Gianni Cuozzo, Founder & CEO at Exein: BREAKING: Exein raised $270M at a $1.7B valuation

0:00Gianni Cuozzo:Hello and welcome back to the Skating Europe show. Today we have a first time. Gianni, where are you right now? Hi, hi, hi Seb. I'm at New York Stock Exchange right now. Pretty exciting day for us here. And thanks so much for having us here. It looks amazing. I mean, I can see your logo plastered all behind you. You are looking sharp. Tell me, what is going on? What are you announcing today? Well, first of all, it's just one day that I'm looking sharp. Normally, I don't look like this. I'm a very easy going guy. Today, we are announcing our new round. We're raising 270 million, and we became 1.7 billion valuation.

0:42It's a huge milestone for us. All of this for building the next step of Exane. Exane has been growing particularly fast in the last year. This round comes as the next steps of our evolution and our expansion plan that we have as mostly on physical AI. As you know, we discussed that on the embedded side, we've been the largest runtime technology in the world right now. We are running on over 2 billion devices and physical AI was the next move in our face because with basically if you will look about connected systems, you know, in the early 80s and 90s we had SCAD and PLCs then we started to have embedded then we started having IoT which is basically embedded with an internet connection now we started to have physical AI which is basically devices that will host artificial intelligence and foundational model directly on those systems and those systems will be autonomously operating without the human intervention so now we have systems that will manage themselves and will be operating themselves and therefore it was a natural evolution for us because we served the entire supply chain in the industry also to move in the physical space.

1:56Gianni Cuozzo:For those who don't know, maybe explain a bit more about why you are so well positioned to expand into physical AI. What kind of devices have you been working on? Why are you so well positioned to take advantage of this huge transition that we're seeing to physical AI? Absolutely. So at Xen for five years, we've been working for with the entire supply chain of embedded connected systems. So we started with the instruction set manufacturers, such as ARM and others. Then we moved to silicon vendors and chipset vendors, such as we have the agreement with MediaTek and many others in that space. So basically we are embedded directly inside their BSP, which is the software layout of those chipset.

2:40And then we've been working with the all ODMs, top ODMs in the world, especially in Taiwan, Japan, South Korea, Europe and the US. And typically the ODMs are the one who actually builds those devices for third-party OEMs. And it turns out that this supply chain is exactly the same supply chain that we found in physical AI, because in physical AI you have the silicon vendors that are building basically the hardware, and then you have the ODMs that are basically combining the physical operation and the chipset and bringing the devices to the physical world. Xen runs with a concept and was born with a concept that security should be on device.

3:20And now that intelligence and decision making is running on device, it's also important that security is running on the device. And because we were already positioning, because we serve the embedded market towards these five years, we've been also well positioned to grab in the physical space. space and therefore we started already working. We have already customers in robotics, customers in the humanoid, Android sector drones, self-driving cars. So it was the natural evolution of the company and we are continuing to serve in the embedded but also expanding ourselves in the physical space.

3:55Gianni Cuozzo:And tell us how many devices you're working with or kind of embedded in to date? So today between our open source distribution and paid customers we are about 2 million devices, 2 billion devices worldwide, which is the largest runtime security module in any industry, which makes us very proud. Of course, open source was a big part of our distribution thesis and also being part of the Octa project, being part of VZephyr and many other software standards that are particularly popular in the embedded space was a huge push for us then we started converting on this installation installed based and now we are moving on towards that i mean we run on devices that are very very different between each other we go from submarine to connected coffee machines to gym equipment to satcom for satellite communication we've been starting running also in satellites.

4:57So we are pretty much in every single device that you can imagine for. And most probably part of our code, maybe also the open source part is already running in your devices, even though you don't know it. But Xn is starting to run in your life, which sounds scary, but it was exactly the dream we had and the project we had when we started as an open source. and now we are building up the company around it.

5:25Gianni Cuozzo:And the growth that you've experienced has been absolutely phenomenal. I think this is your third round in like a year and a half, two years. You've gone from valued, I think, 250 million, maybe a couple of years ago, to now$1.7 billion, the most valuable cybersecurity startup in Europe. What has happened? Where has this growth come from in the last year and a half? I think we were really well positioned for three mega trends that are happening right now in cybersecurity. One was regulation for connected system. For many years, cybersecurity for connected system was a customer-facing problem. So basically, the device manufacturers were selling you a device and it was your responsibility to run this device properly in a secure environment.

6:11Then we started to see regulation that actually shared the responsibility of cybersecurity between the user and the manufacturers. and we help manufacturers to achieve compliancy and to be green light on the certification side. So this was a trend we had in Europe. We had CRA, but we have cybersecurity regulation happening in Japan, South Korea, Taiwan, also mainland China, US. So the entire connected system environment is getting heavily regulated and we help with this regulation and our software helps also with being compliant with those regulations. The second trend was about the foundational models being able to hack systems.

6:55And the reason why we never seen so many attacks on physical systems, typical physical system attacks were very complex attacks to execute, mostly reserved to intelligence operator, military operator operations, and elite hacker, let's call it this way, even though I don't like this labeling, but let's call it just that way. With the rise of foundational model that actually are able to attack and execute full attack chain on those systems, the cost of those attack is going very down. So it's not going to zero yet, but the tendency is that those attack going to zero. And of course, physical attacks are more dangerous than what's happening in, And if somebody stole the password of your database, it's of course a problem.

7:50But if somebody shut down the lighting system of an airport, it's a much bigger problem. And because we are sitting exactly on being the first line of defense between what's happening in the physical world and what's happening in the digital world, of course, this was a huge push for us. And third is what's happening from a geopolitical side. and luckily we are living in a very strange times which I hope regardless of the push of for my company that you know the world will be a safer place but what we are starting to see right now with what's happening in Ukraine what's happening in the Middle East is that cyber security and cyber warfare especially on physical system it's a thing and will be much more a thing in the future.

8:34So those three mega trends are helping XN grow very fast. We are growing 400 % year on year since three years now, which of course is pushing both our valuation, but also our expansion plan very, very future. And this is why we are doing this round. We also, you know, this round was particularly oversubscribed. So we had to close the race at a certain ticket because otherwise the investor would keep flowing in. So we were very happy about that. And it's also nice to see a European cybersecurity company reaching this global level of footprint, which is very important, I guess.

9:18Gianni Cuozzo:And you talk about being oversubscribed. That's an amazing problem to have. can you touch a bit on the investors that you chose to get on board with and why you chose them yeah yeah i mean we chose to partner with headline first because they were very fast because we were not planning to raise this round so when you are not planning to raise around the first thing you want is an investor that can move fast and doesn't lose your time uh you know because if you don't need money or you don't want to raise money in the first place the last thing you want is to get involved in you know calls investor call and others so we really appreciate the fast moving pace that they had and also the network that that line brings headline is a u.s pan-u.s european fund with a lot of LPs in the automation space and stuff so most of the LPs that are begging LP most probably already working with XN so they had ease to have you know cross-reference of how important this technology was, especially for the embedded space.

10:26It's of course a particular space, you know, traditional cybersecurity is mostly happening on code security, network security, traditional endpoint security. So for new investors already it's always complex to find cross-reference about how important this problem is because they don't have network to move in that sense. When you find an investor that has network or through their LP or through their personal connection, things evolve very quickly. And so we really appreciate the fast moving on that side. And also we were investigating a new technology and we knew that if not racing now, but racing in one year will, of course, something that was on our plan.

11:10So we decided to, we see the movement, we decided to race now and we appreciated the fast moving of Adeline and all the investors that are participating, Sofina, Goldman Sachs and the other that they invested in this round. And therefore we decided to pull the trigger. And also we are very grateful also for all previous investors that they all joined in this round, which actually show that they were particularly happy with how the company was executing. And of course our focus is now is about execution bringing new technology to the market and providing and continuing our M &A strategy.

11:49Gianni Cuozzo:And talk to me a bit about your expansion plan. So you've seen huge success in the APAC region. I think it now constitutes 50 % of your revenue. As part of this new raise, I think you're looking to expand in the West Coast, maybe even opening an office in San Francisco? Yes, exactly. I mean, because we are moving in the physicalized space, we want to be close where things happen, as you can imagine. And, you know, California is a nice place for us for two reasons. First, because you have down the valley, you have all the chipset manufacturers that are involved in this transitioning. And in the Bay Area, you have also the foundational labs and also the company that are building on the physical AI layer for that.

12:29So we are opening an office in San Francisco to be close as this. We already have operation in the U.S., but we are expanding this operation. And also we are looking for an M &A here in the U.S. So, you know, we will be announcing pretty soon a major operation here.

12:45Gianni Cuozzo:Amazing. Yeah. I was interested about the M &A strategy side of things. What are you looking to buy? Is it product? Is it talent? Is it distribution? When you're assessing M &A opportunities, what's really important for you? I mean, I think right now it's a little bit of a combination outside of tech because we are particularly strong in technology development. I mean, this has been one of the top of the sphere for Xen for years because all of the technology, we are not dependent by anyone. Everything that is part of the technology that we build is in-house, is managed by us. So we are not dependent by anyone in that sense.

13:25What we are looking for is mostly talent and distribution. And of course, because right now we're living in a very fast-paced market. And if you wait to build distribution, it may take too long. Therefore, when you find a target that has the right amount of distribution, also the right amount of talent, because right now we are in a talent war and everybody's fighting for talent, you're trying to buy them and to expand. Sometimes you also buy new product that can complete the product offering that you have for your customer, maybe a company that you're already partnered with, so that you can expand and better control what you can provide to your customers.

14:10Gianni Cuozzo:You've been on this amazing journey, round after round, extreme revenue growth. Now looking forward to exploring new frontiers or doubling down on some new frontiers, whether it's physical AI, but also the West Coast of America. Looking forward, 6, 12, 18 months. What have you got to get right? Or what have you got to do to feel like you've been a success in the next year? Yeah, of course, for us, success is to get more distribution here in the U.S. to starting to be the name for physical AI, you know, because we really believe that physical AI will be the next big bottle of AI because, you know, we're starting to see that code security, AI code security, AI vulnerability assessment, penetration test.

14:51It's a little bit of a soft market. It's already, you know, it's not as thrilled anymore. And where we really see the next big challenge and the next big, big battlefield will be on the security of those systems that will start surrounding us. And people will trust this evolution of market only if they trust those devices. And in order to build trust, we have to be to build inside the supply chain and pretty much doing again what we did in Embedded, which was be part on every single supply chain, every single point of the supply chain. For us, success is if we inject ourselves in the physical supply chain from the silicon vendors to the foundational models.

15:36We already are there with OEMs and the chipset manufacturers, but it's also important to us to be on the frontier labs and the foundational models that are being developed for the physical AI. So for us, it's really about success. It's really about conquering the distribution, the supply chain, and then be the name when you think about a company that is doing physical AI. And because we see that physical security, there is no crowd strike of physical AI yet. This is what we want to be, being the crowd strike of physical systems.

16:14Gianni Cuozzo:Yeah, it's absolutely amazing. I think you've done absolutely phenomenal work. how big do you think this market is well i think you know the market is endless when it comes to to physical uh physical systems because first of all it's not only about the device that we already starting we already see now and the device that most probably will be converted to physical system because we are in the middle of a industrial revolution and typically when we are in the middle of industrial revolution also all device will be updated with the physical like abilities you know just thinking about uh industrial machinery right now you have a traditional industrial machine that is taking order and you know it's programmed in a specific way now we are starting to see conversion pack for this physical for this system so there is not only the green field but there is also the brown field that can be converted so the the market is it's It's really big.

17:13It's not only the new devices, but it's also the old devices. And there is also devices that we don't see yet on the market. Delivery drones, humanoid robotics. We certainly see a new class of devices. And that's why it's so important to win the supply chain, because those new class of devices will be built by the supply chain that you should inject to. That's why for us, it's really, really important to get in the supply chain because when those new devices will be produced, we will be already there.

17:49Gianni Cuozzo:I want to ask you one more question. When we spoke last year, we talked about how you had built this phenomenal business from Rome, which is not known as one of the thriving tech ecosystems of Europe. You said one of the advantages that building from Rome has given you is that you had to adopt this sort of global mindset from day one. and that enabled you to scale quite quickly because you were immediately thinking about products that could serve clients from you know us to apac what advice would you give to other founders in smaller ecosystems on how to have that mindset what does that mean what should they be doing to build a business that is global from day one so first of all to choose a global problem to solve uh one of the the the problems that we see sometimes is that people focusing on niche local problem it's good to win a niche problem but it should be a niche global problem because if you don't have the the push to go outside you will never go outside you know because you will just waste time in your local environment and you know by the time you want to be global somebody who already started with a global mentality will be already there so for us at xane we're starting we sell the first license of xane in south korea from rome you know even though we had customers that can be 10 minutes walking distance from us, but we try to be global since day one.

19:12And I think this is an important lesson, especially right now in the AI world. I don't think geography really matters like before. Network matters. Being in the place where things happen matters. But when it comes to solving a problem, every founder right now has access to basically infinite too. While when we started, everything you can solve was only about what kind of talent you can choose. Right now, talent's global, problem are global, everything is global. So the first recommendation I will give to everybody who wants to start from, let's say, not so known ecosystem and scaling globally is starting from a global problem and never have this mentality to say, okay, I'm from that region, so I cannot do it.

20:01I mean nobody will look where you come from if you actually solve the problem they have people are buying and spending money for products that solve them either a necessity or a problem if you solve a problem people will just not look at where you come from and you are living proof of it that

20:18Gianni Cuozzo:you and the team are absolutely flying and you're flying the flag for Italy and Europe all over the world so a massive congratulations and I look forward to probably your fourth round in about four months time by the rate of things. Thank you very much. We have big plans. Let's see what's Great to hit.