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Heartland communities now have another success story to cite when skeptics wonder whether billion-dollar businesses can really be built outside of Silicon Valley. Ann Arbor’s Duo Security last week announced that it was being acquired by Cisco for $2.35 billion. Considering that Duo, a security startup that develops enterprise multi-factor authentication solutions, was last valued at $1.17 billion — I’d venture that its investors are pretty happy with the outcome, as well.
It’s too early to tell just how much of a presence Duo will continue to have in Ann Arbor in the coming years, but Cisco said it remains “committed” to investing in Southeast Michigan, citing the area’s rich talent and infrastructure as positives.
I spoke with Duo Security cofounder and CEO Dug Song this week about the acquisition and Duo’s journey. Below are some highlights from our conversation:
Why Duo decided to sell to Cisco
“Cisco is one of the largest tech companies in the industry today and is on a pretty big journey, not just in the cloud but also in security. They’ve obviously been in both businesses for some time, but as we watched over the last few years, a shift [is] passing there that’s basically a similar kind of change that Microsoft has been facing in the last four or five years. That’s where it’s been really exciting [and we felt] that we can help Cisco.
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How long we’ve talked with them about an acquisition was very short; how long we’ve talked with them about being a strategic partner has been for quite some time. They were actually investors in the Series D that we did [in October 2017].“
What kind of impact Song hopes the deal will have on Ann Arbor
“A large part of our consideration around all this was the fact that a deal like this has a huge impact on a community. I’ve seen this not only for Martin’s [Roesch, chief architect for Cisco’s Security Business Group] company SourceFire and what that looked like for the Maryland and Northern Virginia area with respect to cybersecurity, but also for friends like Scott Dorsey, who was the founder of ExactTarget … and the impact that had on … really the acceleration of the tech community in Indianapolis.
I’m already getting a lot of interest from investors asking, ‘Well is there another Duo in Ann?‘ I say, ‘Well not right now, but there’s hundreds of potential ones that I can point you to‘.”
How Song and his cofounder connected with Silicon Valley investors
“I’m not sure how much folks will be able to extrapolate from my experience, because every business is unique, but a few things: As a founder, my background as a technical founder specifically comes from having created a lot of open source tools and software that many people ended up using … things like that help become a little bit of a calling card.
And everyone asks Puneet [Agarwal of True Ventures, Duo’s first institutional investor] what his thesis was and why did he come to Duo in Michigan to check us out. It’s because he did a lot of backchannel [sic] about us. He didn’t even know necessarily what we did, but he knew that every single person who he asked about us said, ‘Oh yeah, those guys are great, and they write great software‘.”
On finding talent in Ann Arbor
“I think from my perspective, what investors have typically seen here is — I’ve been able to build a world-class team, even when that team has for the most part all been doing their jobs for the first time …. by and large, we have much more of what some investors might call a bit of a ‘rookie team‘.
I believe talent is equally distributed, but opportunity is not — and the opportunity you have in building a startup, which has to think different than what’s come before it in order to be successful, requires you to find people that sometimes aren’t so completely inundated with [the] Silicon Valley kind of cult of how you do things.“
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Cisco is buying Ann Arbor-based Duo Security for $2.35 billion in cash and assumed equity awards, the IT giant announced today. Duo Security was valued at about $1.17 billion as of its last funding round. The company is best known for the two-factor authentication app it created for enterprise companies, and it counts Etsy, Yelp, […]
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