Over the last 12 to 18 months, we have witnessed an almost seismic shift in the posture of large enterprise customers toward cloud-based applications. SaaS has been around for over a decade – and many folks have realized the benefits and become early adopters – but the technology represents a big change for IT, and larger enterprises have been reluctant to move major applications or critical data to the cloud, due to fears of loss of control.

That is now changing. Whether driven by cost-conscious CFOs or CIOs, business teams that want enhanced functionality and accessibility, or just the spreading “grassroots” usage by employees, large enterprises are now in the cloud. In fact, most enterprises now use multiple cloud applications and expect to continue to expand the percentage of their outsourced IT resources from its current 5 – 10 percent standing to 50 – 60 percent by 2015. In February Gartner predicted that $677 billion will be spent on cloud services worldwide between 2013 and 2016.

And while the drive to adopt cloud applications is gaining momentum, the concerns and regulations around data security remain. Cyber attacks continue to grow in complexity and volume; 250,000 new pieces of malicious code are detected every day, designed to steal data and money, or deliver more sinister payloads by attacking infrastructure. Large enterprises are keenly aware of the need to protect sensitive data and are subject to substantial fines, as well as customer loss and other negative repercussions when violations and leaks occur.  

This is where PerspecSys comes in. Its solutions, using certified encryption and tokenization, protect data while permitting use of the full functionality of the cloud application. PerspecSys not only solves data security for enterprise cloud users, but also addresses data residency laws common in Europe and parts of Asia, as well as data privacy laws present in many countries around the world. In short, PerspecSys truly enables enterprises to take full advantage of cloud applications such as SalesForce.com, ServiceNow, Oracle CRM OnDemand and more, without compromising on security and data protection.

On top of a compelling solution in a rapidly expanding market, PerspecSys also has a very experienced and strong leadership team, led by David Canellos. In conjunction with the funding announcement, David provided an overview of the state of the IT security industry and where PerspecSys fits in in a Q&A with USA Today’s Byron Acohido: http://www.usatoday.com/story/cybertruth/2013/05/09/venture-capital-cybersecurity-investments/2145313/

Our conviction around the potential for this company was only reinforced by the numerous customers, partners, analysts and industry veterans we spoke with as part of our diligence process. We want to thank these folks for generously sharing their perspectives and insights.  

So, with fresh capital comes fresh expectations and new goals. We certainly expect a lot from PerspecSys and we will do everything we can to help them achieve their potential. Our congratulations to David and team on a successful funding round, and we look forward to working together.

Given that IT security is a $60 billion market, you might think that we have robust solutions for keeping enterprise networks and data protected. But you’d be wrong. In reality, better than 1 in 5 enterprises—and likely more—has been compromised. In the past few years, the number of cyber-breaches and the sophistication of the attacks have heightened dramatically. 250,000 new pieces of malicious code are detected every day, designed to steal data and money, or deliver more sinister payloads by attacking infrastructure. Today’s security solutions have not kept the pace.

It’s a major reason why cybersecurity has received more attention in Washington than ever before. President Obama included the issue as a pillar of his State of the Union address this year, and followed that by signing a cybersecurity executive order that spawned whispers of pending comprehensive legislation on a national scale. A Senate survey of top U.S. chief executives recently confirmed that several Fortune 500 companies are prepared to back an initiative by the federal government to create cybersecurity standards to protect them, so long as participation remains voluntary.

But voluntarily or not, some notable high profile organizations have been victims of large-scale cyberattacks in the past few years, including the New York Times, Lockheed Martin, and even NASA. These organizations did not drop the ball; in fact, by many standard measures they were using good industry practices. But those standards are just not enough to protect them from today’s threats.

Clearly, new solutions are needed, as well as a fresh approach to IT security.

In my view, the next generation of cybersecurity solutions must:

1. Operate under the assumption that any competent hacker can get past the perimeter defenses and go undetected by traditional security layers. Existing solutions are non-sufficient to stop modern sophisticated attacks. Being secure will again require new investments and it is only getting more costly if data is stolen or the network or service is taken down.  
2. Be able to monitor and prevent malicious code or activity without impacting regular business. For most companies, security that impacts daily business is too expensive and will not be well-received. They will look for a solution that invisibly fixes threats and improves performance when corporate security is threatened.
3. Function at the operating system-level to detect rootkits and other deeply hidden malware.  A rootkit is code that burrows into the OS kernel and today often runs undetected. Solutions offering more visibility at the OS level are the kind of innovative IT security approach needed to defend against modern malware available on the black market today.
4. Be able to track behavior over time, as many advanced persistent threats (APTs) lie dormant for days, weeks, even months. The New York Times was targeted by this kind of attack, typically a long-term pattern of sophisticated hacking attempts aimed at governments and companies. Chinese hackers had attacked the Times for at least four months, the company reported in January. New solutions must build and manage a security infrastructure capable of discovering, containing, and responding to advanced threats.
5. Adapt to new exploit techniques for exploits yet to be invented/used. Our former portfolio company Fidelis (acquired by General Dynamics) has been lauded for its XPS Advanced Threat Defense products that allow organizations to discover and eradicate threats in real-time. Solutions will need to be flexible and creative enough to detect new variants and yet-to-be invented methods of attacks.
6. Be usable by regular IT folks, not just those with advanced IT security knowledge. Not all companies can afford their own highly certified data security team, but all need to be able to protect their networks and data. Solutions should simplify the tasks that consume time and resources, helping both users and IT to keep working. 

We are living in a time of unprecedented cyberattacks on government, business, and at home. Rapid adoption of BYOD and the cloud has provided new vectors of attack for the “bad guys,” and security requirements have increased dramatically. New IT security solutions must secure corporate networks from within and protect against new kinds of threats, but also must be usable by typical IT administrators. It’s a difficult balance to achieve, but the current threat landscape demands it.  It is also an opportunity for new innovative thinkers to solve.

In the month of March 2013 BYOD received more than 80,000 mentions across websites and social channels like Twitter, Facebook, and Pinterest. Compare that to the June 2012 BYOD Index, when over the course of two weeks we saw 22,000 social mentions, a figure we thought substantial at the time. Prorate that number over the full month, and the 44,000 June 2012 figure falls well short of March 2013’s stats.

So what’s driving BYOD’s social rise? For one, the underlying trend of companies allowing BYOD continues to grow. According to a ReadWrite/Intel survey published last month, 82 percent of companies today allow some or all workers to use employee-owned devices. But with this pervasiveness comes increased awareness of the drawbacks of the trend, as organizations that allow BYOD face the risks of corporate data theft and misuse. According to a recent report by J. Gold Associates, companies are realizing “the current mostly wide-open, laissez faire approach to BYOD is not sustainable longer term, and that more controls and better strategy are needed.”

BYOD security was a topic of discussion at our recent B2B IT Forum on enterprise mobility. One of the panelists from our Forum, Cim Buser of Apperian, wrote a March editorial in VentureBeat about what’s next for BYOD. While there are competing theories on how best to implement an organizational BYOD policy, Cim argued that an important element needs to be employee engagement and education of the risks of BYOD. If employees do not buy into the problem and the solution, they will implement their own workarounds of security policies to get their jobs done.

Indeed, it’s still a bit of a free-for-all with employees’ personal devices in the workplace, but ReadWrite’s Antone Gonsalves argued the Wild West days of BYOD will soon come to an end. I agree with that premise. Current BYOD practices cannot persist under the strains of the increasingly wide range of smartphones, tablets, laptops, etc. that infiltrates the enterprise. As our Forum panel discussed, an organization must formulate an approach catered to its specific needs and goals (both end user and corporate), and clearly define the information that requires special handling and protection.

And so, BYOD policy is a current challenge for many organizations with many solutions and opinions voiced by numerous pundits and practitioners. The substantial amount of social data in our Index reflects as much. But if I had to make a prediction, I’d say that in a year from now, our Index will show that BYOD interest has waned. I think we’ve reached the peak of the BYOD craze; in the past couple of years we might have we tackled this topic from enough angles that the conversation will slow down moving forward. Maybe you disagree – have we not even scratched the surface of BYOD? I welcome your thoughts in the comment section.

Despite the monumental traffic on Tuesday night (where did that come from?!?), we had well over 100 folks at our most recent B2B IT Forum, and the feedback has been universally positive. Our panel of experts, led by moderator Chris Hazelton of 451 Research, provided a compelling and informative discussion on the shift to mobile within organizations of all sizes. Thanks to the panel, the audience left the event smarter about how they can navigate the challenges of developing mobile apps for the enterprise.

Here’s a quick recap of the key takeaways of the evening if you weren’t able to attend.

App development and distribution:

• Building apps for the enterprise is not easy, Verivo Software CEO Steve Levy said. Keep your initial expectations low, and learn something from your first few attempts.
• Identify what your users are trying to do, and how you want them to be productive on the device.
• Simply put, the apps have to work and they have to be simple to use. Users expect this because have been trained on consumer apps that are easy to use. They expect the same from enterprise apps. Prat Vermana and Swarna Podila made these points clear to the audience. Prat said he spends more time in testing than in development.
• Remember: people will be using your app. Understand who you are giving the app to, and the types of devices they will be working on. Don’t lose sight of this, Samsung’s Ken Daniels urged the audience.
• Localytics VP of Marketing Bernd Leger referenced a key stat that 26 percent of users download an app and never use it again. Enterprises have the same challenge, he said, so put users in the center of your efforts, and they will be satisfied.
• The distribution of enterprise apps was also an area of interest. The panel discussed three options:
  • Companies can put the app in the App Store, Google Play, etc., which makes it available to a larger audience
  • They can choose to distribute the app privately amongst their employees
  • They can work with a company that already has an app in an app store and provide it to the workforce in a customized manner

BYOD and ensuring the security of sensitive data:

• It’s imperative to define the information you are trying to contain and protect. But it’s easier said than done: how are you ensuring data is accessible to employees without being sharable outside the workplace?
• Strong encryption will prevent/limit the loss of sensitive data if a device falls into the hands of a “bad guy.” Developers need to consider encryption as a necessary part of the app-creation process.
• Only a small percentage of the audience knew of a BYOD security policy in place at their organizations; comparatively, nearly all acknowledged that BYOD was the norm at their company.
• An organizational BYOD policy must exist, but Apperian VP of business development Cim Buser noted that there is no set-in-stone solution to BYOD policy. Formulate an approach catered to your company’s needs and goals.

Our thanks to our excellent panel of experts and our engaged audience. Stay tuned for details about the next Forum coming this spring.

By popular demand: Presentation slides from Matt Fates and Chris Hazelton are available here: http://www.slideshare.net/AscentVP

I have written a number of times about the massive potential that resides in extracting insight from data. Leveraging new database, storage, parallel processing and cloud infrastructure, we can now get to these insights at cost levels and in timeframes that can impact decision making at very regular intervals and in major ways. This was just not possible a few years ago. But it is still hard.

To reach this potential, many companies have to shift their culture to become more data-driven. They must break down political, technical and legacy barriers and figure out how to pull the vast array of data sources – much of it siloed and in unstructured form – together. I expect many companies, large and small, to continue to struggle with this process of data integration, especially when it needs to be performed on a regular basis – not just once.

But the data challenge is also an opportunity. Many technology providers, both established and new, are bringing fresh solutions to market that should make data integration easier. On the infrastructure side we have invested in and work closely with companies like Interactive Supercomputing (acquired by Microsoft), Terascala and ScaleBase. Each addresses a different part of the Big Data problem, but each also plays well with traditional database technologies, meaning existing databases don’t have to be discarded.

We also have had a lot of experience on the application side of Big Data, working with companies such as ZoomInfo, Cymfony (acquired by TNS), Bizo, Network Intelligence (acquired by EMC) and ClickFox. I continue to see major opportunities for these types of companies; solution providers that pull data sources together – sometimes public, sometimes proprietary – and then clean, filter, normalize and analyze it all before presenting it to customers in ready-to-digest form. These companies are basically driving big data insights for their customers – rather than simply providing the tools for them to do it themselves – by sticking to specific areas of focus. 

I welcome any companies leveraging various data sources for customer insights in any vertical or business function to reach out to me (mfates-at-ascentvp-dot-com). I’d love to hear more about what you are doing and how you are enabling customers to be more data-driven.

While our singular focus at Ascent is enterprise IT, our portfolio spans a wide range of tech subcategories: Software & SaaS, Data & Analytics, Cloud Business Services, Mobility & Communications, Financial Services & Transaction Technology, and Security & Compliance. Each sector witnesses regular news and innovation, and each has numerous compelling stories.     

To help facilitate telling those stories, we’ve created an AscentVP Storify. If you’re not familiar with Storify, it’s a web-based platform that allows users to curate content from various types of media in one place, or “story.” Check out our Mobility & Communications “story” to see for yourself – we’ve published a range of coverage on the topic in the form of news articles, tweets, videos, and more. Similarly, our overall Storify page compiles all the elements of what we’ve been reading about when it comes to the various tech sectors in which we invest. 

If you’re new to Storify, you can follow us here: http://storify.com/AscentVP#stories. Take a look and let us know if we’ve missed any worthwhile story elements.

Mobile apps are expected to drive more than $38 billion in revenue by 2015, and enterprises have joined the cause. Not only has there been a significant shift in how enterprises develop and deploy software (enterprises now deploy more apps for employee internal use (22%) than consumers (12%), but smartphones have become the dominant interaction point for employees, as they have with customers and consumers.

BYOD, the app economy, and the overall consumerization of IT have contributed to a growing need for enterprises to build application development lifecycles specifically for mobile that can reap long-term benefits. For those companies grappling with app development, management, security, and more, we will host our third B2B IT Forum, “The New Mobile Reality: App Strategies for the Enterprise,” on Tuesday, March 12 at the Microsoft NERD Center in Cambridge, Mass.

We’re pleased that Boston mobile veteran and 451 Research analyst Chris Hazelton will join us as moderator, as well as an experienced and knowledgeable panel of executives from Samsung, Localytics, Symantec, Verivo Software, Apperian, and Staples. Our panel will bring informed perspectives on designing, developing, managing, measuring and securing mobile apps, as well as usage of mobile apps for enterprises of all sizes across their customers, employees and partners. We will discuss where the market is today, and the additional opportunities and challenges we see in the future.

We hope you can join us at this free event. Our two previous forums were great successes, tackling the issues of cloud security and enterprise IT sales, respectively. We’re confident this event will be the most popular yet—in fact, we expect a sold out crowd—so we do require that you reserve your spot in advance. Food and beverages will be provided. We’re looking forward to another evening of lively discussion and debate, and we hope to see you there.

For more information, please visit: http://mobilityforum.eventbrite.com/.

We are very pleased with the Company’s performance and congratulate the management team for a strong year. Software piracy remains an enormous problem for software providers. According to estimates from multiple analysts, the annual commercial value of software theft worldwide exceeds $50 billion. Moreover, V.i.’s data contradicts the conventional wisdom that piracy is a problem confined just to emerging markets such as Russia, India, and China. Countries with advanced economies and sophisticated regulatory regimes, including the U.S. and western European countries, are among the top offending nations for software piracy.

V.i. Labs’ Code Armor Intelligence (“CAI”) solution has enabled software companies to turn the piracy problem into a revenue opportunity. The Company’s independent software vendor (ISV) clients have collectively identified over $4B in unauthorized software usage, and V.i. has helped these clients recover more than $200 million in license revenue. In a challenging worldwide economy with constrained revenue growth, these results are impossible to ignore.

Ascent initially identified V.i. Labs through our research on potential emerging opportunities related to software piracy. We have continually been impressed by the V.i. team’s ability to innovate within this highly dynamic market. Congrats again to Joe Noonan and team for an outstanding year! We look forward to continued strong progress in 2013.   

For part one of “Everything I Know About Pitching VCs I Learned From Monty Python,” click here.

With help from The Pythons, Matt Fates and I collaborated on some ideas to help turn your exceptional slide deck into an exceptional fundraising pitch.

5) Then, you must cut down the mightiest tree in the forest… with… a herring!

The other key to a great pitch is to highlight your magic, the thing that makes you stand-out from the dozens of other entrepreneurs the VC will see this year. Sometimes you really do have a better mousetrap and the idea can “sell itself.” But there are other kinds of magic: identifying a large and underserved market, having a killer go-to-market strategy, attracting a kick-ass technology, sales or executive team, or having traction with important marquee customers. If you can cut down a tree with a herring, say so. Whatever your particular magic, just make sure it’s not buried in your pitch.  

6) Then shalt thou count to three, no more, no less. Three shall be the number thou shalt count, and the number of the counting shall be three. Four shalt thou not count, neither count thou two, excepting that thou then proceed to three.

This is going to sound silly, but if a VC asks a question like “How much is one plus two?” it’s OK to answer “three.” In other words, a direct question deserves and demands a direct answer. Elaboration afterwards is fine, but failing to answer the question directly is not. Responding to the question you want to answer instead of the question asked is not a good idea, nor is being so busy thinking about your next slide that you’ve stopped listening. You are pitching, true, but there’s a conversation going on and you need to be a part of it. 

It’s amazing how many otherwise excellent pitches go sideways in Q&A because a smart entrepreneur uses a thousand words to answer the wrong question when active listening and a dozen direct words would have sufficed.  

7) I don’t wanna talk to you no more, you empty headed animal food trough wiper! I fart in your general direction! Your mother was a hamster and your father smelt of elderberries!

Sometimes it just goes that way. The VC is not interested. And sometimes—hopefully not often—it’s because the pitch didn’t go well. But other times rejection has less to do with the quality of your idea and more to do with factors beyond your control. Maybe the venture firm has decided their portfolio is already too weighted around your potential customers or industry segment. Maybe they’re preoccupied in raising their own next round. Maybe they’ve simply decided to wait a quarter before making their next investment. The point is, don’t burn any bridges. VCs are a very small club and they compare notes informally. Be polite. Be gracious. Assume you will be back in front of this group again one day. 

An even better idea is to know your audience as well as you can ahead of time. Do your research and homework. There’s always the VC’s website, which describes not only their investment themes and “sweet spot,” but recent activity and a list of their investments. There’s nothing stopping you from networking your way into conversations with two or three of their portfolio executives. The point is, good selling is about good preparation—and it’s important to know that a VC hates elderberries before you arrive to pitch an elderberry idea.

8 ) It’s just a flesh wound.

Raising money is hard work. You’ll get nicked and bruised along the way, even if you are ultimately successful. You need persistence and optimism and energy. Just bear in mind Monty Python’s Black Knight, who, losing all four limbs to good King Arthur, continued to fight on. It may be long, arduous and sometimes painful, but it’s just a flesh wound. 

By the way, as any admissions counselor can tell you after reading through thousands of essays from very serious high school seniors, that a little humor goes a long way. If you decide to write full-on comedy, you’d best be John Cleese. But having a sense of humor is powerful, and a good reminder that if this isn’t fun, you might, in the immortal words of Monty Python, try doing something completely different.

Eric B. Schultz is a former CEO of Sensitech and Venture Partner at Ascent. Read more of his work at his blog, The Occasional CEO.

Most VCs number the annual business plans they see in a year in the thousands, but the implication is the same: There has to be more to distinguish your fundraising pitch than ten or 15 slides in 30-point font.

That’s where Monty Python comes in. John Cleese, Eric Idle and their associates were a VC’s dream, launching a comedy program on television that was so innovative and so influential that it changed the future of their business. And then, after four years, they decided they’d run out of really good ideas and got tired of TV and left for their next big adventure: movies. They had extraordinary, focused success with game-changing ideas and a clean exit at the top of their game.    

Wouldn’t it be great if they could write that about each of us one day?

So, with help from The Pythons, Matt Fates and I collaborated on these eight ideas to help turn your exceptional slide deck into an exceptional fundraising pitch.

1) “Of course, it’s a bit of a jump, isn’t it? I mean, er… chartered accountancy to lion taming in one go… You don’t think it might be better if you worked your way towards lion taming, say via banking?”

As an entrepreneur, you spend day and night working at, thinking about and living a particular idea. Your pitch deck is almost entirely about that idea and how it can be successful. But VCs invest in more than ideas. In fact, most VCs will tell you that a good entrepreneur and a good team trump a good idea every time. They want to invest in you. So, be prepared to talk about yourself. What are some of the relevant experiences that brought you to your idea? How will those experiences help you to be successful? And, if your idea is to tame lions, and you really are a chartered accountant, you might consider bringing a lion tamer onto your team.

2) Nobody expects the Spanish Inquisition.

If the VC is not engaged, you’ll walk through your pitch and be gone. But if there is an interest in your idea and team, there will be questions. Sometimes they will be difficult and unexpected. Rehearsing your presentation a few times in front of the smartest associates you can find is a really good idea, just so you can surface the unexpected. However, if you are caught off-guard during a pitch it’s OK to think out loud, and it’s OK to say you don’t know but will find out. It’s not OK to make something up. It’s not OK to fib, thinking you’ll work it out later. And it’s really not OK to lose your cool, because any pushback you get during a pitch will pale to what you have to put up with after a launch. Nobody expects the Spanish Inquisition, but in the VC world, it might be a sign of real engagement.

3) “Know what I mean? Know what I mean? Nudge nudge. Nudge nudge! Know what I mean? Say no more. . .Know what I mean?”

One of the trickiest parts in pitching is to know how to balance between your “big vision” and keeping things real. There’s no getting around the first part; you have to be able to articulate a vision that is grand and compelling and worthy of investment. But it also has to be grounded, and an effective way to do that is to offer one or two actual customer use cases. These can also clarify any fuzziness in the business model—the important “how do we make money at this?” The logic of your narrative then becomes: Here’s the big idea, here’s how it works in practice, and here’s what happens when we scale it. Voila! Success, funding, a big exit and a happy life. Know what I mean?

4) “Apart from better sanitation and medicine and education and irrigation and public health and roads and a freshwater system and baths and public order… what have the Romans ever done for us?”

One of the keys to a great pitch is leaving your audience wanting more. Your deck should tell a compelling story, but at a high enough level that the basic narrative sings. Detail — all the other good stuff that you know and are just dying to talk about – can come later in the form of due diligence and detailed business modeling. For the first round, leaving your audience with an uncluttered narrative, and the promise that there’s lots of good hard thinking to back things up, is not a bad way to close.

Next week we’ll unveil four more Python-inspired ideas for your VC pitch – stay tuned.

Eric B. Schultz is a former CEO of Sensitech and Venture Partner at Ascent. Read more of his work at his blog, The Occasional CEO.