OEM Partnerships in Cybersecurity: Why They Matter, How to Do Them Well, and What to Avoid

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Quick note before we dive in: Security Revenue LIVE is now The Cybersecurity Ecosystem Show, connecting practitioners, investors, vendors, regulators, and everyone in between. Because the more we learn from each other, the stronger we become.

This conversation with Chad Loeven is a perfect example. OEM partnerships are one of the most important and least understood dynamics in cybersecurity. They shape the products practitioners depend on, the revenue models investors evaluate, and the competitive strategies vendors build around. Chad Loeven has spent 20 years on both sides of the OEM table, licensing technology inbound as a buyer and outbound as a seller, and he opened up the playbook in a way I haven't heard before.

Why OEM Partnerships Matter

OEM stands for original equipment manufacturer. In cybersecurity, it means one company is embedding another company's technology, usually through APIs or SDKs, into their own product. The end customer often has no idea it's there. The threat intelligence enriching your SIEM, the malware scanning in your endpoint tool, the file analysis behind your detection platform. Any of those could be powered by an OEM partner underneath.

This matters for the entire ecosystem. For practitioners, it means the tools you're evaluating during vendor selection may not be entirely built by the vendor selling them. For vendors, OEM is a go-to-market channel that can generate revenue and credibility faster than competing head-to-head for enterprise accounts. For investors, OEM revenue carries its own dynamics around valuation and risk. Understanding how OEM works gives everyone a clearer picture of how the cybersecurity market actually fits together.

How OEM Creates Opportunity

Chad made a compelling case for why OEM can be one of the smartest moves a cybersecurity company makes, especially earlier in its lifecycle.

The total addressable market for OEM in cybersecurity is relatively small and well defined. There are a couple hundred realistic large prospects. You can identify who they are and who the right contacts are inside those companies. Compare that to selling mid-market enterprise, where you're competing with Cisco, Palo Alto, and Fortinet for tens of thousands of accounts.

OEM gives companies access to customers they could never reach on their own. When your technology is embedded inside a major platform, it's being used by thousands of end customers who may never know your name, but your technology is doing the work. That builds revenue, proves the product at scale, and creates credibility that carries over into direct sales conversations.

Chad also highlighted how technology integrations are the natural front door to OEM. A technology partnership starts as a meet-in-the-market integration where both products work together but nobody is reselling anything. When those integrations gain traction and customers start asking for a more seamless experience, that demand is the signal to explore a deeper OEM relationship. His advice: build integrations proactively, even without a proven joint customer. He calls the "we don't have a joint customer" pushback survivorship bias. You only see the prospects committed enough to work through the friction. You never see the ones who checked your integrations page, didn't find what they needed, and quietly bought from a competitor.

How to Do OEM Well

Chad's 20 years of experience boil down to a few principles that separate successful OEM partnerships from the ones that drain companies.

The first is standardization. Only sell the standard SDK and standard APIs. No custom builds, no matter how large the deal. Chad learned this from a seven-figure contract with Yahoo, where his company powered the malware scanning inside the Yahoo toolbar. The money looked incredible on paper. But Yahoo's custom development requests never stopped. Multiple browsers, multiple languages, endless cycles. The company forked their product, dedicated a full team to Yahoo, and at best broke even. His cardinal rule from that experience: one size, one color. If the customer asks you to change the paint, don't do it.

The second is understanding which products are a fit. Products with standardized outputs that don't require per-customer tailoring, like threat intelligence, threat analysis, and detection tools, tend to OEM well. Products that are deeply tied to business workflows and require heavy customization for each end user, like DLP, tend to be poor OEM candidates. Chad tried to OEM a data leakage protection product and ultimately his job became unwinding the deal because the support burden made the economics impossible.

The third is making sure the partnership adds derivative value. The OEM partner should be using your technology to enhance their total solution, not reselling it as a standalone offering. If a partner could publish your feeds or tools on their own without adding anything, that's not OEM. That's a cannibalization risk. Structuring deals around derivative use cases protects both sides.

The fourth is cultural alignment. The best partnerships happen when the OEM partner genuinely understands the value your technology adds and sees it as a differentiator, not a checkbox. If a prospect views your technology as interchangeable with alternatives, you'll get beaten up on price and the deal will sit there without momentum. Understanding what the partner sells, who they sell to, and how your technology fits into their total value proposition is essential before signing anything.

What to Avoid

The cautionary tales from this conversation were just as valuable as the success stories.

Avoid revenue concentration at all costs. Chad joined a company where a single OEM was over 25% of total revenue. That OEM pulled out almost immediately. His rule going forward: no single OEM should represent more than 10% of revenue, ideally no more than 5%. When you're a small company and someone offers a seven-figure check, it's hard to say no. But over-dependence on a single partner is an existential risk. For investors, this is a due diligence question that should be non-negotiable. For practitioners, a vendor with heavy OEM concentration is a supply chain risk. If that deal unwinds, the product you depend on could be affected.

Avoid deals where the OEM partner is selling into consumer or SMB markets unless the economics truly work. Consumer-focused partners watch every penny of their cost of goods. Enterprise-grade technology is expensive to support at consumer scale, and the margin pressure can make even large contracts unprofitable.

Avoid OEM deals without floor pricing protections. Whether the royalty model is a flat annual fee, tiered volume pricing, or a revenue share, make sure there's a minimum unit price the OEM is obligated to charge their customers. Without it, the partner has an incentive to discount your technology to near zero to make their own product more competitive, and your royalty report reflects almost nothing.

And avoid ignoring how investors perceive OEM revenue. Some VCs value it less than enterprise revenue because the brand isn't in front of the end customer and the technology is being discounted to get embedded. Whether or not that logic holds in every case, it's a real conversation that affects fundraising. Founders need to know how to frame it, and investors should evaluate whether the discount is justified when OEM relationships are sticky and well diversified.

Why the Whole Ecosystem Should Pay Attention

OEM isn't a niche topic for partnership teams. It's the invisible infrastructure underneath most of the cybersecurity products the industry depends on.

For practitioners, understanding OEM helps you ask better questions during vendor evaluation. Is this capability built in-house or sourced through a partner? How tightly is it integrated? How diversified is the vendor's revenue? These questions directly affect the reliability and continuity of your security stack.

For vendors, OEM is a strategic decision that affects your product roadmap, your margins, and your competitive positioning. Done well, it accelerates growth. Done poorly, it consumes engineering resources and erodes your business.

For investors, OEM revenue tells a different story than enterprise revenue, but it's not inherently less valuable. The key is understanding concentration risk, deal structure, and whether the company has the discipline to maintain standardization.

That's exactly the kind of cross-cutting conversation The Cybersecurity Ecosystem Show is built for. Not just how cybersecurity works, but how the business of cybersecurity works, and why that matters for everyone.

Watch the full conversation with Chad through the link below.

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