small and medium businesses have been left out of the conversation and have had to rely on subpar or even nonexistent security support due to fewer resources available to acquire the necessary tech. With Kobalt.io, Argast and his co-founders have sought to provide a solution for these businesses, making high-level security accessible for smaller companies.
Argast’s journey may sound straightforward, but there was a time when he wasn’t even sure that a startup would be in his future. In fact, his journey with Kobalt.io started during a period of semi-retirement, with little assurance of what his future would hold.
A “Backwards” Beginning
For Argast, the journey to his first startup was not traditional. “I love telling this story.” He says as he begins to describe how we came to cofound Kobalt.io. “I refer to it as a backward startup story. Because usually you have a founder who goes out and has an idea, and he tries to raise a bunch of money and… that’s kind of the journey.” But for Argast, his participation in Kobalt.io resulted from a rather unexpected connection.
Argast took a period of semi-retirement in 2018 to spend time with his family. After enjoying his time off and relaxing on beaches in Thailand, he felt the itch to get back into work, so he turned to a long-time mentor and friend to help connect him with some opportunities. “I said, I’m looking to do a little bit more work. I don’t want a job, but if you’re aware of any engagements, let me know.”
He made it clear throughout his story that he did not want a job, so I asked him what that meant to him, the difference between “working” and “having a job”. He described how being a founder and being an employee are both jobs, but that being a founder offered more engaging circumstances. “Ultimately, the great thing about being a founder is that you are the person steering the ship, and you get to decide the direction.” This opportunity to “steer the ship” would come when Argast was introduced to his co-founders, Boris Wertz and Pankaj Agarwal.
These two co-founders had invested in many startups independently before (Boris notably invests in many high-tech startups like Coinbase) and decided to work together on a new project. They concluded that a cybersecurity services firm would be a strong idea and were looking for another co-founder with experience in this space. By this time, Argast had already held many roles in the security sector, from sales to marketing and operations, making him a good fit for this new venture.
But while Argast had enjoyed this variety of experiences with the thought that he might pursue his own project one day, he wasn’t necessarily envisioning a startup. However, when this opportunity arose, he saw a possibility to make a real impact. He discussed with his family and reasoned, “if I’m going to get back into something, I want to make a dent.” While Argast knew that there were already thousands of security technology companies, he identified the weak points in the market where small and medium businesses were not being served. “That’s the problem we were ultimately trying to solve.” And that is what led to the founding and operation of Kobalt.io a security service company that has served hundreds of clients and is continuing to grow.
Challenges When Managing a Startup
For Argast, identifying the pain point wasn’t necessarily the biggest challenge. As with any startup, many challenges would come soon after founding the company. “I hired a CTO, and we were developing code, but it was moving too slowly. We were under-capitalized to build a decent-sized platform,” he says. Because of this, Argast and Kobalt.io decided to pivot to a services business about six months in, and Argast mentions that this, “…meant parting ways with a CTO who was engaged and really committed to the business. And that was a hard decision.”
On top of challenges with getting the business headed in the right direction, Argast notes that attaining growth early on was also a struggle. “The first year I remember it took us six months to land our first customer. And then, we started gradually adding customers beyond that.” By the end of the first year, Kobalt.io had 15 customers, but this was nowhere near where they wanted to be.
But I found that Argast’s outlook on this reality was incredibly healthy, and many startup founders would do well to maintain a similar perspective. He realized that while they did not have as many clients as they would have wanted, they had developed a useful network of references. “Now I can, when I’m talking to a new client… I’m not just somebody with an idea; now we can talk about what work we’ve done with other clients.” Kobalt.io has grown to work with over 200 clients across many sectors such as Healthtech, Greentech, FinTech, and many more.
Argast doesn’t shy away from these early struggles and wants other founders to embrace the reality that comes with the startup grind. “There’s always going to be bumps and bruises along the way,” he says.
Connecting with Your Customer Base
When discussing how Kobalt.io came to acquire its customers, Argast describes how security is a trust-based business. Because of this, a lot of the growth they experienced was organic, born out of connections provided by Argast and his well-connected co-founders. “I like to joke that, back in the days when we used to go out for in-person meetings, I couldn’t walk down the street with Pankaj in Vancouver without running into one or two CEOs that he knew personally and would drag into a coffee meeting.” He also detailed how some crucial partnerships with relevant organizations offered them access to a steady customer base as they grew.
And while Argast stresses how these initial relationships helped Kobalt.io land those first customers, he also emphasizes how delivering consistent service with these early clients can snowball into many more connections.
What Should SaaS Founders Consider for their Cybersecurity Needs?
He has now been entrenched in the cybersecurity sector for decades, so I took this opportunity to ask Argast about what he would recommend for SaaS founders managing their own cybersecurity.
He first mentioned the concept of “tech debt” and how many startups will make short-term decisions that will cost them later. So more than anything else, Argast stresses the importance of making good decisions early on, to save stress and money down the line. At Kobalt.io, they help businesses achieve this with their startup package, “which is really about putting the right foundations and guidance in place, so that in six months, 12 months as the business grows, they aren’t having to pay for the bad decisions they made early on.”
Another important part about security, more than just safeguarding your business and customers’ data, is how it enables business growth. In fact, Argast details how this is another significant driver of business for them, proactive companies looking to not only fortify their security but present a better image to customers and investors. “Security is a good end unto itself…But fundamentally, you want to do that to enable the innovation and growth, the value that the organization brings to the world.” With privacy regulations increasing and more businesses entering the fold, reliable security measures can help you stand out from the competition.
Determining Pricing for Subscription-Based businesses
Pricing is a major concern when it comes to starting a business. And with the SaaS model, subscriptions will be a key feature. When it comes to Kobalt.io and its approach, Argast discussed the concept of a “Valley of death” when it comes to pricing.
Essentially, you have two tiers of pricing:
- You can price around $100 or less. When selling your product, a customer can easily pull out a corporate or personal credit card and buy your service without having to get the purchase approved or heavily scrutinized.
- You price your product above $5,000, which can allow you to justify paying a salesperson to go and secure these larger accounts.
The “Valley of Death” in Argast’s terms, lies between these two levels. He mentions how this issue arose when Kobalt.io was pricing their service at around $2000 a month. “The problem with $2000 a month is you can’t pay a salesperson and have them go out and acquire customers for you on what you can afford, paying them in commissions. The math doesn’t work.”
What’s Next for Michael Argast and Kobalt.io?
When I asked Argast about the next steps for Kobalt.io, he mentioned the strength of their existing partnerships, and how a recently acquired partner has currently made them very excited. “A couple of months ago we announced a partnership with RBC, the bank here in Canada, one of the big five.” Through this partnership, RBC is using Kobalt.io to help secure their small and mid-size clientele.
And while these existing partnerships are solid points for Kobalt.io, their ambitions still lead them toward expanding more into the US and beyond. “About 30- 40% of our revenue comes out of the US today, and we’re trying to grow that market faster. Over the next year, our ambition is to continue growing inside North America, and then start tackling English language overseas markets.” The goal is for Kobalt.io to eventually be a fully global organization, providing security for small and medium-sized businesses worldwide.
For Argast, the drive now is the same as when the company first came together: “Helping small and mid-size businesses address security in an approachable, affordable way which develops the culture they need internally and enables their business. The more organizations we reach and help grow, a win-win effect occurs. They start landing more clients, get bigger, get better, and need more from us.” But more than anything else, Argast is excited about how they can contribute to the health and success of SMBs. “I’m excited to get to a point where security in SMBs is no longer an unsolved problem…and we’re at the center.”
If you want to keep up with Michael Argast’s and Kobalt.io’s journey, or even fortify your own business, feel free to check out Kobalt.io.