Forgepoint Founder on What it Takes to be a Cyber Investor

Since its conception in 2015, Forgepoint Capital has become one of the most active cybersecurity venture capital (VC) firms in the world. Founder and Managing Director Alberto Yepez said he and cofounder Donald Dixon started the fund when they saw cybersecurity becoming an integral part of digital transformation and the global economy.  Since its conception in 2015, Forgepoint Capital has become one of the most active cybersecurity venture capital (VC) firms in the world. Founder and Managing Director Alberto Yepez said he and cofounder Donald Dixon started the fund when they saw cybersecurity becoming an integral part of digital transformation and the global economy.  “Greater cybersecurity will enable economic prosperity. So we believe this is impact investment.” Yepez said. “The way we think about it as a mission at Forgepoint is we’re investing in companies that are protecting the digital future.”  In 2021 Forgepoint completed 22 new financings and added 10 cyber companies to its portfolio, including 1Kosmos, Cyberhaven, Noname Security, and WireWheel. The firm has $770 million in assets under management, with over $500 million deployed to date. Even as the cybercrime ecosytem and cybersecurity economy expand, Yepez still believes investing is an endeavor that shouldn’t be taken on by just anyone. In the last two years or so, investors saw the cyber market go hot, and were lured with high valuations across the industry. Now that the market has corrected, Yepez says a lot of investors and companies will have “very hard decisions to be made.” “There are lots of really interesting intricacies,” he added. “That’s why you know at the end of the day, you have to be a specialist to invest in cybersecurity.” According to him, what entrepreneurs look for in VC firms is whether they have necessary investment skills and a track record for success. Yepez has held leadership positions at tech companies for over two decades and calls himself a “serial entrepreneur” and experienced investor. “We view ourselves as company builders, not necessarily just picking stocks, and that’s what drives our mission,” Yepez said.  The biggest value when he was “on the other side” as a CEO of privately held cybersecurity companies, he added, was the board members who offered guidance and new customers. “People look for that ability to not only invest, but help grow the company, help exit the company, and bring the corporate governance to do that,” Yepez said.  Forgepoint’s is the largest investment team in the market with over 70 advisory council members. According to Yepez, the team of many different backgrounds – former entrepreneurs, former government officials, active practitioners, CISOs, CIOs, and CTOs –  is key to the VC firm’s efficiency.  Yepez pointed to CEO of vArmour Tim Eades as an example of an advisor who is experienced in the industry, has a “great eye” for potential investments, and is able to point companies toward Forgepoint. “As an entrepreneur you can only bet on one company,” he noted. “As a VC we can bet on 36 companies for success.” The firm’s advisory council aims to support incubated businesses with their experience and leadership, but they also serve in deciding where Forgepoint chooses to invest. This includes sourcing deals and developing themes of investment – or finding what Yepez calls the “whitespaces” to succeed.  Advisors with experience in cybersecurity like CISOs, he said, are especially equipped to tell Forgepoint where solutions are truly lacking in the industry. The key considerations for Forgepoint, he added, are to determine if a company offers not only a needed industry solution, but also unique intellectual property and a team built to disrupt the market.  “We don’t just react to somebody with a business plan. We typically proactively reach out to entrepreneurs because we have a market map for the areas that we feel are really needed,” Yepez said.