Darius Cheung is happy. He is practically beaming over his morning coffee at the plush Dempsey Hill enclave in Singapore, where he has just finished breakfast with longtime friend James Chan, Neoteny Labs’ investment manager.
“We’ve been tearing our hair out,” he says, beaming. “Figuring out how to do export control for our products, which we never thought would be necessary.”
Cheung has to solve problems like export control because he just sold the company he co-founded, tenCube, to global security giant McAfee days ago. His product, an anti-theft software for mobile platforms called WaveSecure, may now be sold in dozens of markets where McAfee has distribution deals. Some estimate the deal to be worth $25 million.
Singapore’s startup scene hailed tenCube’s buyout with jubilation, although it wasn’t the only exit in recent months. Days after the tenCube deal was announced, mobile payments services provider Transfer To was bought out for USD28 million. In May, travel search engine maker Sprice was acquired by Travelport.
The tenCube deal caused ripples in the local scene because it is one of Singapore’s own. Cheung graduated from the National University of Singapore, and the university was a seed investor in tenCube. It was one of the first startups to pitch at our first Unconference event three years ago. TenCube’s buyout gave other local startups hope that they could make it on the global stage.
We spoke to Darius for his first post-McAfee interview. Find out about tenCube’s future and how the deal happened.
How the deal happened
“We didn’t actually plan for this. To give you the back story, maybe we will start 12 months ago. One of the things we observed very keenly (at the time) was there was a huge growth in the North American market, which traditionally hasn’t been strong for us.
Our first plan was to build a team. We knew we needed a local team in the US. That involves a number of things, right, to go out and hire people, to headhunt, to attend the regular events and so on. And that’s how the serendipity of the thing happened, when we had that discussion with McAfee.
I met one of the guys who is part of the McAfee team who we are working with today, at the Readwriteweb Mobile Summit. That was like two weeks after I first arrived in America. So that’s how I ran into him. (The McAfee contact in question is part of the mobile team).
We actually never talked about how potentially McAfee could work with tenCube as partners and so on. We much more talked about, for example, how the mobile landscape was moving and so on. I was thoroughly impressed with his vision and then later on I found out he was working with McAfee. After that, we started a conversation with the m&a people, the corporate development people, so that was an afterthought.
[McAfee] is definitely one of the strongest players in security but it remains very on the ground. So when we met with the executives at McAfee, they’re all very much hands-on. They didn’t have any PAs or anybody. We went to have lunch with them and we just talked about stuff. There was no power play, they didn’t beat us down, so all those were good things.”
Having a boss
“Oh yeah, I have a boss now. I will be reporting to Todd Gebhart, who is an EVP (executive vice president) at McAfee. (Gebhart heads consumer, mobile and small business there).
Todd for example, he is very high level, he’s responsible for a billion dollars of revenue, that kind of things, but he is still very hands-on. He knows the product, he’s seen the product, he talks about the market as if he has been talking to customers just yesterday. So he’s very hands-on.”
Deals that didn’t happen
“Yeah, uh, we had a number of suitors before this. Let me try to differentiate them. I think throughout the last two years we’ve had, on and off, some suitors. Most of them, their vision was not aligned with what we had, so that was the biggest problem. As a consequence, a number of things were not right. How they think of the team, the product moving forward, including valuation, some of these things were not syncing up.
For example, there was a suitor who was more of a SI (systems integrations) company. They do massive systems for enterprises and all kinds of organizations, and they needed a mobile team. Yes, they needed what we do as a product but they also needed a mobile team to develop and customize things and so on, and that wasn’t what we were interested in. So as a consequence, we didn’t like what they were doing … so those were the kinds of suitors we have had in the last two years.
Some of the suitors we have talked to before, they weren’t nearly as big, they were a quarter of the size of McAfee for example. But to talk to an EVP we have to go through scheduling with a PA three times, so that’s just not the right attitude that we were looking for.”
“Certainly McAfee was not looking for the cash flow that was existing in our company. They were looking more for product technology and so on, that’s where they did a lot of due diligence on. They spent daylong workshops going through our stuff, they met all our developers.
There were things we had to do at the last minute to clean up. For example, there were contracts we had signed before but we didn’t know where they were. We just lost them, so that’s not a good place to be in.
[The process] wasn’t unpleasant. In fact, that is where we got the comfort to know that probably this is the right deal for us. They were asking the right questions, they were probing the right places.”
“It’s a growing up process. We’re not done yet. Our product right now, if we may humbly claim, is one of the best products in the market for its purpose, if not the best. But the problem is if you look at 6 billion people, out of which there are 3 billion mobile users, we have barely touched 0.1% of the population as a user base. We haven’t been able to bring our product to them to help them solve a problem. And we want to do that much more. So in that sense we’re not done with our jobs.
Moving forward, we’re just doing our jobs in a much better manner within a bigger organization. For at least a couple of years we will continue running towards that vision that we started with.
Most of us, in fact, 99% of us, will be moving over. We will be joining the company, we will be employees of McAfee. We certainly have hiring plans, but how, what, when and why — I don’t know, we’re figuring it out.”