Virtru's Gold: 'We've Had Negative Churn'

Charles Gold, CMO at Virtru, says resellers that don’t have some sort of privacy technology on their line cards are leaving money on the table. Data privacy is a hot topic for consumers and businesses alike, yet encryption remains underused, even though it’s required for regulated industries and could save customers significant money, not to mention brand damage.

The main reason customers leave data in the clear? Complexity. Gold says Virtru, which won the 2016 Google Global Cloud Partner Award for solution innovation for its encryption software, is proud of its ease of use. The software helps customers maintain control over data, whether in emails or documents, regardless of where they’ve been shared. Virtru has been in business since 2012 and has more than 6,000 enterprise customers, including HBO; the states of Maryland, Utah and Iowa; and Mt. Sinai Hospital. In August, Virtru closed $31 million in Series A financing, and its offering is available with SaaS or on-premises key management. The software integrates with Office 365 and G Suite; once installed, customers gain better control over their data across platforms, when stored and when shared with third parties. They can even recall email and rescind access to a document remotely. For customers with stringent regulatory and data privacy requirements, such as financial services, health care, government and manufacturing, this sort of add-on is a no brainer.

Channel Partners: Let’s start with an overview of Virtru and its channel program.

Charles Gold: First off, the channel is extremely important to us. We work very closely with resellers and other technology partners.

Virtru is a business privacy and data security company. We make it very, very easy for organizations to protect their content regardless of where it’s shared. As you might imagine if you read the newspaper, with all the breaches and links and concerns about surveillance, privacy is a very hot topic right now. Our product simplifies the process of, say, encrypting an email and ensuring that only authorized parties can access it. In fact, we’ve grown from just a few customers to more than 6,000 customers around the world just in the last two and a half years.

On the channel side, we started our business serving primarily the Google ecosystem, so Google apps or G-Suite, helping organizations that were using Google for their email to add that additional layer of security and privacy. And as I’m sure you know, the Google ecosystem is very partner leveraged — as a result, we go to market through a lot of Google’s premier technology and resale partners.{ad}

CP: You also work with Microsoft?

CG: We do. Probably a third of our business today is the Microsoft ecosystem, but we’re going to be making a big push there later this year. We’re looking to build out the same kind of very …

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… partner-leveraged, very partner-friendly systems we have on the Google side with the Microsoft community.

CP: People mainly think of Virtru as email security, but the technology can help with other sorts of data protection, correct?

CG: Yeah. The fundamental technology that we’ve developed could be used to protect anything. We happened to start with email. We can protect Gmail and Outlook messages and attachments from the time of creation all the way through their entire life cycle. We’ll be doing the same thing for Office 365 on the Microsoft side. Where we go from there is protecting files, so imagine a world where, if you shared an Excel file with somebody, they were able to open it and manipulate the data. But then at some point you decided that you didn’t want them to have that file. You could revoke it, regardless of whether they had shared it or opened it or manipulated it. That’s really where the future of the company goes into 2018.{ad}

CP: The encryption keys are held by the customer?

CG: We actually give customers the option. We have a SaaS model where we will manage the customer’s keys, but we never have access to them. They’re hosted in encrypted format and they’re always kept separate from the content. In all instances, when a customer is using Virtru, we never have access to their unencrypted content. That’s why encryption keys are so, so important. It’s always important to ask, as a customer, ‘Where are encryption keys held, who has access to them, can your vendor ever access unencrypted content?’

We also have an option where the customer can hold the keys on their premises, for very privacy-conscious customers or organizations that are in highly regulated spaces, or for organizations that are concerned with blind subpoenas, like, say, the media.

What’s important is keeping keys and content separated. So in the instance of the media, if Google, for example, had access to both your keys and your content, the government could create a blind subpoena and retrieve even your encrypted content that’s sitting on a Google server. In the instance where those things are separated, that becomes more difficult because you would have to reach out to both the keyholder, in this case Virtru, and the content holder, in this case Google. And then if you were to host the keys on your own premises then the only person they could go to to get access to those keys and to get access to your content, is you.

CP: Which option is more popular, SaaS or on-premises?

CG: What happens, mostly, is you start out saying, “We must hold our own keys.”

CP: Then they realize how tricky that is.

CG: Yes. Then they say, “Ohhh, yeah, you know, SaaS actually sounds pretty good.”

CP: Health care is a …

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… pretty obvious vertical. Where else do your partners find a lot of success?

CG: Government. Media. Manufacturing. If you look at our customers, there is a concentration certainly in health care, but beyond that it really does run the gamut. Everybody today is concerned with business privacy; everybody today is concerned with business security, regardless of industry, regardless of geography.

CP: Discuss ease of use. Is this something that’s transparent to end users, because if it interrupts their work process, the product won’t get used.

CG: That’s a great point. One of the key reasons that Will Ackerly and John Ackerly started Virtru was this notion of making encryption and privacy easy and accessible to everyone. If you think about the legacy technologies for data protection, like PGP or S/MIME, they’re very, very cumbersome, and as a result, people don’t use them. Our ease of use is one of the things that really sets us apart in the market. I’ll talk about Gmail just because that’s easy to follow. We’re integrated directly into the browser. It feels like a part of the Gmail experience. For the end user, they just flip a switch to encrypt or protect their data, they don’t have to manually exchange keys, they don’t have to go to some special place to send an encrypted mail. And for the recipient, they don’t need to create a new account, they don’t need to go to some portal like you might have to do with your bank or your health care provider. Very, very straightforward. We’re very proud of our ease of use. I encourage you to try the product if you want to see for yourself. It’s available to individuals for free right from our site.

CP: Free for individuals, but is the pricing accessible for a small business? Or is your typical customer larger?{ad}

CG: It starts at $60 per user per year. [Pricing is here.] That obviously scales down with larger organizations. What we see is that price point is very, very affordable for even a small business, so we have medical facilities with 50 people, or mortgage brokers or attorneys, who are all using our product in the $60 price point and use it very well. But we scale up, too — the state of Maryland has more than 20,000 seats on Virtru. We just signed a large organization that I wish I could disclose but I can’t that signed up for 168,000 seats.

CP: What is your subscription renewal rate?

CG: We’ve actually had negative churn, if there’s such a thing. Customers tend to buy more seats.

CP: Say I’m a partner who resells Office 365 subscriptions and I want to offer Virtru as an add-on for my customer. What’s the process for that? What is the partner doing versus what are you taking care of?

CG: It varies based on the maturity of the relationship. Let’s say we’re just starting to work together. We’re going to be with you every step of the way. In terms of the sales process, we’ll be on sales calls with you, we’ll provide materials, we’ll answer technical questions. The customer relationship is …

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… yours, but we’re going to be there. We actually pair our reps with reps from our partners. In a more mature state, when you’ve sold thousands and thousands of Virtru seats, you probably don’t need us to be involved in all your calls. You register your deal and you move forward with it and you get paid.

CP: Can you talk about the margin?

CG: Margins vary, depending on the partner here and the amount of committed revenue for the year, but generally 10 to 20 percent. Look, any reseller partner right now should have some sort of privacy technology in their bag. The market is so hot, there is so much need. It’s a confusing space, and customers really need trusted advisers to help them make the right decisions. We think we’re the best one, but really, every partner ought to have some business privacy product in their portfolio.

CP: Whom do you see as your most direct competitors?{ad}

CG: The legacy encryption vendors. We think that we provide – and our customers tell us we provide – a differentiated service because of the ease of use, because of security, and because of the ability that we give customers to really have control of their content, the ability to work both with email on demand or to see where something has been forwarded. We’re able to differentiate pretty clearly on security and user control.

CP: What ROI discussions are your partners having?

CG: I think the ROI case speaks for itself. On the one hand, there’s a win on compliance findings. On the privacy side of things, what’s the cost of your customer list getting out? What’s the cost of records being breached? What’s the cost of your business plan getting in the wrong hands? And you’re protecting more than just yourself, right? You’re protecting your customers, you’re protecting your partners, you’re protecting the people in your supply chain. And in so doing, you’re building your brand. You’re a trusted brand who takes care of your constituents’ data.

CP: Virtru got a good round of funding in Q3. Where’s your technology going, what’s your business plan for the next 18 months to three years?

CG: Really, it’s about pushing hard into that Microsoft ecosystem where we see a tremendous opportunity. It’s about international expansion. Privacy is white hot in the U.S. It’s whiter hot, if that’s a thing, in Europe. We see that as a tremendous opportunity.

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