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From $7M to $70M Revenue: How RealDefense Scaled Through Acquisitions | Gary Guseinov
00:24:03
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- [00:00]
A
How much in top buying revenue will it finish the year with Real defense this year? 2025 between 1670 and EBITDA will be between, what, 10 and 20 million or more?
- [00:09]
B
No, it's between 20 and 25.
- [00:11]
A
What was revenue right before you went public?
- [00:12]
B
It was a relatively small amount, less than $10 million.
- [00:15]
A
When you bought the company back in 2017, how much revenue was it doing at that point? In terms of ARR, they were doing
- [00:20]
B
like 7 million a year.
- [00:22]
A
Gary, you're at 70 million of revenue today with $25 million of EBITDA. If someone comes to and offers you $350 million, all cash upfront, do you sell the business today? Hey, folks, my guest today is Gary Goosenev. He's the CEO of Real Defense. He founded the company actually all the way back in 2003. It was called Cyber Defender back then, grew it from 0 to 70 million bucks of revenue by 2009 and took it public on the NASDAQ. Long story short, bought it back much later in 2017, rebranded. It is now scaling again. So we're going to jump to the full story today. Gary, you ready to take us to the top?
- [00:53]
B
Let's do it.
- [00:54]
A
All right, so let's actually start off with the buyback, which I think happened in 2017. What did you end up buying back the company for? And then tell us what the product does today.
- [01:02]
B
Sure. Yeah. So it was a relatively small amount, less than $10 million. We bought it back when it was declining precipitously month over month and year over year. And we, you know, put a plan together to bring it back to life and grow it through acquisitions. And so the whole concept behind Real Defense from the beginning was to do acquisitions of small companies that are either declining or flat and turn them into synergies and generate more revenue, more LTV, reduce CAC and grow these businesses. And we've done six acquisitions since 2017.
- [01:36]
A
Interesting. And when you bought the company back in 2017, how much revenue was it doing at that point? In terms of ARR?
- [01:40]
B
We were doing less than 10 million. We're doing like 7 million a year.
- [01:44]
A
Okay, so you bought it for around. Around or under 1x ARR?
- [01:49]
B
Under 1x ARR, yeah.
- [01:50]
A
Okay, guys, we're going to go back and learn, like, what the hell happened, right? You go to 0 to 70, 80, 90 million. The new management came in. I guess something happened. We'll get more on that. But let's not. Let's not bury the lead here, which is what the product does today. So Gary, I'm going to share a screen here. Go to your website. I think this animation here is actually really powerful. Help us understand what the product does here.
- [02:09]
B
Sure. It's actually not just a product, it's a platform. Real Defense has many products and brands underneath it. But the fundamental concept is that we monetize our partners user basis. So for instance, if you're an antivirus company and you're looking to build additional revenue but you don't want to invest into R and D, you don't want to invest into your infrastructure, you want to add additional revenue ARR higher ltv increase retention mentioned you would license some one of our technology stacks or all of the products that we market or develop and then you would add them to your existing portfolio of products. So that's the big picture view. Within the platform we have a technology called Real Defense Smart Scan. What Smart Scan does, it analyzes data on your device and looks for telemetry signals. So for instance, let's say you have a laptop and you're at a coffee shop and you're connected to the Internet. We're going to give you an opportunity to connect to through a vpn. So we're going to know that you're connected out of coffee shop. Here's a VPN offer. Let's say your computer is running out of disk space. You want to know about that ahead of time and you want to prevent crashes and problems with your software. We're going to tell you that we're going to sell you an optimization product. And so that telemetry stack and the monetization that comes along with it integrates into your existing platform. So if you're an antivirus company, you have an antivirus product that sits on users devices. We plug right into that and we deliver very customized messaging based on telemetry. It's just in time marketing and it performs really well. It's far more efficient than adding advertising or other forms of monetization that pisses people off at the end of the day. So this is really efficient.
- [03:51]
A
Yeah, I like the word to use just in time marketing. So guys, before we jump into the more of the backstory, I want to make sure you don't you're following along here. Gary is selling a painkiller but what's cool about this is he doesn't have to wait for someone else to talk about the pain. He sells a platform actually tells you the pain. Right. Your PC is running low on drive space. Oh, buy this product.
- [04:07]
B
Right.
- [04:07]
A
So it's the pain and the painkiller. Really interesting vertical integration there. So Gary, let's go back to the founding story. Just briefly. You launched the business in 2003. How old were you in 2003?
- [04:17]
B
Oh boy. I think. Well, I should know that, right? Because it's age. I was 33. Yeah, 33.
- [04:26]
A
Okay. And were you already like wealthy? Was this your second company or were you sort of risking all in this business?
- [04:31]
B
I had successes very early on. I had a direct marketing company that I found in the late 90s and it became a multimillion dollar business fairly quickly. And so I used that knowledge and used some of the capital to build my first CyberSecurity company in 2003. So yes, I had some success, had some money, it was on my first rodeo. But the company that I found in 2003, Cyber Defender, was substantially bigger than the company I had prior to that.
- [04:58]
A
Interesting. Okay, and how much of your own capital did you put in in 2003, 2004? Did you equity instead? VC?
- [05:04]
B
Yeah, it's oh my God, so long ago. So yes, I do put in my own money and I think it was like 50,000 or $75,000. And then we went out and raised about quarter of a million dollars in the initial raise. And then subsequent to that we raised probably close to 100 million from investors. And that the public funds, private debt, equity did all kinds of rounds.
- [05:25]
A
Okay. And during that period, 2004 to 2009 public filing say you grew basically from zero to $70 million in revenue. Help us understand how you did that. Any tactics you use then that are relevant for found to grow that fast.
- [05:36]
B
Sure. So what we realized early on is that you have to, you have to have multiple stages of product offerings in order to generate significant amount of revenue in terms of selling a low price product and then sell a middle price product and an expensive product, meaning something costs 20 bucks, something cost 50 bucks, and that something costs 200, 300, $400. And so we create a path where consumers can buy something at the introductory price at let's say 20$30. And then they would be offered other products that are more expensive. And we found that their elasticity is material. You can go from 20 bucks to $1,000 if you just ask. And so what, what we found a lot of companies out there didn't know how to ask. And we've learned from their mistakes, we've learned from our mistakes and we started asking for more money. And so we saw a significant increase in revenue and profitability.
- [06:27]
A
What would you Remember before you IPO'd. What your largest customer is paying on an annual basis.
- [06:32]
B
Oh, wow. The largest, $500, probably $700 a year.
- [06:37]
A
Okay, so you were still a low arpu, high volume play.
- [06:41]
B
Yeah, we were, yes. So, and this is you're talking about like 20 years ago. So it's very different environment. High speed Internet is not, is not available to everyone there. You know, billing is difficult, recurring billing is not how it is today. There's all these dynamics that didn't exist that we have today. We have a lot more. There's a lot. It's a more favorable landscape today for Enterprise or SaaS, companies who sell to consumers or businesses. It's far easier today than it was before.
- [07:09]
A
Guys, remember, I am not just a YouTuber. I'm investing in my third fund. We've deployed $250 million into 550 software companies so far. Again, @founderpath.com if you're interested in capital, I would love to cut you a check because I know you're investing in your education. You watch my show. So sign up@founderpath.com and when you get the onboarding email, I reply and I see all those. Just reply and say, nathan, I found you through YouTube and I'll make sure to prioritize you. I would love to cut you a check. Check out founderpath.com yep. One of the distinctions that we're going to get into later on the episode is this first company raised a lot of Equity. You mentioned $100 million raised. I believe this new company, you're keeping more equity, you're using debt or talk about that in a second. But to that degree, can you share what were you diluted down to at the first company before you IPO, do you remember?
- [07:53]
B
Yeah, I diluted down to about 32%.
- [07:56]
A
Okay. And what was the highest valuation you guys hit before the IPO
- [08:03]
B
wasn't that high. It was maybe $45 million fund, 70 million, top line. No, no, no, that's at the time. That's at the height of the business being public, not before going public. Oh, I see.
- [08:15]
A
What was revenue before you went. Right before you went public?
- [08:18]
B
Oh, it was like maybe $10 million.
- [08:21]
A
Oh, wow.
- [08:21]
B
This is.
- [08:21]
A
See, this is crazy. Say you've got to have like 180 million, 200 million to going public. You went public in 2010 with 10 million of ARR and a 45 million valuation.
- [08:30]
B
Yeah. And, and it, and it's, you know, it's not a conventional. So we didn't do, do a conventional IPO where you Have a investment bank that goes out there and shops the deal and gets a bunch of investors sign up before you go public. It wasn't like that. It was gone through what's called a self listing. It's a little different now. There's a, there's a diff. Different regulations around that. Today it's a little easier actually do a public today. But back then it was a self registration. So it's, it's as if I go an underwriter. And so it's not a reverse merger. It's not, it's none of that. It's. It's a, it's a conventional public offering without an underwriter. And so you do that on for companies that are worth less than $50 million. And so if you're worth more than $50 million and you have to do a conventional IPO. And so SEC had these rules, I think they still exist, where you can go public and self list for a small cap company. And then we graduated to Nasdaq and so we drove the value of the business, drove the stock price up, drove efficiency and then moved to nasdaq back two years or three years after went public.
- [09:34]
A
You left the company, I believe in 2011. Was that before or after you graduated the Nasdaq?
- [09:38]
B
After.
- [09:39]
A
Okay, so why did you leave?
- [09:41]
B
Yeah, I needed some liquidity. And when you're an insider of a publicly traded company, you're limited to amount of shares you can sell. It's very simple. And I found a very good CEO who, who has experience. We grew to over a thousand employees at the time. When I left, it was a fairly big operation and I needed somebody who understood that type of scale and could grow it as a public company. And I found somebody. They started and operated the business and I felt that it left in good hands and they couldn't figure it out. And after some period of time, the company just started going down and they went private anyway. I could continue talking about it, but let me know if you want me to get into specific basis.
- [10:21]
A
Well, I think one pattern that's very interesting, like today we're recording this in December of 2025. There's a lot of founders right now that are going on raising capital and they don't think about how they're ever going to get personal liquidity. They're stuck at a shitty salary like 60 grand a year. But they raised 50 million bucks from VCs. They're all over TechCrunch and Twitter and the Wall Street Journal feeling good about it, but they're not Thinking about, hey, how am I going to make money on this personally in the next one to five years? It was so extreme for you. You just said you had to quit your own publicly traded company to not be an insider to then liquidity. Is that accurate?
- [10:52]
B
Right? Yeah, yeah, it's, it's because it caps out. Like if you don't control the company, then you don't control the faith of your compensation. Just very simple. And so it's. If you are okay with that, then you're okay with that. If you're not okay with it, meaning you need more liquidity, don't give up control or don't create a situation where you're not in control. And so, you know, but there are, there are ways you can, you can borrow against your stock. You can create a.
- [11:21]
A
Why didn't you do that? Why didn't you borrow against your stock?
- [11:23]
B
I did. I did. It was just very limited at the time when, if you're, if the, if the stock is not trading at certain volumes that investors want, then you're limited in what you can do. So. Meaning you can borrow or sell. And so as a freshly minted company, we continue to have, you know, normal challenges that you would have when you grow in the business. There's not enough awareness of the stock now that, that improved over time. But there are certain points of time where there was not enough awareness, not enough liquidity, not enough trading. And so investors pay attention on stays. And you're limited.
- [11:56]
A
Yeah, I mean, this is how Elon Musk can take over Twitter, right? He's getting a massive loan against his, you know, his, his SpaceX or other company's stock, private or public. The same with Bezos and Amazon. Right. So this is a good time. Just teach your audience quickly in case someone listening today in four or five years is public and they do want to, you know, take a loan out against their business to go do a massive takeover. What was your stock worth at its peak and how did the LE look at it? What was like the max loan you could get against your stock?
- [12:21]
B
Well, you, you just asked a lot of questions. I mean, let me break down that, the concept first, first of all, it, it's, if you, you are not borrowing necessarily against the business, you could not. That's a, that's a recapitalization concept and we talk about that separately. But if you want to borrow against the stock that you own, let's say you own 20% of the publicly traded stock and you want to borrow against it, you can go get a Loan. There are lenders out there who'll say, collateralize your stock, will take your stock and put it in escrow and you, if, if, if it falls below a certain dollar amount, then we sell it so that we don't lose money in our investment. If it stays above certain amount, then we don't sell it and you get your stock back when you pay back the loans. It's really simple. And these loans are sometimes no repource loans, meaning you're not personally liable. It's just a stock you're collateralizing and you can pay back interest only or no interest, and they just sell certain amount of the stock over time to, to collect on their interest. There's lots of ways to structure these loans and that the money you receive from these loans is not income, it's debt. So you're not paying taxes on it. So it's, you know, eventually going to pay taxes on it when the stock is sold. But you are in a relatively good position to do that without incurring a lot of tax overhead and not impacting the stock necessarily because you're not selling this stuff. So yeah, there's, that's one way to do it. And if you're public, if you're private, it's more limited.
- [13:42]
A
Well, Gary, hold on, on the public, can you give us real numbers there for a second? Can you tell us, hey, yeah, listen, if your Stock is worth 5 million, a bank will probably give you a million loan, you're probably going to pay a 4% interest rate. Or can you give us a sort of category there?
- [13:52]
B
Yeah, it's, it's still, it's definitely not going to be 4%. It's going to be way above what the market rate is for these types of loans because, and it depends on how, how risky of an investment it is. You know, if the liquidity of the stock is low means not a lot of trading, it's more risky. If there's high liquidity, lots of trading, high market cap, then the rate's going to be low and you're going to get favorable terms. It just depends on the spectrum of risk.
- [14:15]
A
So what would a high amount be? Are we talking like 10% or higher?
- [14:18]
B
I'll be between 10 and 15%. It could be even higher depending on, well, again, how risky it is. But you, you, you know, you got to look at the investor too, like they're, they're hoping that the stock that they're getting is eventually going to be more liquid, go up in value, but not drop in value, not become Totally liquid. Because if they had to sell the stock to cover their position, well, how are they going to sell the stock? There's more trading going on. And so this, they're this risk on their side as well.
- [14:43]
A
Yeah, makes a ton of sense. Okay, you have an equity and debt mine, your first company got diluted down to 32%. You're this new company, we're going to call it the new company. It's the same company you bough back for cheap in 2017. You're now using debt. This is actually a good transition. You've raised money, I believe, against the company to fund your acquisitions with a bank. Tell us how you did that.
- [15:01]
B
So as a private company, you can buy other companies with debt based on the combined value of the asset. Okay, so let's say that you have one company do $2 million of EBITDA and you're buying another company doing $2 million of EBITDA. Arguably, the value of the combined asset, combined entities, is worth twice more than it was before you did the acquisition. And so you can use the combined value as a basis to borrow against with the metrics that the lenders are willing to work with. So for instance, the base, the most basic fundamental concept in lending is the, is the turns of EBITDA to total debt value that you can borrow. So for instance, if a company is doing $4 million with EBITDA, you can probably get loan between two times to four times of the total EBITDA. So 8 million to $12 million, you should be able to get that alone for that amount. Now, there are certain funds out there who invest or lend into scale. So if you say, hey, yes, you know, My metrics are 4 million of EBITDA and I'm growing really fast. I want to borrow seven times, 10 times. There are lenders that will do that. They'll probably want to take some equity as part of their compensation. Their rates might be higher and their term might be short. And so you have these lenders that will go up even more. But Generally it's between 2 times and 4 times of EBITDA is your lending spectrum where you can borrow against.
- [16:30]
A
Okay, so in 2022, at this new business, you get a $30 million credit facility from Sunflower Bank. If that was trading at 2 to 4x your company's EBITDA, I mean, is it fair to say your EBITDA was somewhere in the five to $10 million range? Or no? Am I missing something there?
- [16:45]
B
Well, you're talking about the cap of the range, right? Or the higher end of the spectrum. So I think at that time, our EBITDA was at more than 10. And so we didn't sell more than 10 million, was more than 10 million. So we didn't max out our debt capacity at any time. We don't do that today. We don't plan to.
- [17:08]
A
So I want to dive deeper here because you're really deep in these things. I mean, you secured a $30 million line from Sunflower bank when interest rates were starting to skyrocke. Right. In 2022. Many founders right now are terrified of debt or they don't even know it's an option. Why are you happy to pay 9 or 10% interest instead of giving up, you know, 10% of your company to a VC for free, no interest?
- [17:28]
B
Because I value the equity far more than I value the debt. So it is simple like, why would you do that? If you, if you think your business is growing and your equity is growing, arguably your amount of equity you're going to be giving up is, is, is worth far more than the money that you're going to be borrowing. And unless, unless you're, unless you're selling equity into your own equity, into the equity raise, meaning you're part of the equity, the buying is yours, and you're able to get some liquidity that might make sense. And so we've done that as well. It's not like we don't do that. We've done that. And so it's a combination of a time opportunity, what the board wants to do, and how the company is scaling. All those factors come into play of how you raise capital. It's not one thing, it's many different things.
- [18:16]
A
So let's fast forward now to today, December 2025. How much in top line revenue will it finish the year with real defense this year? 2025? Between 60 and 70. Okay. And EBITDA will be between what, 10 and 20 million or more?
- [18:29]
B
No, it's, it's between 20 and 25.
- [18:31]
A
It's incredible. So as a capital allocator, how do you think about using that money? Is it just plugging into new acquisitions? What if you can't find a good deal? What do you do with the money?
- [18:38]
B
I have plenty of opportunities for M and A. I have a multibillion dollar pipeline. So we're looking for bigger deals now. So before we were doing deals under 100 million, under 50 million. Now we're more interested in deals that are 100 million plus. There's just, there's a lot of them out There a lot of flat companies not performing. We're not generalist, we're very specific. We're only focused on consumer privacy and security. And we like synergies. We don't like buying businesses and just like letting them exist on their own and prove them on their own. We don't, that's not what we do. We buy it generally. It's a product and technology that we're buying in consumers and then we take them and integrate them into what we already have. And so we have our own billing stack, our marketing stack, our AI stock and then we have products that benefit each other. So I can take a VPN product and sell that into my identity protection product suite of a category of consumers and vice versa. And then they compound each other in terms of growth and that's how we make this work. Otherwise, building businesses that are standalone entities and growing them individually is not an efficient use of your time and your resources because they benefit from each other more than they benefit just from your technology that you bring it to the table.
- [19:50]
A
So using debt to grow the business, since you took it back over in 2017, you bought it for under 10 million bucks. Under 1x ARR. You've now grown to 60, 70 million of ARR. I asked you a question on the, at the last company you said you diluted down to 30%. How much equity do you still own in the business today?
- [20:04]
B
It's, it's, it's less than 20. And the reason is because when we started the business, we started with multiple partners. It's not a dilutive effect that took place. It's actually dilutions with minimal. It's about a structure of the organization of the investors and operators. And we're all sort of operators because the investors are actively involved in companies operations. So it's very different than before. Before it was just me and then investors, VCs and private equity and debt. And it's, it's very risky to do it that way too. Like you have to look at it from that perspective. Right. So. And you spread the risk and also build a bigger business versus trying to do it all on your own. So think about that and take on a lot of risk.
- [20:51]
A
So gary, you're at 70 million of revenue today with $25 million of EBITDA. If someone comes to and offers you $350 million, all cash up front, do you sell the business today?
- [21:01]
B
Possibly. I, I think that, you know, every company is for sale at the right price. I think we still have a lot of Runway where we're growing at a reasonable rate. We have a lot of M and A opportunities. We can take this to a multi billion dollar entity by continuing to do what we're doing there. There is no market shifts that we're predicting that will slow this down. There are a lot of companies that meet the type of mindset that we bring to the table and how we compound revenue, how we create more opportunities and how we create synergies. I think there's a lot of sellers who are going to come to us and say, hey, I think I'm done with my organization. I think you guys are better stewards of this type of business. You know, let's make a deal work. And so we can continue doing this. We have no, no, we're not running for the door. You know, this, this, this, this structure that we built allows us to have a proper compensation, create liquidity. We can continue adding on and keep growing. There's no need to go public. There's no need to sell.
- [22:01]
A
Love that Gary. And how many folks are full time today?
- [22:03]
B
We're at about 300 or so people. About 200 of them are outsourced organization mostly in support and infrastructure. And then 100 is marketing and R and D. Most of their R and D is done in Pasadena. So we have a lot of coders. So a lot of people who come to us from companies like Norton, McAfee, Avast, very smart team of some PhDs. And then we have support, support organization. So yeah, it's, it's not small, you know, and it's, it requires a lot of, a lot of hands on management and, and I think we've done a pretty good job. So yeah, it's, it's working pretty well.
- [22:37]
A
70 million of revenue divided by those 300 folks, many of which are capital efficient because they're outsourced, is still about230,000 bucks of revenue per employee. Really healthy. And it's evident in your bottom line with 25 million bucks of EBITDA here wrapping up 2025. Gary, on that note, excited to see what you do in 2026 in terms of your acquisition pipeline, your inorganic growth, all the new deals that you do. If people want to follow your story over the next 12, best place that can find you online.
- [23:00]
B
LinkedIn is probably the best thing because we post a lot, we post a lot, a lot of updates. Very active on LinkedIn. That's probably the best way.
- [23:08]
A
Guys. Gary Gusev, CEO of Real Defense, started his first company, his first big one in 2003 called Cyber Defender grew to about 10, 1112 million bucks of revenue before self listing but was diluted down to 30% because he raised so much VC. Ultimately once on the NASDAQ the company grew about 70 million bucks of revenue and then hit the fan. Different CEO in place it declined. Gary swooped in in 2017. He was about 7, 8 million bucks of revenue. He bought it for under 1x ARR and now he is running his inorganic playbook using debt. He's partnered with a bank, he's raised a bunch of Capital, he's done six acquisitions. The company now today is doing 70 million top line, 25 million EBITDA with big plans in 2026 again selling a platform to help their partners show the pain and then sell the painkiller. Really smart vertical integration there. Gary, thank you for taking us to the top.
- [23:55]
B
Awesome. Thank you neighbor.
- [23:56]
A
You won't believe this CEO's revenue. Click here to watch the next episode right.